The Influence of Standard Essential Patents on Trade

Authors: Florian Ramel (Technische Universität Berlin) and Knut Blind (Technische Universität Berlin)

Standard essential patents (SEPs) are of increasing importance in the ICT sector. For the first time, we examine their effects on trade flows while controlling for stocks of standards and patents using a gravity model and panel data. To be able to assess the actual global production patterns, we use trade in value-added data in contrast to traditional gross trade flows. This allows us to analyze the influence of SEPs in global value chains (GVCs) of the ICT industries.

We find SEPs to be trade enhancing. The interaction between SEPs and national standards, however, hampers trade because these two factors can promote temporary monopolies. Moreover, we find a macroeconomic cross licensing effect. In contrast to other patents, SEPs influence trade flows positively for both exporters and importers. This results from the strong intermingling in the global ICT production. To produce standardized technologies producers license their patents reciprocally and generate gains from trade for all participating economies. Lastly, we show that SEPs are more valuable than patents without references in standards when it comes to the integration of non-ICT products and services into the GVCs of the ICT sector.

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