Efficient infringement is when firms opt to “infringe now, pay later,” rather than accepting ex ante a license to use a patented technology. This behavior is particularly attractive when the infringer believes that, even if it is found to have infringed a valid patent, it will not be enjoined from continued infringement. At worst, absent injunctive relief, the infringer will need only pay damages for past infringement, approximating what it would have paid if it had licensed the technology ex ante, and then a royalty rate for future infringement. Essentially, the infringer is in no worse a position that it would be had it accepted a license and may even be in an improved position if the royalty rate set by a court is lower than it could have obtained via negotiation.

Efficient infringement is of particular concern in the standards essential patent (SEP) space because injunctive relief is generally unavailable to SEP owners. This chapter explains that courts are unlikely to grant requests for permanent injunctions and SEP owners are unlikely to even seek injunctive relief, setting up the necessary condition for efficient infringement to flourish. Unsurprisingly, there is evidence that infringers are selecting to “infringe now, pay later” when it comes to SEPs and this chapter sets out the case why this is problematic for a well-functioning innovation system.

This chapter introduces the concept of standards-essential intellectual property (SEIP), including standards-essential patents (SEPs), standards-essential copyrights, and other applicable forms of IP. The chapter includes detailed consideration of SEPs – including a survey of scholarship of well-documented issues such as patent holdup, royalty stacking, component patenting and patent thickets – not neglecting also the availability of collective rights organizations, e.g. patent pools. Consideration is also given to applicable limiting doctrines in patent law such as defences for experimental use, as well as fundamental principles such as the requirement to publish. Detailed consideration is given to patent remedies, notably injunction and damages; compulsory licencing is also discussed. Likewise, copyright laws are considered carefully. Likewise, copyright laws are considered carefully. There is discussion of the particular situation of copyrights in relation to software and the structure of databases. There is also consideration of layout circuit and trade secret laws, as well as compulsory licensing.