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000042087 008__ 200625s2006\\\\sz\\\\\\r\\\\\000\0\eng\d
000042087 040__ $$aSzGeWIPO$$beng$$erda
000042087 041__ $$aeng
000042087 1001_ $$aLemley, Mark A.
000042087 1001_ $$aShapiro, Carl
000042087 24503 $$aPatent Holdup and Royalty Stacking
000042087 264_1 $$a[Austin, Texas] :$$bThe Texas Law Review Association,$$c2006.
000042087 300__ $$a59 pages
000042087 336__ $$atext$$btxt$$2rdacontent
000042087 337__ $$aunmediated$$bn$$2rdamedia
000042087 338__ $$avolume$$bnc$$2rdacarrier
000042087 520__ $$aWe study several interconnected problems that arise under the current U.S. patent system when a patent covers one component or feature of a complex product, This situation is common in the information technology sector of the economy. First, we show using bargaining theory that the threat to obtain a permanent injunction greatly enhances the patent holder's negotiating power, leading to royalty rates that exceed a natural benchmark level based on the value of the patented technology and the strength of the patent. Such royalty overcharges are especially great for weak patents covering a minor feature of a product with a sizable price/cost margin. These royalty overcharges do not disappear even if the allegedly infringing firm is fully aware of the patent when it initially designs its product. However, the holdup problems caused by the threat of injunctions are reduced if courts regularly grant stays to permanent injunctions to give defendants time to redesign their products to avoid infringement when this is possible. Second, we show how holdup problems are magnified in the presence of royalty stacking, i.e., when multiple patents read on a single product. Third, using third-generation cellular telephones and Wi-Fi as leading examples, we illustrate that royalty stacking has become a very serious problem, especially in the standard-setting context where hundreds or even thousands of patents can read on a single product standard. Fourth, we discuss the use of reasonable royalties to award damages in patent infringement cases. We report empirical results regarding the measurement of reasonable royalties by the courts and identify various practical problems that tend to lead courts to over-estimate reasonable royalties in the presence of royalty stacking. Finally, we make suggestions for patent reform based on our theoretical and empirical findings.
000042087 525__ $$aPublished in : Texas Law Review 1991 (2007)
000042087 650__ $$aPatent system$$zUnited State of America
000042087 650_0 $$aRoyalty
000042087 650_0 $$aPatent
000042087 650_0 $$aIntellectural property
000042087 85641 $$uhttps://papers.ssrn.com/sol3/papers.cfm?abstract_id=923468$$yView this resource
000042087 904__ $$aJournal article
000042087 980__ $$aBIB