Peng, Shen | April 1, 2023

The Constitution grants patent owners exclusive rights over their inventions to “promote the Progress of Science.”1 This clause was drafted based on the belief that monetary incentives granted to the first inventor, such as the proceeds from selling and licensing the invention, will foster new ideas and accelerate innovation to the benefit of the public welfare. However, when the first inventor is the sole benefactor of the rewards from the innovation, subsequent innovation may be stifled. For instance, the first person to invent the idea of a mobile phone but lacking the right to use the underlying technologies essential to a mobile phone must obtain licenses from the patent owners for the phone’s low-voltage battery, keyboard, camera, operating system, and telecommunication technologies.2 In a free market system, these deals will rarely go smoothly. If a low-voltage battery is the only battery in the market suitable for a future mobile phone, the mobile phone inventor will be forced to license the lowvoltage battery from its owner. Bearing this in mind, a battery patent owner who has a lot of market power will naturally demand a very high royalty (similar to the “patent holdup” issue discussed later in this article). Even if the mobile phone inventor successfully secures all necessary patents at a reasonable royalty rate, the accumulative royalties may be too high for a mobile phone product to make economic sense (similar to the “royalty stacking” issue tackled later in this article). These issues are especially prominent in the context of technology standards. For example, if a particular phone transmitter becomes the industry standard for receiving input and sending output signals, all mobile phone companies would be “forced” to license from the transmitter’s patent owner to ensure their phone’s interoperability to compete with other companies. Despite the possibility that other transmitters in the market may work as well as the standard transmitter (standard–essential technology), the standard–essential technology in effect becomes the only transmitter in the market without competition. In other words, the potential substitutes and alternatives to the standard-essential technology are foreclosed due to its incompatibility with products that implement standard-essential technologies. The standard–essential technology, therefore, gives rise to an antitrust issue that inhibits future innovations and harms public welfare. This paper proposes a solution to antitrust issues arising from technology standard-setting. An overview of the standard-setting process is helpful to understand the issues inherent in the process, including patent holdup, patent ambush, and royalty stacking. These issues have antitrust implications. The paper next examines these issues in light of the Sherman Act and relevant antitrust case law. Two notable solutions to the technology standard antitrust issue and their limitations are briefly mentioned. Finally, we look to copyright law for solutions.