Economics research seminar: Heiko Gerlach, University of Queensland

Research topic: Patent Licensing in the Supply Chain

Heiko Gerlach, University of Queensland

Topic

Patent Licensing in the Supply Chain

abstract

This paper analyzes private and social incentives to levy an ad valorem licensing fee in a supply chain. With perfect competition at the upstream and downstream stage, the choice of the licensing segment is irrelevant for the patent holder and consumers. When exactly one segment of the value chain is monopolistic, the patent holder prefers licensing at the monopolistic stage leading to an alignment of private and social incentives. With imperfect competition at both stages, excessive downstream licensing can arise. We demonstrate that charging licensing fees at both stages of the supply chain (”double dipping”) can be profitable for the patent holder and beneficial for consumers. We discuss the consequences of this result for the First Sale Doctrine of intellectual property.

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