Profit Neutrality in Licensing: The Boundary between Antitrust Law and Patent Law

Posted: 29 Feb 2008  

Stephen M. Maurer

University of California, Berkeley

Suzanne Scotchmer

University of California - Department of Economics ; School of Law, University of California, Berkeley; National Bureau of Economic Research (NBER)

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Date Written: 2006

Abstract

We address the patent/antitrust conflict in licensing and develop three guiding principles for deciding acceptable terms of license. Profit neutrality holds that patent rewards should not depend on the rightholder's ability to work the patent himself. Derived reward holds that the patentholder's profits should be earned, if at all, from the social value created by the invention. Minimalism holds that licenses should not be more restrictive than necessary to achieve neutrality. We argue that these principles are economically sound and rationalize some key decisions of the twentieth century such as General Electric and Line Material.

Suggested Citation

Maurer, Stephen M. and Scotchmer, Suzanne, Profit Neutrality in Licensing: The Boundary between Antitrust Law and Patent Law ( 2006). American Law and Economics Review, Vol. 8, Issue 3, pp. 476-522, 2006. Available at SSRN: https://ssrn.com/abstract=1097908 or http://dx.doi.org/10.1093/aler/ahl013

Stephen M. Maurer (Contact Author)

University of California, Berkeley ( email )

Berkeley, CA 94720
United States

Suzanne Scotchmer

University of California - Department of Economics ( email )

Berkeley, CA 94720-3880
United States
510-643-8562 (Phone)

School of Law, University of California, Berkeley ( email )

215 Boalt Hall
Berkeley, CA 94720-7200
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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