Licensing in the Patent Thicket - Timing and Benefits
AbstractLicensing can be a solution for hold-up in patent thickets. In this paper we study whether licensing is an effective solution for hold-up. To do this we distinguish between ex ante and ex post licensing. A theoretical model shows that firms’ expectations of blocking in a patent thicket determine whether they license ex ante while ex post licensing arises if expected blocking was low but realized blocking turns out to be high. It can also be shown that ex ante licensing will allow firms to reduce their patenting efforts. A sample selection model of licensing is derived from the theoretical model. Applying this to data from the semiconductor industry we show that licensing does help firms to resolve blocking. However, the probability of observing licensing decreases as fragmentation of property rights increases and arises mainly between large firms with similar market shares. Licensing experience is also an important determinant of licensing. As expected ex ante licensing allows firms to reduce the level of patenting.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 24007.
Date of creation: 15 Jul 2010
Date of revision:
Hold-Up Problem; Licensing; Innovation; Patent Race; Patent Thicket;
Find related papers by JEL classification:
- L0 - Industrial Organization - - General
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- O38 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Government Policy
- O34 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Intellectual Property Rights
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