Should Good Patents Come in Small Packages? A Welfare Analysis of Intellectual Property Bundling
AbstractIntellectual property owners often hold the rights to several patents, each of which is essential to make or use a product. We compare the welfare properties of package licenses, under which a licensee pays the same fee regardless of the number of technologies licensed, with component licenses, under which each technology is licensed separately and there is no quantity discount. A central finding is that a long-term package license can induce incentives to invent around patents and invest in complementary assets that are closer to their socially optimal levels than are those induced by a long-term component license. We also identify settings in which a short-term license is a partial substitute for a package license and a prohibition on package licensing induces parties to adopt contracts that result in less efficient complementary investment because of hold-up.
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Bibliographic InfoPaper provided by Competition Policy Center, Institute for Business and Economic Research, UC Berkeley in its series Competition Policy Center, Working Paper Series with number qt59x0t6tv.
Date of creation: 27 Jan 2007
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Intellectual property; Licensing; Asymmetric information; Research and development;
Other versions of this item:
- Gilbert, Richard J. & Katz, Michael L., 2006. "Should good patents come in small packages? A welfare analysis of intellectual property bundling," International Journal of Industrial Organization, Elsevier, vol. 24(5), pages 931-952, September.
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