Strategic Declaration of Standard Essential Patents

We examine how the ex-post assessment of standard essential patents (SEPs) affects the patent holder's strategic incentive to declare SEPs. While declaration guarantees inclusion in the standard, it requires commitment to license under fair, reasonable, and non-discriminatory (FRAND) terms. We consider two forms of essentiality assessment: (i) by an independent organization and (ii) by the courts during a patent dispute or a challenge initiated by a standard implementer. Assessment by an independent organization can eliminate declared patents with low essentiality. Assessment through a dispute can decrease the number of both declared and non-declared (i.e., non-FRAND-encumbered) patents and these different trade-offs affect the rights holder's strategic declaration incentive. We obtain the following results. First, there is less declaration when there is ex-post assessment of either type compared with no assessment. Second, there is less declaration with assessment by an independent organization than with assessment through disputes. We also show that a rights holder with high essentiality patents sets a higher declaration rate than one with low essentiality patents.