Smallest Salable Patent Practicing Unit and Component Licensing: Why $1is not $1

Gautier, Axel; Petit, Nicolas

doi:10.2139/ssrn.2954592

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Smallest Salable Patent Practicing Unit and Component Licensing: Why $1is not $1

Gautier, Axel; Petit, Nicolas

2019 • In Journal of Competition Law and Economics, 15 (1), p. 690-717

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https://hdl.handle.net/2268/230296

DOI
10.2139/ssrn.2954592

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Keywords :

Standard essential patents; Royalty negotiation; SSPPU

Abstract :

[en] The smallest salable patent pricing unit (SSPPU) is a valuation method used as a preliminary step toward the calculation of fair, reasonable, and nondiscriminatory royalties for licenses over standard-essential patents (SEPs). Under SSPPU, royalties should reflect the value added to the smallest salable component implementing the patented invention. In this paper, we discuss policy-making proposals to convert SSPPU into a pricing rule that not only assists the assessment of SEPs’ added value but also forces the specification of royalties terms as a share of component costs in SEP licensing negotiations. We call this new rule SSPPU+ and we show that it distorts the distribution of surplus between SEP owners and implementers by laying down a revenue cap on standardized technologies. Therefore, a change in the royalty basis is not neutral and $1 is not $1. Furthermore, SSPPU+ imposes uniform pricing of SEPs across different industries and does not allow SEP owners to take advantage of complementarities between technologies. This pleads against a generalization of SSPPU+ at early standardization and negotiation stages.

Research Center/Unit :

LCII - Liège Competition and Innovation Institute - ULiège

Disciplines :

Business & economic sciences: Multidisciplinary, general & others

Author, co-author :

Gautier, Axel ; Université de Liège - ULiège > HEC Liège : UER > Economie industrielle

Petit, Nicolas ; Université de Liège - ULiège > Département de droit > Droit européen de la concurrence

Language :

English

Title :

Smallest Salable Patent Practicing Unit and Component Licensing: Why $1is not $1

Publication date :

2019

Journal title :

Journal of Competition Law and Economics

ISSN :

1744-6414

eISSN :

1744-6422

Publisher :

Oxford University Press, United Kingdom

Volume :

Issue :

Pages :

690-717

Peer reviewed :

Peer Reviewed verified by ORBi

Additional URL :

https://dx.doi.org/10.1093/joclec/nhz008

Available on ORBi :

since 18 December 2018

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