Patent Licensing Networks

Posted by Social Science Research Network

Patent Licensing Networks – Doh-Shin Jeon (Toulouse School of Economics (TSE) ; Centre for Economic Policy Research) and Yassine Lefouili (University of Toulouse 1 – Toulouse School of Economics)

ABSTRACT: This paper investigates the patent licensing networks formed by competing fi?rms. Assuming that licensing agreements can involve the payment of ?fixed fees only and that fi?rms compete à la Cournot, we show that the complete network is always bilaterally efficient and that the monopoly network is bilaterally efficient if the patents are complementary enough. In the case of independent patents, we fully characterize the bilaterally efficient networks and ?nd that when the cost reduction resulting from getting access to a competitor?s technology is large enough, the complete network is the only bilaterally efficient one. We also show that the bilaterally efficient networks can be sustained as subgame-perfect Nash equilibria with symmetric payoffs. This implies that the Pareto-dominance criterion selects the network that maximizes industry pro?ts when more than one bilaterally efficient network exists.