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Deal or No Deal? Licensing Negotiations in Standard-Setting Organizations


Technical standards benefit consumers and producers by facilitating productadoption, promoting compatible solutions, and helping to create anecosystem of products and services in which competition can thrive. However,standards also may create opportunities for the exercise of market power. Owners of patents with claims that are essential to a standard may “hold up” firms or consumers that are “locked-in” to a standard by charging high royalties for the use of products that comply with the standard. This licensor (or seller) market power3 arises “ex post,” i.e., after firms and consumers have made investments that are specific to the standard.

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