Just-in-time inventions and the development of standards: How firms use opportunistic strategies to obtain standard-essential patents (SEPs)

Recent years have seen large-scale litigation of standard-essential patents (SEPs) between companies like Apple, Samsung, Motorola, Nokia, Google, HTC, Microsoft, Kodak, and Research in Motion. Such patents are particular because they are, by definition, indispensable to any company wishing to implement a technical standard. Such patents bring substantial benefits to their owners and firms that do not have such patents in their own portfolio are sometimes prepared to spend billions of dollars purchasing them and/or signing a license agreement with each of the owners. In addition, the owners have other benefits in financial returns (Blind et al., 2011) and stock market returns (Aggarwal et al., 2011). Thus, firms have huge incentives to obtain essential patents. While there is already a considerable body of literature on the possible effects of SEP ownership on competition (e.g. patent holdup, royalty stacking), not much work has yet been done on how firms obtain such patents in the first place. Notable exceptions are the studies of Omachi (2004), who shows how firms use patent continuations to extend the scope of existing patents in order to make them essential to the standard.