Investment and patent licensing in the value chain

Arbeitspapier

At which stage in the production chain should patent licensing takes place? In this paper we show that under realistic circumstances a patent holder would be better off by licensing downstream. This occurs when the licensing revenue can depend on the downstream value of the product either directly or through the use of ad-valorem royalties. We show that the results are similar when, instead, we assume that the downstream licensee is less informed about the validity of the patent. In most cases, downstream licensing increases allocative efficiency. However, it might reduce the incentives to invest by the manufacturers and thereby reduce welfare. We characterize the circumstances under which a conflict arises between the stage at which patent holders prefer to license their technology and the stage at which it is optimal from a social standpoint that licensing takes place.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Graduate Institute of International and Development Studies Working Paper ; No. HEIDWP30-2022

Classification and Topics

• Classification: Wirtschaft ; Information and Product Quality; Standardization and Compatibility ; Contracting Out; Joint Ventures; Technology Licensing ; Innovation and Invention: Processes and Incentives ; Intellectual Property and Intellectual Capital
• Subject: Royalty Neutrality ; Standard Setting Organizations ; Patent Licensing ; R&D Investment

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Llobet, Gerard ; Neven, Damien J.
• Event: Veröffentlichung
• (who): Graduate Institute of International and Development Studies
• (where): Geneva
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/278327