Standard Setting, Patents, and Access Lock-In: RAND Licensing and the Theory of the Firm

Standard Setting, Patents, and Access Lock-In: RAND Licensing and the Theory of the Firm

Joseph Scott Miller, Associate Professor, Lewis & Clark Law School

6/08/2008
(Original Publish Date: 5/1/2005)

Many leading voluntary standard-setting organizations (“SSOs”) have adopted intellectual property policies under which participants must promise to license on reasonable and non-discriminatory terms (“RAND”) any patents on technology that they contribute to a standard. The widespread use of this RAND promise has generated its own boomlet in the legal literature on standard setting. A common refrain in analyses of the RAND promise is that its meaning is uncertain to a troubling degree. We know more, however, than these individual analyses sug-gest. I show that we already know the RAND promise’s core meaning, and why it remains at-tractive to SSOs. Specifically, I demonstrate that, although framed by reference to patent rights, the RAND promise’s core function is to solve a problem of business organization that all SSOs confront—namely, the need to clear the path to team production of a viable standards-based technology platform by removing the threat of post-adoption hold-up. One solves the organiza-tional problem by transfering a property right. For example, corporate law scholars have shown that the corporate form enables team production of complex goods by giving contribu-tors a way to lock in their capital to a separate property-holding entity, precluding subsequent withdrawal and hold-ups from threatened withdrawal. Patent pools thus use new central enti-ties to hold all patent rights. Similarly, in the standard setting context, SSOs enable team pro-duction of a standards-based platform by conditioning contributors’ participation on making the RAND promise, i.e., on making a property-like grant to the adopter community that lock in adopters’ access to contributors’ patented contributions to the standard, precluding subsequent shutouts or hold-ups from threatened shutouts. Every participating patent owner, by making the RAND licensing promise, has thereby irrevocably waived any right to seek that most tradi-tional of intellectual property law remedies, a court injunction against unauthorized access. The only relief a frustrated patent owner can seek against an adopter thereafter is the reasonable royalty expressly contemplated. The irrevocable RAND promise, according to the access lock-in model, must also follow the patent if the patent is sold to another party. In property law terms, the RAND promise creates an enduring servitude that burdens the patent and benefits the standard adopters. Only in this way does the RAND promise ensure that the standard can flourish without hold-up for as long as the market supports the technology.