Document Type
Working Paper
Publication Date
2-2002
Publisher
Boston University School of Law
Language
en-US
Abstract
When innovation is cumulative, early patentees hold claims against later innovators. Then potential hold-up may cause prospective second stage innovators to forego investing in R&D. It is sometimes argued that ex ante licensing (before R&D) avoids hold-up. This paper explores ex ante licensing when information about development cost is private. In this case, contracts may not be written ex ante. Moreover, the socially optimal division of profit occurs with weak patents and ex post licensing. Empirical evidence on licensing conforms to a model with private information. In some innovative industries, little ex ante licensing occurs, suggesting hold-up remains a problem.
Recommended Citation
James Bessen,
Hold-Up and Patent Licensing of Cumulative Innovations with Private Information
(2002).
Available at:
https://scholarship.law.bu.edu/faculty_scholarship/3328
