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Attracting Skeptical Buyers: Negotiating For Intellectual Property Rights

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  • James J. Anton
  • Dennis A. Yao

Abstract

Expropriable disclosures of knowledge to prospective buyers may be necessary to facilitate the sale of intellectual property (IP). In principle, confidentiality agreements can protect disclosures by granting the seller rights to sue for unauthorized use. In practice, sellers often waive confidentiality rights. We provide an incomplete information explanation for the waiver of confidentiality rights that are valuable in complete information settings. Waiving sacrifices the protective value of confidentiality to gain greater buyer participation. Buyer skepticism, which reduces participation, arises endogenously from three elements: asymmetric information regarding seller IP, rent dissipation from competition for IP, and ex post costs from expropriation lawsuits. Copyright 2008 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

Suggested Citation

  • James J. Anton & Dennis A. Yao, 2008. "Attracting Skeptical Buyers: Negotiating For Intellectual Property Rights," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(1), pages 319-348, February.
  • Handle: RePEc:ier:iecrev:v:49:y:2008:i:1:p:319-348
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    Cited by:

    1. Jay Pil Choi & Christodoulos Stefanadis, 2017. "Sequential Innovation, Naked Exclusion, and Upfront Lump-Sum Payments," CESifo Working Paper Series 6412, CESifo Group Munich.
    2. David Gaddis Ross, 2012. "On Evaluation Costs in Strategic Factor Markets: The Implications for Competition and Organizational Design," Management Science, INFORMS, vol. 58(4), pages 791-804, April.
    3. Bronwyn Hall & Christian Helmers & Mark Rogers & Vania Sena, 2014. "The Choice between Formal and Informal Intellectual Property: A Review," Journal of Economic Literature, American Economic Association, vol. 52(2), pages 375-423, June.
    4. Payot, Frederic & Szalay, Dezsö, 2008. "Sequential Innovations and Intellectual Property Rights," The Warwick Economics Research Paper Series (TWERPS) 864, University of Warwick, Department of Economics.

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