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Licensing probabilistic Patents: The duopoly case

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  • Vargas Barrenechea, Martin

Abstract

In this work we study licensing games of non drastic innovations under the shadow of probabilistic patents. We study the situation of a insider innovator that get a new reduction cost innovation and acts in a duopoly market under Cournout competition. When the property rights are not ironclad the potential licensee additional to the option of use the backstop technology instead of the new technology ,has the option of infringe the patent. Under infringement the patent holder can sue the infringer in a court and if its successful could get a order of damages payment. Then when the infringer decides about what kind of technology to use the infringement is always better than to use the backstop technology then a difference of the ironclad licensing games probabilistic rights, change the threats points and makes attractive for the patent holder just to license big innovations under the Lost Profit rule.

Suggested Citation

  • Vargas Barrenechea, Martin, 2008. "Licensing probabilistic Patents: The duopoly case," MPRA Paper 9925, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:9925
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    File URL: https://mpra.ub.uni-muenchen.de/17217/2/MPRA_paper_17217.pdf
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    References listed on IDEAS

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    1. Schankerman, Mark & Scotchmer, Suzanne, 2001. "Damages and Injunctions in Protecting Intellectual Property," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 199-220, Spring.
    2. Jay Pil Choi, 2006. "How Reasonable is the ‘Reasonable’ Royalty Rate? Damage Rules and Probabilistic Intellectual Property Rights," CESifo Working Paper Series 1778, CESifo Group Munich.
    3. Sen, Debapriya & Tauman, Yair, 2007. "General licensing schemes for a cost-reducing innovation," Games and Economic Behavior, Elsevier, vol. 59(1), pages 163-186, April.
    4. James J. Anton & Dennis A. Yao, 2007. "Finding "Lost" Profits: An Equilibrium Analysis of Patent Infringement Damages," Journal of Law, Economics, and Organization, Oxford University Press, vol. 23(1), pages 186-207, April.
    5. Joseph Farrell & Carl Shapiro, 2008. "How Strong Are Weak Patents?," American Economic Review, American Economic Association, vol. 98(4), pages 1347-1369, September.
    6. Wang, X. Henry, 1998. "Fee versus royalty licensing in a Cournot duopoly model," Economics Letters, Elsevier, vol. 60(1), pages 55-62, July.
    7. Kamien, Morton I & Tauman, Yair, 2002. "Patent Licensing: The Inside Story," Manchester School, University of Manchester, vol. 70(1), pages 7-15, January.
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    More about this item

    Keywords

    Patents; innovation economics; probabilistic property rights; damage rules;

    JEL classification:

    • L0 - Industrial Organization - - General
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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