Cross-licensing Agreements Research Articles

Technology acquisition strategy in the context of the Internet of Things using game theory

ABSTRACT In the era of open innovation, it is of great significance to analyse strategic trade-offs for enterprises’ technology acquisition between external and internal. This paper considers the relative pay-offs amongst two manufacturers’ selection for their respective scarce technology of the Internet of Things, using game theory models and numerical analysis. In addition to self-innovation relying on internal resources, enterprises can obtain technology from external sources, including technology imported from a third party or cross-licensing with its competitor. Unlike empirical analysis, this study focuses on the strategic firms’ interactions at the micro-level study and operational considerations, such as the factors influencing the mode of enterprise technology acquisition, firm competition and cooperation behaviour mechanism, and the selection of innovation initiators. The findings provide implications for competitive enterprises in high-tech industries to acquire complementary technologies by identifying what conditions lead to win-win outcomes. In particular, firms can adjust their licensing levels under certain conditions to adapt to the disparities in each other’s development capabilities, thus achieving cross-licensing agreements.

Cross-Licensing and Competition

We study bilateral cross-licensing agreements among N(> 2) firms that engage in competition after the licensing phase. It is shown that the most collusive cross- licensing royalty, i.e. the one that allows the industry to achieve the monopoly pro.t, is sustainable as the outcome of bilaterally efficient agreements. When the terms of cross-licensing agreements are not observable to third parties, the monopoly royalty is the unique symmetric bilaterally efficient royalty. However, when the terms of the agreements are public, the most competitive royalty (i.e. zero) can also be bilaterally efficient. Policy implications regarding the antitrust treatment of cross-licensing agreements are derived from these results.

From Non-Practicing Entities (NPEs) to Non-Practiced Patents (NPPs): A Proposal for a Patent Working Requirement

Injecting fresh oxygen into the strangled patent troll problem, professors Mark Lemley and Douglas Melamed advised us recently to change our focus from targeting specific entities that unduly burden technology users to addressing the underlying features of the patent system that account for “trollish” profits. Taking Lemley and Melamed’s advice seriously, this proposal focuses on one specific feature of the patent system that it believes to constitute the heart and bones of the troll problem – the legitimacy of non-practiced patents (NPPs). Particularly, it suggests changing the paradigmatic understanding of the troll problem, into one that understands that the patents that are being exploited to impose litigation threats and extract settlements are the real problem, not those who assert them. Because such patents are not developed into actual products or services, their holders are immune to a counterclaim of patent infringement. For the same reason, the likelihood of entering into low-cost, cross-licensing agreements over such patents is almost impossible. NPPs – patents that are not developed promptly into sufficiently commercialized goods – are the essence of the patent troll problem. Pursuant to this refined conception of the troll problem, and borrowing from trademark law, this proposal contends that a patent working requirement, which requires all patent owners to promptly submit a proof of sufficient patent commercialization to the United States Patent and Trademark Office, excluding those having an acceptable excuse, may solve the patent troll problem. Under this model, the two fundamental features of NPPs that facilitate patent trolling could be no longer sustained. First, all patents will become suspected to a counterclaim of patent infringement. Second, low-cost, cross-licensing agreements will become essential to all patent exploitations. By substantially reducing the amount of NPPs, the proposed model is expected to thwart the assertion of useless patents against operating companies, consequently encouraging innovation and progress. At the same time, because it does not search for “bad actors,” the proposed model will allow different types of entities to operate in the market and support small inventors; so long they promote commercially beneficial inventions.

The Coordination of Independently-Owned Vacuum Tube Patents in the Early Radio Alleged Patent Thickett

It has been proposed that difficulties in negotiating cross-licenses under multiple, independently-owned and ?overlapping? patents may lead entrepreneurs to hold-up or deter development of technology covered by such patents. The literature alleges these features were present in radio development during 1905-1920, with numerous allegations of an impasse in bargaining the necessary patent rights until these were ultimately incorporated in the RCA patent pool. This paper seeks to determine with new precision how entrepreneurs and managers actually managed patent rights in this scenario. Accordingly, we re-examine the legal trajectories and entrepreneurial exploitation of patents on early vacuum tube technology where Fleming?s diode patent was alleged to have ?overlapped? with De Forest?s triode patents. We show, by means of the relevant historical record, patent claims, litigation records and other relevant law, how patent rights were resolved by the courts and by the immunity of suppliers to the government from patent infringement liability. We trace the cross-licensing agreements between the different radio interests and find that licensing was always chosen over hold-up and so enabled robust, state-of-the-art radio development.

