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

48 Pages Posted: 18 Jun 2004 Last revised: 26 Apr 2021

See all articles by Stephen M. Maurer

Stephen M. Maurer

University of California, Berkeley

Suzanne Scotchmer

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

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Date Written: June 2004

Abstract

For over a century, courts and commentators have struggled to find principles that reconcile patent and antitrust law, especially as to patent licensing. We interpret case law and commentary to arrive at three unifying principles for 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 patent holder's profits should be earned, if at all, from the social value created by the invention. Minimalism' holds that licensing contracts should not contain more restrictions than are necessary to achieve neutrality. We argue that these principles largely rationalize important decisions of the twentieth century. They also justify the Supreme Court's controversial General Electric decision, which holds that patentholders can set prices charged by their licensees.

Suggested Citation

Maurer, Stephen M. and Scotchmer, Suzanne, Profit Neutrality in Licensing: The Boundary between Antitrust Law and Patent Law (June 2004). NBER Working Paper No. w10546, Available at SSRN: https://ssrn.com/abstract=556533

Stephen M. Maurer

University of California, Berkeley ( email )

Berkeley, CA 94720
United States

Suzanne Scotchmer (Contact Author)

University of California - Department of Economics (Deceased)

Berkeley, CA 94720-3880
United States

University of California, Berkeley - School of Law

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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