Consultants Discuss Economics of Royalty Bundling in ABA’s “Landslide”
May 16, 2012
In the May/June 2012 issue of Landslide, a publication of the ABA Section of Intellectual Property Law, Managing Principal Jeffrey Cohen, Manager Divya Mathur, and David Giardina, a partner in the law firm of Sidley Austin LLP, discuss patent values in the context of bundling.
In their article “Some Economics of Royalty Bundling,” the authors contend that the value of a patented invention need not be higher than its standalone worth just because it gets bundled with another good, even a “bigger” good. “The value of the patented invention in bundled goods may be higher, lower, or the same as its value in a standalone good,” they write. Most important, they note, “the value of the patented invention in the bundle can be distinct from the economic underpinnings of bundling itself.”
Using a range of examples, from Chicago-style “red hots” to cellular phones, the authors demonstrate how the importance of a patented feature may be swamped by the larger set of the bundle’s features. “As a result, demand for the patented feature may become more elastic as consumers develop relatively inelastic demand for the bundle’s new features,” they write.
Read the article
© Copyright 2012 by the American Bar Association. Reprinted with permission.