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A Dynamic Model of Cross Licensing

  • Yann Ménière

    (Ecole des Mines de Paris)

  • Sarah Parlane

    (University College Dublin)

In sectors with cumulative and complementry technologies, some firms 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 firms 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 al- ternative settings. One where the firms cross license or pool their patents and another where the patent strength is restricetd. We verify whether and when such alternatives are socially efficient.

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File URL: http://www.ucd.ie/economics/research/papers/2004/WP04.24.pdf
File Function: First version, 2004
Download Restriction: no

Paper provided by School Of Economics, University College Dublin in its series Working Papers with number 200424.

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Length: 28 pages
Date of creation: 05 Nov 2004
Date of revision:
Handle: RePEc:ucn:wpaper:200424
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  1. Chaim Fershtman & Morton I. Kamien, 1990. "Cross Licensing of Complementary Technologies," Discussion Papers 866, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. 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, 03.
  3. James Bessen & Robert M. Hunt, 2004. "An empirical look at software patents," Working Papers 03-17, Federal Reserve Bank of Philadelphia.
  4. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
  5. 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, vol. 32(1), pages 101-28, Spring.
  6. Mazzoleni, Roberto & Nelson, Richard R., 1998. "The benefits and costs of strong patent protection: a contribution to the current debate," Research Policy, Elsevier, vol. 27(3), pages 273-284, July.
  7. James Bessen & Eric Maskin, 2009. "Sequential innovation, patents, and imitation," RAND Journal of Economics, RAND Corporation, vol. 40(4), pages 611-635.
  8. Carl Shapiro, 2003. "Antitrust Limits to Patent Settlements," Law and Economics 0303004, EconWPA.
  9. Josh Lerner & Jean Tirole, 2002. "Efficient Patent Pools," NBER Working Papers 9175, National Bureau of Economic Research, Inc.
  10. Suzanne Scotchmer, 1991. "Standing on the Shoulders of Giants: Cumulative Research and the Patent Law," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 29-41, Winter.
  11. James Bessen, 2004. "Patent Thickets: Strategic Patenting of Complex Technologies," Working Papers 0401, Research on Innovation.
  12. Mark A. Lemley & Carl Shapiro, 2005. "Probabilistic Patents," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 75-98, Spring.
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