Patent Licensing: The Inside Story

Morton I. Kamien and Yair Tauman ()

Manchester School, 2002, vol. 70, issue 1, 7-15

Abstract: In this paper we compare and contrast the most profitable modes of licensing a cost‐reducing invention by an inventor who is an industry incumbent with one who is not. We find that an industry incumbent favors licensing by means of a royalty per unit of output to which the new technology is applied while an outsider prefers to auction off a fixed number of licences outright. Our analysis also suggests that an outside inventor finds it most profitable to target greater cost‐reducing inventions to monopolistic industries while an incumbent inventor favors competitive industries.

Date: 2002
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