Control Rights Over Intellectual Property: Corporate Venturing and Bankruptcy Regimes

24 Pages Posted: 17 Apr 2008 Last revised: 25 Oct 2014

See all articles by Sudipto Bhattacharya

Sudipto Bhattacharya

London School of Economics; Centre for Economic Policy Research (CEPR)

Sergei Guriev

Sciences Po; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: July 1, 2008

Abstract

We develop a theory of control rights in the context of licensing interim innovative knowledge for further development, which is consistent with the inalienability of initial innovator's intellectual property rights. Control rights of a downstream development unit, a buyer of the interim innovation, arise from his ability to prevent the upstream research unit from forming financial coalitions at the ex-interim stage of bargaining, over the amount and structure of licensing fees as well as the mode of licensing, either based on trade secrets or via patenting. We model explicitly the equilibrium choice of the financial structure of licensing fees and show that the innovator's financial constraint is more likely to bind when the value of her innovation is low. By constraining the flexibility of the upstream unit regarding her choice of the mode of licensing of her interim knowledge, the controlling development unit is able to reduce the research unit's payoffs in such contingencies. This incentivises the research unit to expend costly effort ex ante to generate more productive interim innovations. We show that such interim control rights can be renegotiation-proof.

Keywords: control rights, intellectual property rights, corporate venturing

JEL Classification: D23, K12, O32.

Suggested Citation

Bhattacharya, Sudipto and Guriev, Sergei, Control Rights Over Intellectual Property: Corporate Venturing and Bankruptcy Regimes (July 1, 2008). Available at SSRN: https://ssrn.com/abstract=1121711 or http://dx.doi.org/10.2139/ssrn.1121711

Sudipto Bhattacharya

London School of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom
44 171 955 7320 (Phone)
44 171 955 7420 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Sergei Guriev (Contact Author)

Sciences Po ( email )

27 rue Saint-Guillaume
Paris Cedex 07, 75337
France

HOME PAGE: http://econ.sciences-po.fr/staff/sergei-guriev

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
211
Abstract Views
1,572
rank
109,655
PlumX Metrics