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Jostling for Advantage: Licensing and Entry into Patent Portfolio Races

  • Siebert, Ralph
  • von Graevenitz, Georg

Licensing in a patent thicket allows firms to either avoid or resolve hold-up. Firms’ R&D incentives depend on whether they license ex ante or ex post. We develop a model of a patent portfolio race, which allows for endogenous R&D efforts, to study firms’ choice between ex ante and ex post licensing. The model shows that firms’ relationships in product markets and technology space jointly determine the type of licensing contract chosen. In particular, product market competitors are more likely to avoid patent portfolio races, since the threat of hold-up increases. On the other hand, more valuable technologies are more likely to give rise to patent portfolio races. We also discuss the welfare implications of these results.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5753.

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Date of creation: Jul 2006
Date of revision:
Handle: RePEc:cpr:ceprdp:5753
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  1. Reinganum, Jennifer F., 1989. "The timing of innovation: Research, development, and diffusion," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 14, pages 849-908 Elsevier.
  2. Beath, John & Katsoulacos, Yannis & Ulph, David, 1989. "Strategic R&D Policy," Economic Journal, Royal Economic Society, vol. 99(395), pages 74-83, Supplemen.
  3. Nti, Kofi O, 1997. "Comparative Statics of Contests and Rent-Seeking Games," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(1), pages 43-59, February.
  4. Katsoulacos, Yannis & Ulph, David, 1998. "Endogenous Spillovers and the Performance of Research Joint Ventures," Journal of Industrial Economics, Wiley Blackwell, vol. 46(3), pages 333-57, September.
  5. repec:oup:restud:v:71:y:2004:i:4:p:1064-1088 is not listed on IDEAS
  6. Carl Shapiro, 2003. "Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard-Setting," Law and Economics 0303005, EconWPA.
  7. Siebert, Ralph & von Graevenitz, Georg, 2006. "How Licensing Resolves Hold-Up: Evidence from a Dynamic Panel Data Model with Unobserved Heterogeneity," CEPR Discussion Papers 5436, C.E.P.R. Discussion Papers.
  8. Bronwyn H. Hall, 2005. "Exploring the Patent Explosion," The Journal of Technology Transfer, Springer, vol. 30(2_2), pages 35-48, 01.
  9. Baye, Michael R. & Hoppe, Heidrun C., 2003. "The strategic equivalence of rent-seeking, innovation, and patent-race games," Games and Economic Behavior, Elsevier, vol. 44(2), pages 217-226, August.
  10. repec:oup:qjecon:v:93:y:1979:i:3:p:395-410 is not listed on IDEAS
  11. Anand, Bharat N & Khanna, Tarun, 2000. "The Structure of Licensing Contracts," Journal of Industrial Economics, Wiley Blackwell, vol. 48(1), pages 103-35, March.
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