Intellectual Property Clearinghouses and Investment in R&D
28 Pages Posted: 26 Feb 2008
Date Written: January 30, 2008
Abstract
We examine third-party clearinghouses that license innovations on behalf of inventors when downstream uses require licenses to multiple complementary innovations. We consider two simple clearinghouse royalty redistribution schemes, and two different innovation environments. We show that in most cases clearinghouses increase incentives to invest in R&D as they increase profits from licensing. However, expected profits of inventors who have the unique ability to develop a crucial component may be reduced. We also show that clearinghouses may increase or decrease expected welfare, and are more likely to be beneficial when R&D costs are relatively high, and/or the probability of success for inventors is relatively low.
Keywords: Intellectual property, licensing, clearinghouses, anticommons
JEL Classification: L24, O31, O34
Suggested Citation: Suggested Citation
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