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Cross-Licensing of Competing Patents as a Facilitating Device

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  • Mukesh Eswaran

Abstract

This paper hypothesizes that, when their products are imperfect substitutes, firms can promote collusion by cross-licensing their competing patents. Cross-licensing is shown to enhance the degree of collusion achieved in a repeated game by credibly introducing the threat of increased rivalry in the market for each firm's product. The paper then examines the consistency of the theory developed with the available evidence. Antitrust implications of the practice of cross-licensing of competing patents are discussed.

Suggested Citation

  • Mukesh Eswaran, 1994. "Cross-Licensing of Competing Patents as a Facilitating Device," Canadian Journal of Economics, Canadian Economics Association, vol. 27(3), pages 689-708, August.
  • Handle: RePEc:cje:issued:v:27:y:1994:i:3:p:689-708
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    Citations

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    Cited by:

    1. Luigi Filippini, 2006. "Cournot competition among multiproduct firms:specialization through licensing," DISCE - Quaderni dell'Istituto di Teoria Economica e Metodi Quantitativi itemq0542, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    2. Eswaran, Mukesh & Gallini, Nancy, 2016. "Rescuing the Golden Age of Antibiotics: Can Economics Help Avert the Looming Crisis?," Economics working papers nancy_gallini-2016-9, Vancouver School of Economics, revised 04 Jul 2016.
    3. Rockett, Katharine, 2010. "Property Rights and Invention," Handbook of the Economics of Innovation, Elsevier.
    4. Arijit Mukherjee & Uday Bhanu Sinha, 2013. "Patent Protection, Southern Innovation and Welfare in a North–South Trade Model," Economica, London School of Economics and Political Science, vol. 80(318), pages 248-273, April.
    5. Miguel González-Maestre, 2008. "Coordination Incentives Under Complementary Cost-Reducing Technologies ," Australian Economic Papers, Wiley Blackwell, vol. 47(3), pages 221-234, September.
    6. Gelves, Juan Alejandro & Heywood, John S., 2016. "How does a mixed ownership firm license a patent?," Economic Modelling, Elsevier, vol. 59(C), pages 278-284.
    7. Heywood, John S. & Li, Jianpei & Ye, Guangliang, 2014. "Per unit vs. ad valorem royalties under asymmetric information," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 38-46.
    8. Zhao, Dan, 2017. "Choices and impacts of cross-licensing contracts," International Review of Economics & Finance, Elsevier, vol. 48(C), pages 389-405.
    9. Mottner, Sandra & Johnson, James P., 2000. "Motivations and risks in international licensing: a review and implications for licensing to transitional and emerging economies," Journal of World Business, Elsevier, vol. 35(2), pages 171-188, July.
    10. Saracho, Ana I., 2011. "Licensing information goods," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 187-199, March.
    11. Eswaran, Mukesh & Gallini, Nancy, 2017. "Can Competition Extend the Golden Age of Antibiotics?," Microeconomics.ca working papers -2017-9, Vancouver School of Economics, revised 19 Oct 2017.
    12. Marjit, Sugata & Mukherjee, Arijit & Ling Shi, He, 2001. "Cooperation in R&D: the case of patent infringement agreements," Journal of Economic Behavior & Organization, Elsevier, vol. 45(4), pages 383-401, August.
    13. Ping-Sing Kuo & Yan-Shu Lin & Cheng-Hau Peng, 2016. "International Technology Transfer and Welfare," Review of Development Economics, Wiley Blackwell, vol. 20(1), pages 214-227, February.
    14. Jean-François Sattin, 2016. "Exploring the survival of patent licensing: some evidence from French foreign agreements," The Journal of Technology Transfer, Springer, vol. 41(3), pages 610-630, June.
    15. Marie-Laure Cabon-Dhersin & Rim Lahmandi-Ayed, 2011. "R&D Organization: Cooperation or Cross-Licensing?," Recherches économiques de Louvain, De Boeck Université, vol. 77(1), pages 31-52.
    16. TAKECHI Kazutaka, 2012. "Negative Effects of Intellectual Property Protection: The unusual suspects?," Discussion papers 12057, Research Institute of Economy, Trade and Industry (RIETI).
    17. Neelanjan Sen, 2015. "Technology Transfer in Oligopoly in Presence of Fixed-Cost in Production," Journal of Industry, Competition and Trade, Springer, vol. 15(4), pages 383-409, December.
    18. Arijit Mukherjee & Soma Mukherjee, 2008. "Excess-Entry Theorem: The Implications Of Licensing," Manchester School, University of Manchester, vol. 76(6), pages 675-689, December.
    19. Doh-Shin Jeon & Yassine Lefouili, 2014. "Patent Licensing Networks," Working Papers 14-16, NET Institute.
    20. Horbulyk, Theodore M., 2000. "Strategy And Incentives In The Compulsory Licensing Of Intellectual Property In Agriculture," Proceedings:Transitions in Agbiotech: Economics of Strategy and Policy, June 24-25, 1999, Washington, D.C. 26011, Regional Research Project NE-165 Private Strategies, Public Policies, and Food System Performance.
    21. Doh-Shin Jeon & Yassine Lefouili, 2013. "Cross-Licensing and Competition," Working Papers 13-11, NET Institute.
    22. Kato, Atsushi, 2004. "Patent pool enhances market competition," International Review of Law and Economics, Elsevier, vol. 24(2), pages 255-268, June.
    23. R�gibeau, P & Rockett, K, 2004. "The Relationship Between Intellectual Property Law and Competition Law: An Economic Approach," Economics Discussion Papers 2851, University of Essex, Department of Economics.

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