Bargaining and delay in patent licensing

Ana Mauleon, Vincent Vannetelbosch and Cecilia Vergari ()

No 2010077, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We consider a model of licensing of a non-drastic innovation in which the patent holder (an outside innovator) negotiates either up-front fixed fees or per-unit royal- ties with two firms producing horizontally differentiated brands and competing à la Cournot. We investigate how licensing schemes (fixed fee or per-unit royalty) and the number of licenses sold (exclusive licensing or complete technology diffusion) affect price agreements and delays in reaching an agreement. We show that the patent holder prefers to license by means of up-front fixed fees except if market competition is mild and the innovation size is small. Once there is private information about the relative bargaining power of the parties, the patent holder may prefer licensing by means of per-unit royalties even if market competition is strong. Moreover, the delay in reaching an agreement is greater whenever the patent holder chooses to negotiate up-front fixed fees instead of per-unit royalties.

Keywords: patent licensing; fixed fee; royalty; bargaining; private information (search for similar items in EconPapers)
JEL-codes: C78 D43 D45 L13 (search for similar items in EconPapers)
Date: 2010-12-01
New Economics Papers: this item is included in nep-com, nep-cta, nep-gth, nep-ind, nep-ino, nep-ipr, nep-pr~ and nep-tid
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Related works:
Journal Article: Bargaining and delay in patent licensing (2013)
Working Paper: Bargaining and delay in patent licensing (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2010077

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