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Jostling for advantage or not: Choosing between patent portfolio races and ex ante licensing

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  • Siebert, Ralph
  • von Graevenitz, Georg

Abstract

Complex high technology industries are increasingly affected by patent thickets in which firms' patents mutually block the use of important technologies. Firms facing patent thickets patent intensively to acquire bargaining chips and use licensing to ensure freedom to operate. Such licensing allows rivals to either avoid or resolve hold-up from blocking patents. R&D incentives depend on whether licensing takes place ex ante or ex post. We model the choice between ex ante licensing and entry into patent portfolio races leading to ex post licensing. It is shown that higher degrees of blocking lead firms to license ex post, while stronger product market competition leads firms to license ex ante. Empirical results support these theoretical predictions.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 73 (2010)
Issue (Month): 2 (February)
Pages: 225-245

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Handle: RePEc:eee:jeborg:v:73:y:2010:i:2:p:225-245

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Web page: http://www.elsevier.com/locate/jebo

Related research

Keywords: Hold-up problem Licensing Innovation Patent race Patent thicket Research joint ventures;

References

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  1. Nicholas Bloom & Mark Schankerman & John Van Reenen, 2007. "Identifying Technology Spillovers and Product Market Rivalry," NBER Working Papers 13060, National Bureau of Economic Research, Inc.
  2. Lanjouw, Jean O & Schankerman, Mark, 2004. "Protecting Intellectual Property Rights: Are Small Firms Handicapped?," Journal of Law and Economics, University of Chicago Press, vol. 47(1), pages 45-74, April.
  3. Michael Noel & Mark Schankerman, 2006. "Strategic Patenting and Software Innovation," STICERD - Economics of Industry Papers 43, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  4. Nti, Kofi O, 1997. "Comparative Statics of Contests and Rent-Seeking Games," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(1), pages 43-59, February.
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  7. James Bessen & Eric Maskin, 2006. "Sequential Innovation, Patents, and Imitation," Economics Working Papers 0025, Institute for Advanced Study, School of Social Science.
  8. Noel, Michael D. & Schankerman, Mark, 2006. "Strategic Patenting and Software Innovation," CEPR Discussion Papers 5701, C.E.P.R. Discussion Papers.
  9. Loury, Glenn C, 1979. "Market Structure and Innovation," The Quarterly Journal of Economics, MIT Press, vol. 93(3), pages 395-410, August.
  10. Carl Shapiro, 2003. "Antitrust Limits to Patent Settlements," Law and Economics 0303004, EconWPA.
  11. Reinganum, Jennifer F., 1989. "The timing of innovation: Research, development, and diffusion," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 14, pages 849-908 Elsevier.
  12. Katsoulacos, Yannis & Ulph, David, 1998. "Endogenous Spillovers and the Performance of Research Joint Ventures," Journal of Industrial Economics, Wiley Blackwell, vol. 46(3), pages 333-57, September.
  13. Josh Lerner & Jean Tirole, 2002. "Efficient Patent Pools," NBER Working Papers 9175, National Bureau of Economic Research, Inc.
  14. Siebert, Ralph & Graevenitz, Georg von, 2008. "Does Licensing Resolve Hold Up in the Patent Thicket?," Discussion Papers in Business Administration 2104, University of Munich, Munich School of Management.
  15. Michael Noel & Mark Schankerman, 2006. "Strategic Patenting and Software Innovation," CEP Discussion Papers dp0740, Centre for Economic Performance, LSE.
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Cited by:
  1. Tannista Banerjee & Ralph Siebert, 2014. "The Impact of R&D Cooperations on Drug Variety Offered on the Market. Evidence from the Pharmaceutical Industry," CESifo Working Paper Series 4567, CESifo Group Munich.
  2. Denicolò, Vincenzo & Zanchettin, Piercarlo, 2012. "A dynamic model of patent portfolio races," Economics Letters, Elsevier, vol. 117(3), pages 924-927.
  3. Tannista Banerjee & Stephen Martin, 2013. "Pharmaceutical regulation and innovative performance: a decision-theoretic model," Auburn Economics Working Paper Series auwp2013-21, Department of Economics, Auburn University.
  4. Jay Pil Choi & Heiko Gerlach, 2013. "A Theory of Patent Portfolios," CESifo Working Paper Series 4405, CESifo Group Munich.

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