Jostling for Advantage or Not: Choosing between Patent Portfolio Races and Ex Ante Licensing

41 Pages Posted: 27 Jul 2017

See all articles by Ralph Siebert

Ralph Siebert

Purdue University; CESifo

Georg von Graevenitz

Queen Mary, School of Business and Management; Center for Competition Policy; University of Glasgow - CREATe, RCUK Centre for Copyright and New Business Models in the Creative Economy

Date Written: July 24, 2017

Abstract

Complex high technology industries are increasingly affected by patent thickets in which firms’ patents mutually block the use of important technologies. Firms facing patent thickets patent intensively to acquire bargaining chips and use licensing to ensure freedom to operate. Such licensing allows rivals to either avoid or resolve hold-up from blocking patents. R&D incentives depend on whether licensing takes place ex ante or ex post. We model the choice between ex ante licensing and entry into patent portfolio races leading to ex post licensing. It is shown that higher degrees of blocking lead firms to license ex post, while stronger product market competition leads firms to license ex ante. Empirical results support these theoretical predictions.

Keywords: Hold-Up Problem, Licensing, Innovation, Patent Race, Patent Thicket, Research Joint Ventures

JEL Classification: L13, L49, L63

Suggested Citation

Siebert, Ralph and von Graevenitz, Georg, Jostling for Advantage or Not: Choosing between Patent Portfolio Races and Ex Ante Licensing (July 24, 2017). Journal of Economic Behavior and Organization, Vol. 73, 2010, Available at SSRN: https://ssrn.com/abstract=3007808

Ralph Siebert (Contact Author)

Purdue University ( email )

610 Purdue Mall
West Lafayette, IN 47907
United States

CESifo ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Georg Von Graevenitz

Queen Mary, School of Business and Management ( email )

Mile End
London, E1 4NS
United Kingdom

Center for Competition Policy ( email )

UEA
Norwich Research Park
Norwich, Norfolk NR47TJ
United Kingdom

University of Glasgow - CREATe, RCUK Centre for Copyright and New Business Models in the Creative Economy ( email )

10 The Square, Glasgow University
Glasgow, G12 8QQ
United Kingdom

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