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Patents and Licenses

Author

Listed:
  • Yair Tauman

    () (Department of Economics, Stony Brook University)

  • Debrapiya Sen

    () (Department of Economics, Ryerson University, Toronto, ON, Canada.)

Abstract

This article considers the problem of patent licensing in a Cournot oligopoly under a class of general demand functions. We consider two cases, the case where the innovator is an outsider and the one where it is one of the incumbent rms. The licensing policies considered are upfront fees, royalties and combinations of the two. It is shown that (i) for generic values of magnitudes of the innovation, a royalty policy is better than fee or auction provided the industry size is relatively large, (ii) under combinations of fees and royalties, provided the innovation is relatively signi cant (or the industry size is relatively large), (a) there is always an optimal policy where the innovation is licensed to practically all rms of the industry and (b) any optimal combination includes a positive royalty.

Suggested Citation

  • Yair Tauman & Debrapiya Sen, 2012. "Patents and Licenses," Department of Economics Working Papers 12-05, Stony Brook University, Department of Economics.
  • Handle: RePEc:nys:sunysb:12-05
    as

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    File URL: http://www.stonybrook.edu/economics/research/papers/2012/licensingDeb-Yair.pdf
    File Function: First version, 2012
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    References listed on IDEAS

    as
    1. San Martín, Marta & Saracho, Ana I., 2010. "Royalty licensing," Economics Letters, Elsevier, vol. 107(2), pages 284-287, May.
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    6. Morton I. Kamien & Yair Tauman, 1986. "Fees Versus Royalties and the Private Value of a Patent," The Quarterly Journal of Economics, Oxford University Press, vol. 101(3), pages 471-491.
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    10. Tauman, Yair & Weng, Ming-Hung, 2012. "Selling patent rights and the incentive to innovate," Economics Letters, Elsevier, vol. 114(3), pages 241-244.
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    13. Stamatopoulos, Giorgos & Tauman, Yair, 2008. "Licensing of a quality-improving innovation," Mathematical Social Sciences, Elsevier, vol. 56(3), pages 410-438, November.
    14. Wang, X Henry & Yang, Bill Z, 1999. "On Licensing under Bertrand Competition," Australian Economic Papers, Wiley Blackwell, vol. 38(2), pages 106-119, June.
    15. Jelnov, Artyom & Tauman, Yair, 2009. "The private value of a patent: A cooperative approach," Mathematical Social Sciences, Elsevier, vol. 58(1), pages 84-97, July.
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    28. repec:adr:anecst:y:1991:i:24:p:08 is not listed on IDEAS
    29. 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.
    30. Sen, Debapriya & Stamatopoulos, Giorgos, 2009. "Drastic innovations and multiplicity of optimal licensing policies," Economics Letters, Elsevier, vol. 105(1), pages 7-10, October.
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    32. Yair Tauman & Naoki Watanabe, 2007. "The Shapley Value of a Patent Licensing Game: the Asymptotic Equivalence to Non-cooperative Results," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 30(1), pages 135-149, January.
    33. Ana I. Saracho, 2002. "Patent Licensing Under Strategic Delegation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(2), pages 225-251, June.
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    Cited by:

    1. SCHOLZ, Eva-Maria, 2014. "Licensing to vertically related markets," CORE Discussion Papers 2014020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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