Essentiality checks for standard essential patents

There is widespread concern about the lack of transparency regarding standard essential patents (SEPs). This paper examines the proposal to introduce essentiality checks, a certification scheme for declared SEPs. We develop a framework that allows us to evaluate how essentiality checks would impact licensing, litigation, and incentives to innovate. In our model, an upstream innovator invests in R&D and privately learns about the likely essentiality of its patents for a standard. The innovator then licenses the patents to a downstream implementer who can contest the essentiality of the patents in court. We show that, although essentiality checks can reduce litigation, they also raise incentives for R&D investment. Because the latter can be excessive if FRAND requirements are ineffective and spillovers are small, the overall welfare impact of essentiality checks is ambiguous.