Patent Licensing and Bargaining with Innovative Complements and Substitutes

Research output: Working paper

4 Citations (Scopus)

Abstract

Inventors and producers bargain over royalties to license multiple patented inventions. In the first stage of the bargaining game, inventors offer licenses to producers and producers demand licenses. In the second stage of the game, inventors and producers engage in bilateral bargaining over licensing royalties. The analysis shows that there is a unique weakly dominant strategy equilibrium in license offers. The main result is that this bargaining procedure maximizes the joint profits of inventors and producers. Licensing royalties are less than bundled monopoly royalties. The efficiency of the bargaining outcome contrasts with the inefficiency of patent royalties in the Cournot model. The analysis explores the implications of the main results for antitrust policy concerns including Standard Essential Patent holdup, royalty stacking, patent thickets, the tragedy of the anticommons, and justification for patent pools. The discussion also considers how imperfect intellectual property rights affect bargaining over royalties.
Original languageEnglish (US)
PublisherSocial Science Research Network (SSRN)
StatePublished - Aug 3 2016

Fingerprint

Patent licensing
Substitute
Royalty
License
Inventor
Patents
Licensing
Antitrust policy
Profit
Dominant strategy
Monopoly
Invention
Anticommons
Bargaining games
Justification
Patent pool
Inefficiency
Bilateral bargaining
Intellectual property rights
Holdup

Cite this

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title = "Patent Licensing and Bargaining with Innovative Complements and Substitutes",
abstract = "Inventors and producers bargain over royalties to license multiple patented inventions. In the first stage of the bargaining game, inventors offer licenses to producers and producers demand licenses. In the second stage of the game, inventors and producers engage in bilateral bargaining over licensing royalties. The analysis shows that there is a unique weakly dominant strategy equilibrium in license offers. The main result is that this bargaining procedure maximizes the joint profits of inventors and producers. Licensing royalties are less than bundled monopoly royalties. The efficiency of the bargaining outcome contrasts with the inefficiency of patent royalties in the Cournot model. The analysis explores the implications of the main results for antitrust policy concerns including Standard Essential Patent holdup, royalty stacking, patent thickets, the tragedy of the anticommons, and justification for patent pools. The discussion also considers how imperfect intellectual property rights affect bargaining over royalties.",
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Patent Licensing and Bargaining with Innovative Complements and Substitutes. / Spulber, Daniel F.

Social Science Research Network (SSRN), 2016.

Research output: Working paper

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