Optimal licensing of uncertain patents in the shadow of litigation

Rabah Amir (), David Encaoua () and Yassine Lefouili

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: This paper investigates the choice of a licensing mechanism by the holder of a patent whose validity is uncertain. We provide sufficient conditions of a general nature under which the licensor prefers to use a per-unit royalty contract. In particular we show that this is the case for the holders of weak patents if the strategic effect of an increase in a potential licensee's unit cost on the equilibrium industry profit is positive. The latter condition is shown to hold in a Cournot (resp. Bertrand) oligopoly with homogeneous (resp. differentiated) products under general assumptions on the demands faced by firms. As a byproduct of our analysis, we contribute to the literature on the cost paradox in oligopoly by offering some new insights of independent interest regarding the effects of cost variations on Cournot and Bertrand equilibria.

Keywords: Licensing mechanisms; Uncertain patents; Patent litigation; Cost comparative statics JEL Classi…cation: D45 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-com, nep-ino, nep-ipr, nep-pr~ and nep-law
Note: View the original document on HAL open archive server: https://hal.science/hal-01087234v1
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

Published in Games and Economic Behavior, 2014, 88, pp.320-338. ⟨10.1016/j.geb.2014.09.009⟩

Downloads: (external link)
https://hal.science/hal-01087234v1/document (application/pdf)

Related works:
Journal Article: Optimal licensing of uncertain patents in the shadow of litigation (2014)
Working Paper: Optimal licensing of uncertain patents in the shadow of litigation (2014)
Working Paper: Optimal Licensing of Uncertain Patents in the Shadow of Litigation (2013)
Working Paper: Optimal Licensing of Uncertain Patents in the Shadow of Litigation (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:hal-01087234

DOI: 10.1016/j.geb.2014.09.009

Access Statistics for this paper

More papers in Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL
Bibliographic data for series maintained by CCSD ().