|
Speakers |
|
Vanderbilt University On the Optimal Number of Licensees for a Technology [pdf] Abstract A framework is proposed to analyze the sale of multiple licenses to use a cost-reducing technology. Firms differ in their ability to reduce their costs by purchasing a license. A purchaser imposes a negative externality on others. The payo¤ of each firm depends on the number and abilities of the licensees. The seller maximizes her revenue by optimally choosing the licensees. The optimal mechanism is determined both when each firm’s ability to reduce its cost is publicly observable and when it is not. In the optimal mechanism, sometimes non-licensees make a payment to the seller. |
|
Kellogg School of Management, Northwestern University Brand Management in Pharmaceuticals [pdf] (joint work with Morton I. Kamien, Israel Zang)
|
|
Competition Bureau Licensing Innovations with Exclusive Contracts [pdf] (joint work with Armando Priegue Freire and Yves Richelle) Abstract We look for the existence of (simple) licensing contracts that can generate revenues for an innovator equal to those that would be obtained by a monopolist using the cost reducing innovation that is being licensed. The contracts we focus on specify an exclusive territory clause and a fixed fee as a form of payment. While such licensing contracts are commonly observed their effects have not been investigated in the licensing literature. We find that their existence are greatly influenced by three factors: the size of the market relative to the pre-innovation marginal cost, the quality of the innovation, and the degree of substitutability between the goods being produced in the market. |
|
Universitat d'Alacant Patent Licensing by Means of an Auction: Internal vs. External Patentee [pdf] (joint work with Joel Sandonís) Abstract An independent research laboratory owns a patented process innovation that can be licensed by means of an auction to two Cournot duopolists producing differentiated goods. For large innovations and close enough substitute goods the patentee auctions off only one license, preventing the full diffusion of the innovation. For this range of parameters, however, if the laboratory merged with one of the firms in the industry, full technology diffusion would be implemented as the merged entity would always license the innovation to the rival firm. This explains that, in this context, a vertical merger is both profitable and welfare improving. |
|
Università Cattolica, Milano Cournot Competition Among Multiproduct Firms: Specialization Through Licensing [pdf] Abstract In a duopoly where each firm produces substitute goods, we show that under process innovation, specialization is the equilibrium attained with cross-licensing. Each firm produces only the good for which it has an advantage. Patent pool extension confirms the results. |
|
London School of Economics Cross-License Agreements in the Semiconductor Industry: Waiting to Persuade? [pdf] Abstract In various industries cross-licensing is considered a useful method to obtain freedom to operate and to avoid patent litigation. In this paper we study the trade-off between litigating and cross-licensing that firms face to protect their intellectual property. We present a dynamic model of bargaining with learning in which firms’ decision to litigate or cross-license depends on their capital intensity. In particular the model predicts that where firms’ capital intensity is higher their incentive to litigate and delay a cross-license agreement is lower. Using a novel dataset on the US Semiconductor Industry we obtain empirical results consistent with those suggested by the model. |
|
ISEG Universidade Tecnica de Lisboa Quality Improvement and Network Externalities [pdf] (joint work with Jean Gabszewicz) Abstract
We analyse the optimal pricing choice of an incumbent firm that sells a good with network externalities and is threatened by the entry of a higher quality variant. In the framework of a vertical differentiation model, we find a necessary and sufficient condition under which quality improvement occurs as a result of this competition. |
|
Dartmouth College Little Firms and Big Patents: Patent Filing Incentives and Competition for Technology Partners [pdf] Abstract This paper considers a three-player signaling game to study patent filing strategies of small firms. In particular, filing incentives of two domestic firms that aim at attaining a partnership with a large foreign technology user are studied. Each firm's decision to file shall depend on the costs to reach a particular disclosure quality and on the payoffs that the foreign firm expects to receive from cooperation with the firm under consideration. Different payoff regimes are discussed. The disclosure level of known technology competitors and the profit expectations of the foreign partner are discussed in two separating/semi-separating profit regimes. In general, separation is reached. However, in one regime both firms have equal chances to win a partnership. Patent subsidizations that typically aim at reducing the costs of patent applications do not change the result. An empirical case in point is provided to motivate the analysis. |
|
Tel Aviv University The Private Value of a Patent: A Cooperative Approach [pdf] (joint work with Yair Tauman) Abstract We consider a game in characteristic form played by firms in a Cournot market and an outside patent holder of a cost-reducing innovation. The worth of a coalition of players is the total Cournot profit of the active firms within the coalition which results in the Nash equilibrium of the strategic game played by the coalition and its complement; each one of them chooses the number of firms to activate. Only firms in a coalition containing the patent holder are allowed to use the new technology. We prove that when the number of firms is large, the Shapley value of the patent holder approximates the non-cooperative result obtained previously in literature. When there is a positive fixed cost component, the Nash equilibrium must be mixed in some cases, but nevertheless the result still holds. |
|
Northwestern University Entrepreneurship by the Books [pdf]
|
|
University of California, Berkeley Complementary Innovations
|
|
