Working Paper: NBER ID: w10546
Authors: Stephen M. Maurer; Suzanne Scotchmer
Abstract: For over a century, courts and commentators have struggled to find principles that reconcile patent and antitrust law, especially as to patent licensing. We interpret case law and commentary to arrive at three unifying principles for acceptable terms of license. Profit neutrality' holds that patent rewards should not depend on the rightholder's ability to work the patent himself. Derived reward' holds that the patent holder's profits should be earned, if at all, from the social value created by the invention. Minimalism' holds that licensing contracts should not contain more restrictions than are necessary to achieve neutrality. We argue that these principles largely rationalize important decisions of the twentieth century. They also justify the Supreme Court's controversial General Electric decision, which holds that patentholders can set prices charged by their licensees.
Keywords: Patent Law; Antitrust Law; Licensing; Economic Theory
JEL Codes: K21; L12; L24; L41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| structure of licensing agreements (D45) | economic outcomes for patent holders (O34) |
| licensing agreement does not align with derived reward principle (D45) | monopolistic practices (L12) |
| excessive restrictions in licensing contracts (D45) | anti-competitive behavior (L41) |