Overcoming inefficiencies of patent licensing:A method to assess patent’s essentiality for technical standards

The market for patent licenses is of highest importance for technological innovation, yet riddled with inefficiencies. A particular problem in the context of technical standards such as LTE is a lack of information regarding which patents are 'essential’ to implement the standard. This information is crucial because it simplifies the determination of infringement and implies specific, 'FRAND’ licensing rules. However, while many standards-developing organisations stipulate that such patents be explicitly declared, little is known about which of these are actually essential. The absence of publicly available information on essentiality has significant social costs due to frictions it causes in the licensing market. Responding to calls from industry, courts, and policy makers, several commercial and a few academic studies have attempted such assessments, but each has limitations. This paper reports on the technical feasibility of a system of expert assessments for patent essentiality. In an experiment, based on a factorial design, twenty-eight experts, including many patent examiners, performed 109 assessments, spending a total of over 100 working days. Comparing their outcomes to a high-quality reference point, we conclude that sufficiently accurate assessments, at a price level that allows large scale testing, are certainly technically feasible, and identify routes to further improvement