The interplay of patents and standards for information and communication technologies

ICT products are often interdependent and in some cases indispensably work together. Firms may thus compete on different market levels pursuing different business models to sponsor their proprietary technologies and to maintain market share for their products and services. Interoperability of products is a crucial factor for market success and firms evermore have to coordinate and set standards. These standardized technologies are in some cases protected by patents. Standard essential patents claim an invention that must be used by any company to comply with a technical standard. They are subject to a new and different legal framework which goes beyond the rights of regular patent law. This may influence incentives to develop and specify ICT standards, incentives to invest in R&D or incentives to file patents. Yet, the inclusion of intellectual property in standards, and the strategic behavior of its owners, can have far-reaching consequences for market structure, market entry, and sustained technical progress and innovation. This article discusses current legal and economic issues on the interplay of patents and standards and provides empirical insides on licensing, patenting and coordination.