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A dynamic model of cross licensing

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  • Yann Ménière
  • Sarah Parlane

Abstract

In sectors with cumulative and complementry technologies, some rms build patent portfolios in order to block their competitors' access to the technology and/or to negociate cross licensing agreements. We propose a dynamic model that captures this behaviour in an integrated duopoly where the rms invest successively in upstream patentable technologies and downstream marketable products. We study the impact of legal patent strength on competition and investment. We then consider two alternative settings. One where the rms cross license or pool their patents and another where the patent strength is restricetd. We verify whether and when such alternatives are socially efficient.

Suggested Citation

  • Yann Ménière & Sarah Parlane, 2004. "A dynamic model of cross licensing," Working Papers 200424, School of Economics, University College Dublin.
  • Handle: RePEc:ucn:wpaper:200424
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    File URL: http://hdl.handle.net/10197/680
    File Function: First version, 2004
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    References listed on IDEAS

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    9. Fershtman, Chaim & Kamien, Morton I., 1992. "Cross licensing of complementary technologies," International Journal of Industrial Organization, Elsevier, pages 329-348.
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    11. James Bessen & Eric Maskin, 2009. "Sequential innovation, patents, and imitation," RAND Journal of Economics, RAND Corporation, pages 611-635.
    12. Ted O'Donoghue & Suzanne Scotchmer & Jacques-François Thisse, 1998. "Patent Breadth, Patent Life, and the Pace of Technological Progress," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(1), pages 1-32, March.
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    14. Hall, Bronwyn H & Ziedonis, Rosemarie Ham, 2001. "The Patent Paradox Revisited: An Empirical Study of Patenting in the U.S. Semiconductor Industry, 1979-1995," RAND Journal of Economics, The RAND Corporation, pages 101-128.
    15. Suzanne Scotchmer, 1991. "Standing on the Shoulders of Giants: Cumulative Research and the Patent Law," Journal of Economic Perspectives, American Economic Association, pages 29-41.
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