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On the inefficiencies of anti-stacking royalty clauses

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  • Sinitsyn, Maxim

Abstract

When negotiating with multiple licensors, anti-stacking royalty clauses allow the licensee to reduce its payment to the original licensor in proportion to the royalty rate of subsequent licensors. I show that these clauses increase the licensing burden on the licensee and lead to higher prices and smaller output. The licensee and the original licensor could increase the profits of all parties by removing the anti-stacking clause.

Suggested Citation

  • Sinitsyn, Maxim, 2022. "On the inefficiencies of anti-stacking royalty clauses," Economics Letters, Elsevier, vol. 221(C).
    • Handle: RePEc:eee:ecolet:v:221:y:2022:i:c:s0165176522003640
    DOI: 10.1016/j.econlet.2022.110890
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    References listed on IDEAS

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    1. Gerard Llobet & Jorge Padilla, 2016. "The Optimal Scope of the Royalty Base in Patent Licensing," Journal of Law and Economics, University of Chicago Press, vol. 59(1), pages 45-73.
    2. Josh Lerner & Jean Tirole, 2004. "Efficient Patent Pools," American Economic Review, American Economic Association, vol. 94(3), pages 691-711, June.
    3. Galetovic, Alexander & Haber, Stephen & Zaretzki, Lew, 2018. "An estimate of the average cumulative royalty yield in the world mobile phone industry: Theory, measurement and results," Telecommunications Policy, Elsevier, vol. 42(3), pages 263-276.
    4. Spulber, Daniel F., 2016. "Patent licensing and bargaining with innovative complements and substitutes," Research in Economics, Elsevier, vol. 70(4), pages 693-713.
    5. Lemley, Mark A & Shapiro, Carl, 2007. "Patent Hold-Up and Royalty Stacking," Competition Policy Center, Working Paper Series qt8638s257, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Licensing; Royalty stacking; Anti-stacking clause; Ad valorem rates;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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