Should Good Patents Come in Small Packages? A Welfare Analysis of Intellectual Property Bundling

Richard Gilbert and Michael Katz ()

Department of Economics, Working Paper Series from Department of Economics, Institute for Business and Economic Research, UC Berkeley

Abstract: Intellectual property owners often hold the rights to several patents, each of which is essential to make or use a product. We compare the welfare properties of package licenses, under which a licensee pays the same fee regardless of the number of technologies licensed, with component licenses, under which each technology is licensed separately and there is no quantity discount. A central finding is that a long-term package license can induce incentives to invent around patents and invest in complementary assets that are closer to their socially optimal levels than are those induced by a long-term component license. We also identify settings in which a short-term license is a partial substitute for a package license and a prohibition on package licensing induces parties to adopt contracts that result in less efficient complementary investment because of hold-up.

Keywords: Intellectual property; Licensing; Asymmetric information; Research and development (search for similar items in EconPapers)
Date: 2007-01-27
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Related works:
Working Paper: Should Good Patents Come in Small Packages? A Welfare Analysis of Intellectual Property Bundling (2007)
Journal Article: Should good patents come in small packages? A welfare analysis of intellectual property bundling (2006)
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