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Licensing and Royalty Contracts for Copyright

17 Pages Posted: 11 Jun 2008  

Richard Watt

University of Canterbury - Economics and Finance; The Society for Economic Research on Copyright Issues (SERCI)

Abstract

This paper reviews briefly how the owner of the copyright to a creation can best market access to that right to licensees under a variety of assumptions concerning the market. After an introductory section, the paper considers a situation of full certainty, in which the value of the final product that is sold by licensees is fully deterministic. In that setting, we consider a very simple model in which the copyright holder himself may or may not compete with the licensee in the final product market. Above all, it is shown that a linear form for the royalty contract always suffices in equilibrium. After that, a model with certainty as to the market value of the final product is developed. In this model, we consider Pareto efficient sharing contracts, and it is shown that now a linear form is unlikely to suffice. Throughout (i.e. in both sections), we shall be interested in exactly when a linear royalty contract is efficient, since these types of contract are so prevalent in the real world.Finally, as an introduction to the papers contained in the symposium, I devote a few words to each of them in turn.

Keywords: Licensing, Royalty, Copyright

Suggested Citation

Watt, Richard, Licensing and Royalty Contracts for Copyright. Review of Economic Research on Copyright Issues, Vol. 3, No. 1, pp. 1-17, 2006. Available at SSRN: https://ssrn.com/abstract=1143822

Richard Watt (Contact Author)

University of Canterbury - Economics and Finance ( email )

Private Bag 4800
Christchurch
New Zealand

The Society for Economic Research on Copyright Issues (SERCI) ( email )

Apartado de correos 1100
Palma de Mallorca, 08080
Spain

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