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Decentralized licensing of complementary patents: Comparing the royalty, fixed-fee and two-part tariff regimes

  • Yann Ménière

    ()

    (CERNA - Centre d'économie industrielle - Mines ParisTech)

  • Sarah Parlane

    ()

    (UCD School of Economics - University College Dublin)

This paper explores the decentralized licensing of complementary patents reading on a technology standard. We develop a model in which manufacturers must buy licenses from different patent owners in order to enter the market for differentiated standard-compliant products. We consider three different types of licensing, namely, the fixed-fee, per-unit royalty and two-part tariff regimes, and compare their performances in terms of licensing revenue, price, product variety and welfare. We show that each regime entails different types of coordination failures. We establish that each of them may maximize the licensing revenue depending on the number of licensors, number of potential entrants and product differentiation.

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Paper provided by HAL in its series Post-Print with number hal-00460754.

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Date of creation: May 2010
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Publication status: Published, Information Economics and Policy, 2010, 22, 2, 178-191
Handle: RePEc:hal:journl:hal-00460754
Note: View the original document on HAL open archive server: http://hal-ensmp.archives-ouvertes.fr/hal-00460754/en/
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  1. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, June.
  2. Reiko Aoki; Sadao Nagaoka, 2004. "The Consortium Standard and Patent Pools," Econometric Society 2004 Far Eastern Meetings 788, Econometric Society.
  3. Sougata Poddar & Uday Bhanu Sinha, 2004. "On Patent Licensing in Spatial Competition," The Economic Record, The Economic Society of Australia, vol. 80(249), pages 208-218, 06.
  4. Benjamin Chiao & Josh Lerner & Jean Tirole, 2005. "The Rules of Standard Setting Organizations: An Empirical Analysis," NBER Working Papers 11156, National Bureau of Economic Research, Inc.
  5. Nisvan Erkal, 2005. "Optimal Licensing Policy in Differentiated Industries," The Economic Record, The Economic Society of Australia, vol. 81(252), pages 51-60, 03.
  6. Can Erutku & Yves Richelle, 2007. "Optimal Licensing Contracts and the Value of a Patent," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(2), pages 407-436, 06.
  7. Kamien, Morton I. & Oren, Shmuel S. & Tauman, Yair, 1992. "Optimal licensing of cost-reducing innovation," Journal of Mathematical Economics, Elsevier, vol. 21(5), pages 483-508.
  8. Sen, Debapriya, 2005. "Fee versus royalty reconsidered," Games and Economic Behavior, Elsevier, vol. 53(1), pages 141-147, October.
  9. Francisco CABALLERO-SANZ & Rafael MONER-COLONQUES & José J. SEMPERE-MONERRIS, 2002. "Optimal Licensing in a Spatial Model," Annales d'Economie et de Statistique, ENSAE, issue 66, pages 257-279.
  10. Kamien, Morton I., 1992. "Patent licensing," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 11, pages 331-354 Elsevier.
  11. Morton I. Kamien & Yair Tauman, 1984. "Fees Versus Royalties and the Private Value of a Patent," Discussion Papers 583, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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