Working Paper: CEPR ID: DP5753
Authors: Ralph Siebert; Georg von Graevenitz
Abstract: Licensing in a patent thicket allows firms to either avoid or resolve hold-up. Firms? R&D incentives depend on whether they license ex ante or ex post. We develop a model of a patent portfolio race, which allows for endogenous R&D efforts, to study firms? choice between ex ante and ex post licensing. The model shows that firms? relationships in product markets and technology space jointly determine the type of licensing contract chosen. In particular, product market competitors are more likely to avoid patent portfolio races, since the threat of hold-up increases. On the other hand, more valuable technologies are more likely to give rise to patent portfolio races. We also discuss the welfare implications of these results.
Keywords: holdup problem; innovation; licensing; patent race; patent thicket; research joint ventures
JEL Codes: L13; L49; L63
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| firms' relationships in product markets and technology space (L14) | type of licensing contract chosen (L24) |
| product market competitors (L19) | avoid patent portfolio races (L49) |
| more valuable technologies (O39) | patent portfolio races (O34) |
| blocking strength of rival firms' patent portfolios (L49) | likelihood of firms choosing ex ante licensing (L24) |
| higher blocking strength (Y50) | probability of ex ante licensing (D45) |
| R&D cost function not steep (D24) | likelihood of firms choosing ex ante licensing (L24) |
| higher blocking strength (Y50) | likelihood of ex ante cooperation (C71) |
| value of new technology increases (O33) | attractiveness of ex post licensing relative to ex ante licensing (D45) |