Licensing in the Patent Thicket - Timing and Benefits

Ralph Siebert and Georg von Graevenitz

MPRA Paper from University Library of Munich, Germany

Abstract: Licensing can be a solution for hold-up in patent thickets. In this paper we study whether licensing is an effective solution for hold-up. To do this we distinguish between ex ante and ex post licensing. A theoretical model shows that firms’ expectations of blocking in a patent thicket determine whether they license ex ante while ex post licensing arises if expected blocking was low but realized blocking turns out to be high. It can also be shown that ex ante licensing will allow firms to reduce their patenting efforts. A sample selection model of licensing is derived from the theoretical model. Applying this to data from the semiconductor industry we show that licensing does help firms to resolve blocking. However, the probability of observing licensing decreases as fragmentation of property rights increases and arises mainly between large firms with similar market shares. Licensing experience is also an important determinant of licensing. As expected ex ante licensing allows firms to reduce the level of patenting.

Keywords: Hold-Up Problem; Licensing; Innovation; Patent Race; Patent Thicket (search for similar items in EconPapers)
JEL-codes: C13 L0 O34 O38 (search for similar items in EconPapers)
Date: 2010-07-15
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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