Field-of-use restrictions in licensing agreements
A widely used clause in license contracts -- the field-of-use restriction (FOUR) -- precludes licensees from operating outside of the specified technical field. When a technology has several distinct applications, FOUR allow the licensor to slice up his rights and attribute them to the lowest-cost producer in each field of use. This can improve production efficiency. However, with complex technologies, the boundaries of fields of use may be difficult to codify, entailing a risk of overlap of licensees' rights. We explore how this affects the optimal license contract in a moral hazard framework where the licensor's effort determines the probability of overlap. We show that depending on the contracting environment, the license agreement may include output restrictions and nonlinear royalty schemes.
|Date of creation:||15 Jul 2007|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Choi, Jay Pil, 2001.
"Technology transfer with moral hazard,"
International Journal of Industrial Organization,
Elsevier, vol. 19(1-2), pages 249-266, January.
- 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.
- Patrick Bajari & Steven Tadelis, 1999.
"Incentives versus Transaction Costs: A Theory of Procurement Contracts,"
99029, Stanford University, Department of Economics.
- Bajari, Patrick & Tadelis, Steven, 2001. "Incentives versus Transaction Costs: A Theory of Procurement Contracts," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 387-407, Autumn.
- Giacinta Cestone & Lucy White, 2003.
"Anticompetitive Financial Contracting: The Design of Financial Claims,"
Journal of Finance,
American Finance Association, vol. 58(5), pages 2109-2142, October.
- Cestone, G. & White, L., 1999. "Anti-Competitive Financial Contracting: the Design of Financial Claims," Papers 99.525, Toulouse - GREMAQ.
- Giacinta Cestone & Lucy White, . "Anti-Competitive Financial Contracting: The Design Of Financial Claims," UFAE and IAE Working Papers 453.00, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Cestone, Giacinta & White, Lucy, 2002. "Anti-Competitive Financial Contracting: The Design of Financial Claims," CEPR Discussion Papers 3182, C.E.P.R. Discussion Papers.
- 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.
- Hart, O. & Tirole, J., 1990. "Vertical Integration And Market Foreclosure," Working papers 548, Massachusetts Institute of Technology (MIT), Department of Economics.
- Miklós-Thal, Jeanine & Rey, Patrick & Vergé, Thibaud, 2010. "Vertical relations," International Journal of Industrial Organization, Elsevier, vol. 28(4), pages 345-349, July.
- Beggs, A. W., 1992. "The licensing of patents under asymmetric information," International Journal of Industrial Organization, Elsevier, vol. 10(2), pages 171-191, June.
- Marie Thursby & Richard Jensen, 2001. "Proofs and Prototypes for Sale: The Licensing of University Inventions," American Economic Review, American Economic Association, vol. 91(1), pages 240-259, March.
- Sreya Kolay & Greg Shaffer & Janusz A. Ordover, 2004. "All-Units Discounts in Retail Contracts," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(3), pages 429-459, 09.
- Richard Gilbert & Carl Shapiro, 1997. "Antitrust Issues in the Licensing of Intellectual Property: The Nine No-No's Meet the Nineties," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1997 Micr), pages 283-349.
- Thomas R Varner, 2011. "An Economic Perspective on Patent Licensing Structure and Provisions," Business Economics, Palgrave Macmillan, vol. 46(4), pages 229-238, October.
- Anand, Bharat N & Khanna, Tarun, 2000. "The Structure of Licensing Contracts," Journal of Industrial Economics, Wiley Blackwell, vol. 48(1), pages 103-35, March.
- Kathryn E. Spier, 1992. "Incomplete Contracts and Signalling," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 432-443, Autumn.
- G.F. Mathewson & R.A. Winter, 1984. "An Economic Theory of Vertical Restraints," RAND Journal of Economics, The RAND Corporation, vol. 15(1), pages 27-38, Spring.
- Caves, Richard E & Crookell, Harold & Killing, J Peter, 1983. "The Imperfect Market for Technology Licenses," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 45(3), pages 249-67, August.
- Klemperer, Paul, 1990.
"How Broad Should the Scope of Patent Protection Be?,"
CEPR Discussion Papers
392, C.E.P.R. Discussion Papers.
- Paul Klemperer, 1990. "How Broad Should the Scope of Patent Protection Be?," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 113-130, Spring.
- Economides, Nicholas, 1986. "Minimal and maximal product differentiation in Hotelling's duopoly," Economics Letters, Elsevier, vol. 21(1), pages 67-71.
- Patrick Rey & Jean Tirole, 1985. "The Logic of Vertical Restraints," Working papers 396, Massachusetts Institute of Technology (MIT), Department of Economics.
- Bessy, Christian & Brousseau, Eric, 1998. "Technology licensing contracts features and diversity1," International Review of Law and Economics, Elsevier, vol. 18(4), pages 451-489, December.
- Michael L. Katz & Carl Shapiro, 1986. "How to License Intangible Property," The Quarterly Journal of Economics, Oxford University Press, vol. 101(3), pages 567-589.
- Dye, Ronald A, 1985. "Costly Contract Contingencies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(1), pages 233-50, February.
- Nancy T. Gallini & Brian D. Wright, 1990. "Technology Transfer under Asymmetric Information," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 147-160, Spring.
- Ashish Arora, 1995. "Licensing Tacit Knowledge: Intellectual Property Rights And The Market For Know-How," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 4(1), pages 41-60.
- Ilya Segal, 1999. "Contracting with Externalities," The Quarterly Journal of Economics, Oxford University Press, vol. 114(2), pages 337-388.
- Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, vol. 25(3), pages 329-369, December.
- Mathias Dewatripont, 1992. "Implementation theory: a discussion," ULB Institutional Repository 2013/9667, ULB -- Universite Libre de Bruxelles.
- Bousquet, Alain & Cremer, Helmuth & Ivaldi, Marc & Wolkowicz, Michel, 1998. "Risk sharing in licensing," International Journal of Industrial Organization, Elsevier, vol. 16(5), pages 535-554, September.
- Katz, Michael L., 1989. "Vertical contractual relations," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 11, pages 655-721 Elsevier.
- Joseph J. Spengler, 1950. "Vertical Integration and Antitrust Policy," Journal of Political Economy, University of Chicago Press, vol. 58, pages 347.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:8534. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.