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Patent Pools And Cross-Licensing In The Shadow Of Patent Litigation


  • Jay Pil Choi


This article develops a framework to analyze the incentives to form a patent pool or engage in cross-licensing arrangements in the presence of uncertainty about the validity and coverage of patents that makes disputes inevitable. It analyzes the private incentives to litigate and compares them with the social incentives. It shows that pooling arrangements can have the effect of sheltering invalid patents from challenges. This result has an antitrust implication that patent pools should not be permitted until after patentees have challenged the validity of each other's patents if litigation costs are not too large. Copyright (2010) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Jay Pil Choi, 2010. "Patent Pools And Cross-Licensing In The Shadow Of Patent Litigation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(2), pages 441-460, May.
  • Handle: RePEc:ier:iecrev:v:51:y:2010:i:2:p:441-460

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    References listed on IDEAS

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    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Jeitschko Thomas D. & Zhang Nanyun, 2014. "Adverse Effects of Patent Pooling on Product Development and Commercialization," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 14(1), pages 1-31, January.
    2. Gilbert, Richard J. & Katz, Michael L., 2011. "Efficient division of profits from complementary innovations," International Journal of Industrial Organization, Elsevier, vol. 29(4), pages 443-454, July.
    3. Steffen Brenner, 2009. "Optimal formation rules for patent pools," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 40(3), pages 373-388, September.
    4. Ghafele, Roya & Gibert, Benjamin, 2011. "The Transaction Cost Benefits of Electronic Patent Licensing Platforms: A Discussion at the Example of the PatentBooks Model," MPRA Paper 36010, University Library of Munich, Germany, revised 10 Jan 2012.
    5. Jeon, Doh-Shin & Lefouili, Yassine, 2015. "Cross-Licensing and Competition," CEPR Discussion Papers 10941, C.E.P.R. Discussion Papers.
    6. Akifumi Ishihara & Noriyuki Yanagawa, 2013. "Dark Sides of Patent Pools with Compulsory Independent Licensing," CARF F-Series CARF-F-318, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    7. Bourreau, Marc & Cambini, Carlo & Hoernig, Steffen, 2013. "Cooperative Investment, Uncertainty and Access," CEPR Discussion Papers 9376, C.E.P.R. Discussion Papers.
    8. repec:kap:revind:v:51:y:2017:i:1:d:10.1007_s11151-016-9542-z is not listed on IDEAS
    9. Aharony, Joseph & Liu, Chelsea & Yawson, Alfred, 2015. "Corporate litigation and executive turnover," Journal of Corporate Finance, Elsevier, vol. 34(C), pages 268-292.
    10. Thomas Jeitschko & Nanyun Zhang, 2011. "Patent Pools and Product Development," Working Papers 2011-02, Towson University, Department of Economics, revised Feb 2011.
    11. Doh-Shin Jeon & Yassine Lefouili, 2013. "Cross-Licensing and Competition," Working Papers 13-11, NET Institute.
    12. Gastón Llanes & Joaquín Poblete, 2014. "Ex Ante Agreements in Standard Setting and Patent-Pool Formation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(1), pages 50-67, March.
    13. Gallini, Nancy, 2014. "Cooperating with competitors: Patent pooling and choice of a new standard," International Journal of Industrial Organization, Elsevier, vol. 36(C), pages 4-21.
    14. Cambini, Carlo & Silvestri, Virginia, 2013. "Investment sharing in broadband networks," Telecommunications Policy, Elsevier, vol. 37(10), pages 861-878.
    15. 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.
    16. Arijit Mukherjee, 2013. "Patent pool under endogenous technology choice," Discussion Paper Series 2013_07, Department of Economics, Loughborough University, revised Jul 2013.
    17. Zhao, Dan, 2017. "Choices and impacts of cross-licensing contracts," International Review of Economics & Finance, Elsevier, vol. 48(C), pages 389-405.
    18. Mark A. Lemley & Carl Shapiro, 2005. "Probabilistic Patents," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 75-98, Spring.
    19. Gallini, Nancy, 2015. "Promoting Competition by Coordinating Prices: When Rivals Share Intellectual Property," Economics working papers nancy_gallini-2015-22, Vancouver School of Economics, revised 07 Dec 2015.
    20. Haejun Jeon, 2016. "Patent litigation and cross licensing with cumulative innovation," Journal of Economics, Springer, vol. 119(3), pages 179-218, November.
    21. Doh-Shin Jeon & Yassine Lefouili, 2014. "Patent Licensing Networks," Working Papers 14-16, NET Institute.

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