The Value of Disclosing IPR to Open Standard Setting Organizations

Open standard-setting organizations (SSOs) have emerged as important coordination and diffusion mechanism for information and communication technologies. Standards define a set of technical specifications which are intended to provide a common interface design among modules in a technological architecture. Open standards are developed in an open, voluntary and consensus-based process and licensed to anybody at reasonable and non-discriminatory terms. Economic and managerial literature has begun to study cooperative standard-setting only recently.

Little is known about the value of IP contributions to open standards for technology providers. On the one hand, the open availability of essential licenses facilitates entry and increases competitive pressure. Standard-setting codifies frontier technological knowledge and provides laggard firms access to technical experts. On the other hand, entry stimulation provides mix-and-match opportunities to customers and installs the user base of the standardization approach which might be served with compatible products by technology providers.

Open SSOs require their members to disclose upfront standard-essential IPR and associated licensing intentions. They are not required to search their patent portfolios for specific patents which might be essential. We employ a market value approach in order to investigate the valuation of financial markets for disclosing IPR to open SSOs. Our sample consists of large established companies which have been publicly-traded in the U.S. from 1986 to 2005. Presample information shall control for unobserved firm heterogeneity. Citations prior to SSO disclosure shall control for the importance of disclosed patents.

We find that disclosure of standard-relevant IP ownership is positively correlated with company valuation if associated patent rights are referred to explicitly. This suggests that product market advantages from standardized technology outweigh the loss of exclusivity from contributed IPR. Prior literature suggests that firms with low R&D intensity benefit additionally from access to SSO expertise. This is not supported by our evidence. Disclosure of standard-relevant IP ownership without referring to a patent is negatively correlated with company valuation for firms with low R&D intensities. Hence, patents appear to signal the quality of technology contributions from firms with low R&D intensity.

Hussinger, Katrin and Franz Schwiebacher (2013), The Value of Disclosing IPR to Open Standard Setting Organizations, ZEW Discussion Paper No. 13-060, Mannheim, published in: Industry and Innovation.