Tilburg Law and Economics Center

TILEC supports and stimulates academic research on the governance of economic activity. It fosters academically path breaking and practically relevant research and aims to be a leading center worldwide.

TILEC Work in Progress: Olia Kanevskaia and Panos Delimatsis

Exit, Voice and Loyalty: Strategic Behaviour in IEEE
10:45-11:45, T 50A

The protection of intellectual property rights and its limits has spurred controversy in the realm of standardization. While standard-setting evinces an array of conflicting interests, considerations regarding the inclusion and subsequent treatment of proprietary elements in a technical standard hold the lion’s share of concerns that Standards Development Organizations (SDOs) have to grapple with. When charging excessive licensing fees or attempting to manipulate the standard-setting process through essential patent claims, patent-holders effectively prevent the access to the standard and thereby abuse their technological supremacy to the detriment of newcomers and innovation. On the opposite side, any use of patented components without guaranteeing proper remuneration for patent-holders will weaken their incentives to contribute to standards development and risks constraining technological progress. In an attempt to alleviate possible antitrust concerns while offering adequate compensation for patent-holders, SDOs adopt formal policies that govern matters related to intellectual property issues and the incorporation of patented technologies into standards. These policies aim at striking a balance between conflicting interests of technology vendors and implementers.  Similarly to statutes and working procedures, patent policies form an integral part of SDOs’ operational framework: their acceptance is a prerequisite for companies to acquire SDOs’ membership and formally participate in its standard-setting. Following this logic, then, any modifications of an SDO’s patent policy alter the agreement each party initially entered into when joining the organization. Accordingly, a situation may occur when a forum does not live up to the expectations raised by the initial repertoire of rules anymore, and members may find themselves bound by the obligations they have never intended to assume.

This paper seeks to explore how members of Standards Development Organisations (SDOs) respond to the amendments of intellectual property rules. We use the exit and voice theory by Hirshman (1970) to discuss the incentives of firms to enter and exit standards development groups, and also review strategies of stakeholders joining or leaving professional associations that are well documented in academic scholarship. Drawing upon the example of the Institute of Electrical and Electronics Engineers (IEEE) revised patent policy, which took effect in 2015, we offer a taxonomy of strategies that can be adopted by members opposing modifications, and study the effect that such changes may have in the nature and structure of a given industry and whether different types of exit appear to exist.

When: 15 November 2017 10:45

End date: 15 November 2017 11:45

Where: Tias building