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Rescuing Antitrust’s Role in Patent Holdup

Standards, common platforms allowing products to work together, are ubiquitous in our economy. They allow consumers to know that their plugs will fit into outlets and that their phones will connect to wireless networks. But imagine that a company (1) has a patent needed to use a standard, (2) promises to license the patent on reasonable terms, and then (3) reverses course, seeking to block the product or charge an exorbitant price. In such a case, the users of the standard are stuck. They have invested in technologies based on the standard. And they may be forced to pay a price reflecting not the added value of the technology but the costs of switching to a new technology. In other words, they are subject to “patent holdup.”