Chao and Duncan, ‘Why Patent Monopsonies Increase Consumer Welfare’

Technical standards are an essential part of how the modern world operates. Standards enable different devices to communicate with each other, use the same power supply and even exchange data. These standards are created by groups of companies coming together through standard settings organizations (SSOs). Besides defining standards, SSOs set policies that affect how much member companies charge for their standard essential patents (SEPs). Unsurprisingly, many companies want to pay less for these patents. But as SSOs adopt policies that lower patent prices, their conduct begins to look like collusion subject to antitrust scrutiny. Indeed, classic economic theory suggests that when a monopsonist (or multiple oligopsonists) lowers prices, it also lowers output and creates deadweight loss. In economic terms, lowering prices harms static consumer welfare. Presumably, that is why Makan Delrahim, the Assistant Attorney General for the Antitrust Division of the Department of Justice (DOJ) in the Trump administration, adopted policies that caution SSOs against these practices …

Chao, Bernard H and Duncan, Tod, Why Patent Monopsonies Increase Consumer Welfare (September 7, 2021). University of Denver Legal Studies Research Paper No 21-22.

First posted 2021-09-08 13:00:57

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