Complementary Patents and Market Structure

Klaus Schmidt ()
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Klaus Schmidt: Department of Economics, University of Munich, Ludwigstrasse 28, D-80539 Muenchen, Germany

No 249, Discussion Papers from SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: Many high technology goods are based on standards that require access to several patents that are owned by different IP holders. We investigate the royalties chosen by IP holders under different market structures. Vertical integration of an IP holder and a downstream producer solves the double mark-up problem between these firms. Nevertheless, it may raise royalty rates and reduce output as compared to non-integration. Horizontal integration of IP holders (or a patent pool) solves the complements problem but not the double mark-up problem. Vertical integration discourages entry and reduces innovation incentives, while horizontal integration always encourages entry and innovation.

Keywords: IP rights; complementary patents; standards; licensing; patent pool; vertical integration (search for similar items in EconPapers)
JEL-codes: L15 O31 L24 O32 K11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ind, nep-ino, nep-ipr, nep-law, nep-mic and nep-tid
Date: 2008-09
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Persistent link: http://EconPapers.repec.org/RePEc:trf:wpaper:249

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