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Screening for Good Patent Pools through Price Caps on Individual Licenses

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  • Aleksandra Boutin

Abstract

Patent pools reduce prices when selling complementary inputs to technologies, but can also effectively cartelize markets when involving substitutes. Independent licensing, by reintroducing competition, ensures that only good pools form when there are two patent holders involved. For larger pools, independent licensing needs to be complemented by other policy tools. We propose to constrain the royalties for the patents individually licensed outside the pool with price caps replicating the pool's sharing rule. This information-free screening device works with asymmetries, even when licensors try to stabilize pools by readjusting the sharing rule in a way that may not reflect contributions.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Aleksandra Boutin, 2014. "Screening for Good Patent Pools through Price Caps on Individual Licenses," Working Papers ECARES ECARES 2014-18, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:eca:wpaper:2013/159222
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    References listed on IDEAS

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    1. Josh Lerner & Marcin Strojwas & Jean Tirole, 2007. "The design of patent pools: the determinants of licensing rules," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 610-625, September.
    2. Carlsson, Hans & van Damme, Eric, 1993. "Global Games and Equilibrium Selection," Econometrica, Econometric Society, vol. 61(5), pages 989-1018, September.
    3. Carl Shapiro, 2001. "Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard Setting," NBER Chapters, in: Innovation Policy and the Economy, Volume 1, pages 119-150, National Bureau of Economic Research, Inc.
    4. Layne-Farrar, Anne & Lerner, Josh, 2011. "To join or not to join: Examining patent pool participation and rent sharing rules," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 294-303, March.
    5. Rey, Patrick & Tirole, Jean, 2013. "Cooperation vs. Collusion: How Essentiality Shapes Co-opetition," IDEI Working Papers 801, Institut d'Économie Industrielle (IDEI), Toulouse.
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    Cited by:

    1. Patrick Rey & Jean Tirole, 2019. "Price Caps as Welfare-Enhancing Coopetition," Journal of Political Economy, University of Chicago Press, vol. 127(6), pages 3018-3069.
    2. Jean Tirole, 2015. "Market Failures and Public Policy," American Economic Review, American Economic Association, vol. 105(6), pages 1665-1682, June.
    3. Gerard Llobet & Jorge Padilla, 2016. "The Inverse Cournot Effect in Royalty Negotiations with Complementary Patents," Working Papers wp2016_1608, CEMFI.
    4. Jay Pil Choi & Heiko Gerlach, 2015. "Patent pools, litigation, and innovation," RAND Journal of Economics, RAND Corporation, vol. 46(3), pages 499-523, September.
    5. Tesoriere, Antonio, 2019. "Stable sharing rules and participation in pools of essential patents," Games and Economic Behavior, Elsevier, vol. 117(C), pages 40-58.
    6. Ishihara, Akifumi & Yanagawa, Noriyuki, 2018. "Dark sides of patent pools with independent licensing," International Journal of Industrial Organization, Elsevier, vol. 57(C), pages 1-34.
    7. Lampert, Hodaya & Wettstein, David, 2020. "Patents and pools in pyramidal innovation structures," International Journal of Industrial Organization, Elsevier, vol. 69(C).

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    More about this item

    Keywords

    technology licensing; patent pools; substitutes and complements; independent licensing; price caps; joint marketing;
    All these keywords.

    JEL classification:

    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General

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