Thanks to global high-tech telecommunication standards such as GSM, UMTS, or LTE, we can use our mobile phones anywhere in the world without having to switch devices. The same interoperability is true for standardized file formats like MP3 and JPEG, and in many other technological areas. Some technologies that are used to enable these standards are protected by patents – so-called standard-essential patents (SEPs).

This combination of protected intellectual property and global usability constitutes a very powerful asset. One company can have the exclusive rights to a technology that is implemented all around the world. New academic research, presented at the European Policy for Intellectual Property (EPIP 2015) conference in Glasgow, organized by CREATe (Research Councils UK Copyright Centre), seeks to assess the economic impact of such SEPs for today’s globalized economies.

The study by Florian Ramel and Professor Knut Blind, both from Technische Universität Berlin, finds that SEPs have become a major driver of trade in the global IT and communication technology sector. Moreover, the authors are able to show that SEPs are an important bargaining chip for companies that wish to get involved in global value chains (i.e. the global network to produce one good in several steps across more than one country). Usually, one high-tech standard combines a large number of technologies, many of which are protected by SEPs. In order to realize production in compliance with the standard, SEP owners have to allow other producers to use their protected technology. The license fees can be reduced for the licencees, if these also have something to offer – such as another SEP license. This kind of reciprocal relationship makes SEPs an important currency in the global collaboration of companies.

The study uses econometric techniques to examine the trade flows between 20 developed countries that are active in the IT and communication technology sector in the time period between 1995 and 2008. In particular, the results show that the trade flows between two countries increase by more than 12%, when the total number of SEPs held by companies in these countries increases by 1%.

This leads to important implications especially for countries’ research and innovation policy. If domestic companies hold SEPs, they can engage in global value chains. Fewer SEPs do not only lead to less engagement in these value chains. Fewer SEPs also mean reduced bargaining power when it comes to the production of components or whole products in compliance with globally accepted standards, for which the domestic companies need licenses to one or more SEPs from foreign firms. Governments are hence well advised to foster research and development producing results and patents that are likely to be used in future global standards. Only when domestic firms are supported in this direction, they will be able to compete, or simply participate, in future global markets.

ENDS

Note for editors: ‘The Influence of Standard Essential Patents on Trade’ by Florian Ramel and Knut Blind is a paper presented at the European Policy for Intellectual Property (EPIP) Conference, University of Glasgow, 2-3 September 2015. For more information visit: http://www.epip2015.org/

Florian Ramel is is research associate at the Chair for Innovation Economics, Technische Universität Berlin.

Knut Blind holds the Chair for Innovation Economics, Technische Universität Berlinin collaborarion with the Fraunhofer Institute of Open Communication Systems FOKUS, and the Chair of Standardisation at the Rotterdam School of Management

For further information contact the corresponding author Florian Ramel on +49.30.314.76624 (email: florian.ramel@tu-berlin.de) Or the CREATe PR team (email: contact@create.ac.uk) .

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