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Profit Neutrality in Licensing: The Boundary Between Antitrust Law and Patent Law

  • Stephen M. Maurer

    (Maurer Graduate School of Public Policy, University of California, Berkeley)

  • Suzanne Scotchmer

    (Department of Economics & Graduate School of Public Policy, University of California, Berkeley & NBER)

From the antitrust case law that governs restrictions on patent licenses, we derive three unifying principles: just reward, profit neutrality and minimalism. The just-reward principle holds that the patentholder's profits should be earned, if at all, from the social value created by his invention. Profit neutrality holds that patent rewards should not depend on the rightholder's ability to work the patent himself. Minimalism holds that licensing contracts should not use more restrictive terms than required for neutrality. We discuss how these principles determine which patent license restrictions should and should not be acceptable from an antitrust perspective. We also compare these principles and the per se rules that follow from them to the potential benefits and drawbacks likely to be encountered under a rule of reason approach.

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File URL: http://128.118.178.162/eps/le/papers/0407/0407001.pdf
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Paper provided by EconWPA in its series Law and Economics with number 0407001.

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Length: 43 pages
Date of creation: 02 Jul 2004
Date of revision:
Handle: RePEc:wpa:wuwple:0407001
Note: 43 pages, Acrobat .pdf
Contact details of provider: Web page: http://128.118.178.162

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  1. Shapiro, Carl, 2001. "Antitrust Limits to Patent Settlements," Competition Policy Center, Working Paper Series qt87s5j911, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  2. Klemperer, Paul, 1990. "How Broad Should the Scope of Patent Protection Be?," CEPR Discussion Papers 392, C.E.P.R. Discussion Papers.
  3. O'DONOGHUE, Ted & SCOTCHMER, Suzanne & THISSE, Jacques-François, . "Patent breadth, patent life, and the pace of technological progress," CORE Discussion Papers RP -1314, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. 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.
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