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Dirk Auer headshot

Director of Competition Policy

Dirk Auer manages ICLE’s work on competition and antitrust issues in the United States, the United Kingdom, Europe, and abroad. Dirk joined ICLE as a Senior Fellow in October 2018 and was promoted to his current position in January 2022.

Julian Morris headshot

Senior Scholar

Before joining ICLE, Julian was Vice President of Research at Reason Foundation. Prior to that he was Executive Director of International Policy Network, a London-based think tank which he co-founded. Before that, he ran the environment and technology program at the Institute of Economic Affairs. He has also been a visiting professor in the Department of International Studies at the University of Buckingham (UK).

Intellectual Property

Antitrust Copyright Intellectual Property Patents

ICLE White Paper

Governing the Patent Commons

Thousands of patents underpin the technologies that power the digital economy. Coordination among firms developing and implementing these novel technologies has notably been facilitated in large part by Standards Developing Organizations (SDOs). Despite the evident benefits of standardization in general and SDOs in particular, certain aspects of these processes have come under severe scrutiny from scholars, antitrust authorities and courts. These critics argue that the standardization space suffers from two crippling market failures, namely “patent holdup” and “royalty stacking”. They thus conclude that opportunistic firms will squeeze their rivals’ profits, harming consumers and stifling innovation in the process. However, recent empirical scholarship strongly suggests that patent holdup and royalty stacking rarely, if ever, occur in the standardization space.

Against this checkered backdrop, our paper argues that standardization is an emergent phenomenon, where parties have strong incentives to design institutions and contractual relationships that mitigate the scope for opportunistic behavior (including patent holdup and royalty stacking). The paper explores how these incentives have likely enabled firms to avoid severe market failures. We argue that ignoring these complex market dynamics may cause antitrust authorities and courts to do more harm than good (notably by exacerbating patent holdout behavior). The paper then reviews recent regulatory interventions and questions whether this has indeed been the case. Finally, we suggest that antitrust authorities and courts should draw inspiration from acclaimed scholarship regarding both the evolution of cooperation and the management of common-pool resources.

“The greatest improvement in the productive powers of labour, and the greater part of the skill, dexterity, and judgment with which it is anywhere directed, or applied, seem to have been the effect of the division of labour.”

Adam Smith

Click here to read the full paper.