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LICENSING 'WEAK' PATENTS -super-

Author

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  • DAVID ENCAOUA
  • YASSINE LEFOUILI

Abstract

In this paper, we revisit the issue of licensing 'weak' patents under the shadow of litigation. Departing from the seminal paper by Farrell and Shapiro [2008] , we consider innovations of any size and not only 'small' innovations, and we allow the number of licensees to be less than the number of firms in the downstream industry. It is shown that the optimal two-part tariff license from the patent holder's perspective may either deter or trigger litigation, and conditions under which each case arises are provided. We also reexamine the claim that the licensing revenues from 'weak' patents overcompensate the patent holder relative to what a natural benchmark would command. Finally we suggest two policy levers that may alleviate the harm raised by the licensing of 'weak' patents. Copyright 2009 The Authors. Journal compilation 2009 Blackwell Publishing Ltd. and the Editorial Board of The Journal of Industrial Economics.

Suggested Citation

  • David Encaoua & Yassine Lefouili, 2009. "LICENSING 'WEAK' PATENTS -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 57(3), pages 492-525, September.
  • Handle: RePEc:bla:jindec:v:57:y:2009:i:3:p:492-525
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    References listed on IDEAS

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    1. Lanjouw, Jean O & Schankerman, Mark, 2001. "Characteristics of Patent Litigation: A Window on Competition," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 129-151, Spring.
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    Cited by:

    1. Amir, Rabah & Encaoua, David & Lefouili, Yassine, 2014. "Optimal licensing of uncertain patents in the shadow of litigation," Games and Economic Behavior, Elsevier, vol. 88(C), pages 320-338.
    2. Rabah Amir & David Encaoua & Yassine Lefouili, 2011. "Per-Unit Royalty vs Fixed Fee: The Case of Weak Patents," Working Papers halshs-00595493, HAL.
    3. Gaessler, Fabian & Lefouili, Yassine, 2017. "What to Buy When Forum Shopping? Analyzing Court Selection in Patent Litigation," TSE Working Papers 17-775, Toulouse School of Economics (TSE).
    4. Cremers, Katrin & Gaessler, Fabian & Harhoff, Dietmar & Helmers, Christian & Lefouili, Yassine, 2016. "Invalid but infringed? An analysis of the bifurcated patent litigation system," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PA), pages 218-242.
    5. Rabah Amir & David Encaoua & Yassine Lefouili, 2013. "Optimal Licensing of Uncertain Patents in the Shadow of Litigation," Working Papers halshs-00847955, HAL.

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