Domestic patenting systems and foreign licensing choices

Tsai, Yingyi; Mukherjee, Arijit

Abstract

This paper examines a foreign technology holder’s licensing choices between royalty and fixed-fee scheme. We emphasize that foreign licensor chooses the quality of licensed technology when the licensee country does not implement perfect intellectual property protection for licensor’s technology. We study quality choice as the foreign licensor’s selection for a particular grade of technical skills. We show that fixed fee emerges as the equilibrium licensing scheme when both the transfer of his technology is relatively efficient and the licensee is sufficiently cost competitive in the domestic market, and that royalty licensing prevails otherwise. We further show it need not hold the general belief that welfare in the licensor country unambiguously rise with a stronger patenting system in the licensee country when, in particular, such patenting system in place is sufficiently lax.

Citation

Tsai, Y., & Mukherjee, A. (in press). Domestic patenting systems and foreign licensing choices. Journal of Economics, https://doi.org/10.1007/s00712-017-0523-y

• Journal Article Type: Article
• Acceptance Date: Jan 17, 2017
• Online Publication Date: Feb 10, 2017
• Deposit Date: Feb 14, 2017
• Publicly Available Date: Feb 14, 2017
• Journal: Journal of Economics
• Print ISSN: 0976-5239
• Electronic ISSN: 1617-7134
• Publisher: Kamla-Raj Enterprises
• Peer Reviewed: Peer Reviewed
• DOI: https://doi.org/10.1007/s00712-017-0523-y
• Keywords: Intellectual Property Protection; Licensing; Quality of the licensed technology; Welfare
• Public URL: http://eprints.nottingham.ac.uk/id/eprint/40455
• Publisher URL: http://link.springer.com/article/10.1007/s00712-017-0523-y/fulltext.html
• Copyright Statement: Copyright information regarding this work can be found at the following address: http://eprints.nottingham.ac.uk/end_user_agreement.pdf
• Additional Information: The final publication is available at Springer via http://dx.doi.org/10.1007/s00712-017-0523-y.