Working Paper: NBER ID: w21090
Authors: Alexander Galetovic; Stephen Haber; Ross Levine
Abstract: A large literature asserts that standard essential patents (SEPs) allow their owners to “hold up” innovation by charging fees that exceed their incremental contribution to a final product. We evaluate two central, interrelated predictions of this SEP hold-up hypothesis: (1) SEP-reliant industries should experience more stagnant quality-adjusted prices than similar non-SEP-reliant industries; and (2) court decisions that reduce the excessive power of SEP holders should accelerate innovation in SEP-reliant industries. We find no empirical support for either prediction. Indeed, SEP-reliant industries have the fastest quality-adjusted price declines in the U.S. economy.
Keywords: patent holdup; standard essential patents; innovation; quality-adjusted prices
JEL Codes: K11; O31; O34; O38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| SEPreliant industries (L63) | slower price declines (E31) |
| eBay decision (D44) | faster decline in quality-adjusted prices for SEPreliant products (L15) |
| SEPreliant products (L63) | rapid price declines (E30) |
| classic holdup industries (L67) | stagnant quality-adjusted prices (P22) |
| SEPreliant products (L63) | quality-adjusted price declines that are faster than non-SEPreliant products (E30) |