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The Transaction Cost Benefits of Electronic Patent Licensing Platforms: A Discussion at the Example of the PatentBooks Model

  • Ghafele, Roya
  • Gibert, Benjamin

Current mechanisms to compensate inventors and improve legal access to their inventions remain ineffective. Manufacturers encounter significant transaction costs in the process of licensing the multitude of patent rights implicated in their products. High-technology product manufacturing requires access to a diverse pool of technologies that are owned by different organizations all over the world. The transaction costs of licensing these disparate rights are inhibiting unlicensed manufacturers in emerging economies from entering important markets and simultaneously limiting the revenue patent owners can generate from non-exclusive licenses. As communications technologies improve, innovative licensing mechanisms are emerging that can help firms avoid many of these transaction costs. Search and information costs, bargaining and decision costs, enforcement costs and adjustment costs all limit the value generated from licensing transactions. These costs are particularly severe for smaller firms that lack complementary assets to develop their products, lack experience with licensing and do not have large human and financial resources to invest in negotiation outcomes. The transaction costs of licensed manufacturing increase exponentially when having to license multiple rights among disparate rightsholders in a global market. By identifying, grouping, and valuing different rights into a single license, PatentBooks, an illustration of an electronic patent licensing platform, reduces search and information transaction costs. Firms instantaneously identify appropriate license rights from all over the globe without investing considerable resources in hundreds of discrete negotiations. Patent owners are able to generate greater non-exclusive licensing revenue from manufacturers than they could by licensing their rights in isolation. In doing so, they permit firms of all sizes and nationalities to generate more returns from technology and accelerate innovation by facilitating access to valuable inventions.

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File URL: http://mpra.ub.uni-muenchen.de/36010/1/MPRA_paper_36010.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 36010.

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Date of creation: 20 Dec 2011
Date of revision: 10 Jan 2012
Handle: RePEc:pra:mprapa:36010
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  1. Aoki, Reiko & Nagaoka, Sadao, 2004. "The Consortium Standard and Patent Pools," Discussion Paper 222, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  2. Carl Shapiro, 2003. "Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard-Setting," Law and Economics 0303005, EconWPA.
  3. Aoki, Reiko & Schiff, Aaron, 2007. "Intellectual Property Clearinghouses: The Effects of Reduced Transaction Costs in Licensing," PIE/CIS Discussion Paper 335, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  4. Jay Pil Choi, 2010. "Patent Pools And Cross-Licensing In The Shadow Of Patent Litigation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(2), pages 441-460, 05.
  5. Gould, David M. & Gruben, William C., 1996. "The role of intellectual property rights in economic growth," Journal of Development Economics, Elsevier, vol. 48(2), pages 323-350, March.
  6. Schneider, Patricia Higino, 2005. "International trade, economic growth and intellectual property rights: A panel data study of developed and developing countries," Journal of Development Economics, Elsevier, vol. 78(2), pages 529-547, December.
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