Competing Away Market Power? An Economic Assessment of Ex Ante Auctions in Standard Setting

"In this paper, we provide a bridge between these two worlds: the technical economics literature on auction design and the policy-oriented legal literature that has recently been exploring ex ante auctions as a means of limiting ex post opportunistic behaviours. Despite the size of the economics literature on auctions, it has not anticipated the specifics of IP auctions in standard-setting contexts. We therefore extend and apply the lessons of economic thinking about auctions to the particulars of IP in standard setting. Our focus is on auction design. Is the auction process proposed by Swanson and Baumol likely to yield efficient outcomes? That is, is it likely to appropriately compensate innovators and hence preserve the incentives to invest and innovate in new technologies? Is it likely to keep the cost of the selected technologies under control and ensure

their optimal diffusion ex post? And lastly, would SSOs using ex ante auctions select the most efficient technologies, ie those that create the most value for the standard’s users at a reasonable cost?"