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Licensing in the Patent Thicket - Timing and Benefits


  • Siebert, Ralph Bernd
  • Graevenitz, Georg von


Licensing can be a solution for hold-up in patent thickets. In this paper we study whether licensing is an effective solution for hold-up. To do this we distinguish between ex ante and ex post licensing. A theoretical model shows that firms’ expectations of blocking in a patent thicket determine whether they license ex ante while ex post licensing arises if expected blocking was low but realized blocking turns out to be high. It can also be shown that ex ante licensing will allow firms to reduce their patenting efforts. A sample selection model of licensing is derived from the theoretical model. Applying this to data from the semiconductor industry we show that licensing does help firms to resolve blocking. However, the probability of observing licensing decreases as fragmentation of property rights increases and arises mainly between large firms with similar market shares. Licensing experience is also an important determinant of licensing. As expected ex ante licensing allows firms to reduce the level of patenting.

Suggested Citation

  • Siebert, Ralph Bernd & Graevenitz, Georg von, 2010. "Licensing in the Patent Thicket - Timing and Benefits," MPRA Paper 24007, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:24007

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    References listed on IDEAS

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    2. Graham, Stuart J.H. & Harhoff, Dietmar, 2006. "Can Post-Grant Reviews Improve Patent System Design? A Twin Study of US and European Patents," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 38, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    3. Georg Graevenitz & Stefan Wagner & Dietmar Harhoff, 2013. "Incidence and Growth of Patent Thickets: The Impact of Technological Opportunities and Complexity," Journal of Industrial Economics, Wiley Blackwell, vol. 61(3), pages 521-563, September.
    4. Carl Shapiro, 2001. "Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard Setting," NBER Chapters,in: Innovation Policy and the Economy, Volume 1, pages 119-150 National Bureau of Economic Research, Inc.
    5. Tom Lee & Louis L. Wilde, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, Oxford University Press, vol. 94(2), pages 429-436.
    6. Alberto Galasso, 2007. "Broad Cross-License Agreements andPersuasive Patent Litigation: Theory andEvidence from the Semiconductor Industry," STICERD - Economics of Industry Papers 45, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    7. Fershtman, Chaim & Kamien, Morton I., 1992. "Cross licensing of complementary technologies," International Journal of Industrial Organization, Elsevier, vol. 10(3), pages 329-348, September.
    8. Derek J. Clark & Kai A. Konrad, 2008. "Fragmented Property Rights and Incentives for R& D," Management Science, INFORMS, vol. 54(5), pages 969-981, May.
    9. Albert, M. B. & Avery, D. & Narin, F. & McAllister, P., 1991. "Direct validation of citation counts as indicators of industrially important patents," Research Policy, Elsevier, vol. 20(3), pages 251-259, June.
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    Cited by:

    1. Doh-Shin Jeon & Yassine Lefouili, 2013. "Cross-Licensing and Competition," Working Papers 13-11, NET Institute.
    2. Fischer, Timo & Henkel, Joachim, 2012. "Patent trolls on markets for technology – An empirical analysis of NPEs’ patent acquisitions," Research Policy, Elsevier, vol. 41(9), pages 1519-1533.
    3. Schwiebacher, Franz, 2013. "Does fragmented or heterogeneous IP ownership stifle investments in innovation?," ZEW Discussion Papers 13-096, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

    More about this item


    Hold-Up Problem; Licensing; Innovation; Patent Race; Patent Thicket;

    JEL classification:

    • L0 - Industrial Organization - - General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital


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