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Collective Rights Organizations and Upstream R&D Investment

Reiko Aoki and Schiff Aaron

No 457, PIE/CIS Discussion Paper from Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University

Abstract: We examine the effect of collective rights organizations (CROs) on upstream innovation. CROs are established to facilitate downstream use, such as production and downstream innovation, of upstream intellectual property. We compare CROs with two alternative royalty redistribution rules, two different upstream innovation environments and two different anti-trust rules. Most CROs increase upstream R&D incentives by increasing licensing profit but this may lead to over-investment. We observe that when the market is ex-ante asymmetric (only one firm has ability to develop one of the technologies), unequal royalty distribution in favor of the one firm may be ex-post efficient but may result in under investment in the complementary technology. Thus in addition to balancing the trade-off between ex-ante (dynamic) efficiency and ex-post (static) efficiency as in the case of a single intellectual property, CROs must achieve the balance among members.

Keywords: Intellectual property; patent licensing; collective rights organizations; anticommons; anti-trust; royalty (search for similar items in EconPapers)
JEL-codes: L24 O31 O34 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ino, nep-ipr and nep-tid
Date: 2009-10
Note: 8 January 2009
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