Cerna, Ecole des mines de Paris Licensing a Standard: Fixed Fee versus Royalty [pdf] (joint work with Sarah Parlane) Abstract This paper considers the allocation of essential patents by a profit maximizing monopoly. Using a model incorporating product di¤erentiation and network externalities we show that …xed fee licences are optimal either when there is little competition downstream or when it is desirable to restrict entry. By opposition, royalty based licenses allows for more downstream …rms (thanks to higher prices) and lead to a revenue which is less sensitive to more product homogeneity. They are optimal when downstream entry is desirable, which occurs either because there are positive network externalities, or for some intermediate values of product differentiation. |
|
University of Nottingham Unionization Structure, Licensing and Innovation [pdf] (joint work with Enrico Pennings) Abstract Taking technological differences between firms as given, we show that the technologically advanced firm has a stronger incentive for technology licensing under a decentralized unionization structure than with centralized wage setting. Furthermore, We show that, in presence of licensing, the incentive for innovation may also be stronger under decentralized unions. Unions have a clear preference for centralization only if productivity improvements are relatively small. |
|
Tokyo Institute of Technology Stable Profit Sharing in Patent Licensing: General Bargaining Outcomes [pdf] (joint work with Naoki Watanabe) Abstract We investigate coalition structures formed by an external licensor of a patented innovation and firms operating oligopolistic markets, and study licensing agreements reached as the bargaining outcomes under those coalition structures. Every core with coalition structure is empty. If the number of licensees that maximizes the total surplus of licensees is greater than the number of non-licensees, the bargaining set with coalition structure is a singleton and the optimal number of licensees that maximizes the licensor's revenue is uniquelydetermined. The bargaining set coincides with the core, if the core is nonempty. |
|
Oakland University The Benefit of the Start-Up Handicap [pdf] (joint work with Manfred Dix) Abstract Why do prestigious companies choose to fund new product development by venture capital instead of doing so in their own Research & Development Laboratories? In this note, we consider the launching of a start-up to be associated with “waste”. The inventor has to deal with much of the bureaucratic proceedings himself to get the start-up off the ground, and such dealing with bureaucracy and paperwork is wasteful (a “handicap”). One reason might be asymmetric information of the quality of the inventor. Only the most productive of the inventors are able to lead start-up ventures, and overcome the problems associated with getting a new venture off the ground. We characterize the conditions for a unique separating contract (among the different contracts that a financing company could offer), such that the high type inventor launches a start-up company and the low type scientist remains in in-house development. |
|
National University of Singapore Patent Licensing from High-Cost Firm to Low-Cost Firm [pdf] (joint work with Uday Bhanu Sinha) Abstract We study the optimal patent licensing under Cournot duopoly where the technology transfer takes place from an innovative firm, which is relatively inefficient in terms of cost of production to its costefficient rival. It is found that the optimal licensing arrangement often involves a two part tariff (i.e., fixed fee plus a linear per unit output royalty). We also find that even a drastic technology is licensed even though the patentee is a competitor in the homogenous product market. |
|
Stony Brook University Patent Licensing: a Survey
|
|
Tel Aviv University Licensing Interim R&D Knowledge [pdf] Abstract This paper examines licensing of interim R&D knowledge among firms engaged in a winner-takes-all R&D contest to come up with particular commercially profitable innovation. Interim knowledge represents basic research knowledge which the firms already posses and it enhances the chances of the licensees to win the contest. The paper shows that there is a wide range of parameters for which the leading firm in the contest will prefer to either license or sell its knowledge to one of its rivals or to both. Although licensing erodes its technological lead, it also allows the leading firm to play the rival firms against one another by charging them fees that reflect not only the value for getting a license but also the value of preventing the other firm from getting an exclusive license. |
|
University of Crete On the Licensing of a Demand-Enhancing Innovation [pdf] Abstract In this paper we analyze the licensing of an innovation that raises the quality level of the products in a market and also expands total market demand. We show that if consumers’ evaluation for the products is sufficiently high then irrespective of the magnitude of the innovation there is no transfer of technology from an incumbent innovator to his rival. If the evaluation is low then transfer of technology occurs only if the magnitude of the innovation is sufficiently low. |
|
University of Tsukuba The Kernel of a General Licensing Game: the Optimal Number of Licensees [pdf] (joint work with Shigeo Muto)
|
|
Stony Brook University Selling Patent Rights and the Incentive to Innovate [pdf] (joint work with Yair Tauman) Abstract We study the diffusion of a process innovation of which the outside innovator puts on an auction to sell his patent rights. The winning firm can then sell licenses to other firms in the same industry. We show that the private value of the patent and the incentive to innovate are increasing (decreasing) in the industry size if the demand is strictly convex (concave), and are independent of the industry size if the demand is linear. |
|
Tel Aviv University Brand Management in Pharmaceuticals [pdf] (joint work with James G. Conley, Morton I. Kamien)
|
|
The Hebrew University Bargaining with a Patent Holder: Axiomatic Approach (joint work with Yair Tauman) Abstract We study the bargaining problem of a patent holder of a cost-reducing innovation and firms in an oligopolistic industry. A patent holder, an incumbent firm or an outside entity, can license its innovation to some (or all) of the firms in the industry, thus increasing their competitive edge. The firms which receive the license transfer some part of their payoffs to the patent holder. We state five axioms and characterize the bargaining solution which satisfies them: Every firm obtains a weighted average of its individually rational level and its contribution to the total industry welfare. The solution of the equal weights case is the nucleolus of a naturally related game in characteristic form. |