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Profit Neutrality in Licensing: The Boundary Between Antitrust Law and Patent Law

Author

Listed:
  • Stephen Maurer

    (Graduate School of Public Policy, University of California, Berkeley)

  • Suzanne Scotchmer

    (Dept. of Economics & Graduate School of Public Policy, University of California, Berkeley and NBER)

Abstract

From the antitrust case law that governs restrictions on patent licenses, we derive three unifying principles: just reward, profit neutrality and minimalism. The just-reward principle holds that the patentholder's profits should be earned, if at all, from the social value created by his invention. Profit neutrality holds that patent rewards should not depend on the rightholder's ability to work the patent himself. Minimalism holds that licensing contracts should not use more restrictive terms than required for neutrality. We discuss how these principles determine which patent license restrictions should and should not be acceptable from an antitrust perspective. We also compare these principles and the per se rules that follow from them to the potential benefits and drawbacks likely to be encountered under a rule of reason approach.
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Suggested Citation

  • Stephen Maurer & Suzanne Scotchmer, "undated". "Profit Neutrality in Licensing: The Boundary Between Antitrust Law and Patent Law," American Law & Economics Association Annual Meetings 1090, American Law & Economics Association.
  • Handle: RePEc:bep:alecam:1090
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    References listed on IDEAS

    as
    1. Shapiro, Carl, 2003. " Antitrust Limits to Patent Settlements," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 391-411, Summer.
    2. Paul Klemperer, 1990. "How Broad Should the Scope of Patent Protection Be?," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 113-130, Spring.
    3. Ted O'Donoghue & Suzanne Scotchmer & Jacques-François Thisse, 1998. "Patent Breadth, Patent Life, and the Pace of Technological Progress," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(1), pages 1-32, March.
    4. Suzanne Scotchmer, 1991. "Standing on the Shoulders of Giants: Cumulative Research and the Patent Law," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 29-41, Winter.
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    Citations

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    Cited by:

    1. Reyer Gerlagh & Snorre Kverndokk & Knut Einar Rosendah, 2008. "Linking Environmental and Innovation Policy," Working Papers 2008.53, Fondazione Eni Enrico Mattei.
    2. Toker Doganoglu & Firat Inceoglu, 2014. "Licensing of a Drastic Innovation with Product Differentiation," Manchester School, University of Manchester, vol. 82(3), pages 296-321, June.
    3. Schankerman, Mark & Scotchmer, Suzanne, 2005. "Still Looking for Lost Profits: The Case of Horizontal Competition," Department of Economics, Working Paper Series qt45r7776m, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    4. Rockett, Katharine, 2010. "Property Rights and Invention," Handbook of the Economics of Innovation, Elsevier.
    5. Matthew D. Henry & John L. Turner, 2010. "PATENT DAMAGES AND SPATIAL COMPETITION -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 58(2), pages 279-305, June.
    6. Alberto BUCCI, 2004. "Economic growth in an enlarged Europe: the human capital and R&D dimensions," Departmental Working Papers 2004-22, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    7. Llobet, Gerard & Suarez, Javier, 2005. "Financing and the Protection of Innovators," CEPR Discussion Papers 4944, C.E.P.R. Discussion Papers.
    8. Gerlagh, Reyer & Kverndokk, Snorre & Rosendahl, Knut Einar, 2014. "The optimal time path of clean energy R&D policy when patents have finite lifetime," Journal of Environmental Economics and Management, Elsevier, vol. 67(1), pages 2-19.
    9. 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.

    More about this item

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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