Building Patent Portfolios to Facilitate Cross-Licensing Agreements: Implications for Merger Efficiency Analysis

One important issue at the cross section of antitrust and patent law is the patent holdup problem, which arises when one party makes relationship-specific investments ex ante that incentivizes the other party to engage in opportunistic behavior ex post. Firms facing the potential for holdup can be expected to make investments aimed at minimizing this potential. Merger is an important, but thus far little-discussed, method by which firms can attempt to solve potential holdup problems. Merger internalizes the externalities that allow for patent holdup. By merging, two firms with relatively undeveloped patent portfolios may gain meaningfully increased bargaining power in licensing negotiations, which they may use to facilitate cross-licensing agreements — thereby decreasing transactions costs and reducing the risk of opportunistism. For purposes of antitrust analysis, courts, agencies, and economists have long recognized that significant efficiencies often derive from cross licensing, including increases in output arising from the diminished marginal costs of production. As the Google-Motorola acquisition exemplifies, merger may provide an important alternative solution to holdup problems, despite being largely overlooked in the contemporary patent holdup debate. This acquisition potentially provides Google with leverage and ownership rights to protect the entire Android ecosystem that cannot be accomplished by alternative contractual structures. Such a merger — which increases output that cannot be achieved by alternative structures — appears to satisfy the basic definition of a merger efficiency. Whether these benefits — which presumably would increase output — are cognizable efficiencies in merger analysis is thus an important question. Part I of this Article discusses the economics of patent portfolios and cross licensing, addressing both their procompetitive tendencies and their anticompetitive possibilities. Part II demonstrates that merging to build a patent portfolio, and thereby to induce cross licenses, is consistent with traditional economic rationales underlying the ownership-contract tradeoff. Part III examines the treatment of efficiencies within antitrust law, articulating and analyzing the Guidelines’ framework for evaluating proffered efficiencies. Part IV then investigates whether building patent portfolios in order to facilitate cross-licensing agreements — and accordingly to increase output — satisfies the requirements of this framework. Part V concludes.

Building Patent Portfolios to Facilitate Cross-Licensing Agreements: Implications for Merger Efficiency Analysis

The intersection of antitrust and patent law has increased in scope and importance over the past several decades. One important issue at this cross-section is the patent holdup problem, which arises when one party makes relationship-specific investments ex ante that incentivizes the other party to engage in opportunistic behavior ex post. Firms facing the potential for holdup can be expected to make investments aimed at minimizing this potential. Numerous methods of solving the holdup problem exist, including using ex ante auctions to identify and alleviate holdup problems, as well as patent reform. Merger is another important, but thus far little-discussed, method by which firms can attempt to solve potential holdup problems. Merger internalizes the externalities that allow for patent holdup. By merging, two firms with relatively undeveloped patent portfolios may gain meaningfully increased bargaining power in licensing negotiations, which they may use to facilitate cross-licensing agreements—thereby decreasing transactions costs and reducing the risk of opportunistism. For purposes of antitrust analysis, courts, agencies, and economists have long recognized that significant efficiencies often derive from cross licensing, including increases in output arising from the diminished marginal costs of production. As the Google-Motorola acquisition exemplifies, merger may provide an important alternative solution to holdup problems, despite being largely overlooked in the contemporary patent holdup debate. This acquisition potentially provides Google with leverage and ownership rights to protect the entire Android ecosystem that cannot be accomplished by alternative contractual structures. Such a merger—which increases output that cannot be achieved by alternative structures—appears to satisfy the basic definition of a merger efficiency. Whether these benefits—which presumably would increase output—are cognizable efficiencies in merger analysis is thus an important question.

The Impact of Effective Patents on Future Innovations in Nanomedicine

The success of nanomedicine is dependent upon an effective protection of IP rights. Unfortunately, the US nanomedicine patent system is dysfunctional because long R&D procedures as well as the patent pendency are insufficiently taken into account. This could be solved by changing the patent-protection starting point and increasing the capacity of the US PTO. The nanotechnology industry also suffers from overlapping patents. This could be avoided by improving the expertise of the PTO, using a more accurate definition of nanotechnology and devising a generally accepted nomenclature that enhances prior-art searches. To avoid disputes, inference practices and strategic patenting can be used. In the case of a dispute, parties can fall back on re-examination, cross-licensing and patent litigation. Cross-licensing agreements are recommended since they allows parties to access technology, create synergies and exclude third-party competitors. Solving the patent problems in the nanotechnology industry is a necessary step for future success.

Management of patent applications for digital camera considering the product life cycle

Digital cameras have a long product life cycle. Generally, sales decline once the product reaches maturity. However in Japan, the number of patent applications continues to grow even after the maturity stage. This indicates that there must be a number of useless patent applications. In Japan, companies tend to file patent applications without regard to the possible effects of the patent application on the companies productivity and profitability. In general, patent applications are filed to thwart competition and improve its bargaining power in cross licensing agreements. This study analyses the cumulative number of patent applications using correlation analysis and examination of the financial indicators of each company. More importantly, this paper makes a comparative study of the company’s management of patent applications with the product life cycle of digital cameras.

Pricing Abuses by Essential Patent Holders in a Standard-Setting Context: A View from Europe

Pricing Abuses by Essential Patent Holders in a Standard-Setting Context: A View from Europe

Abusive Pricing in an IP Licensing Context: An EC Competition Law Analysis

Abusive Pricing in an IP Licensing Context: An EC Competition Law Analysis

Sequential innovation and the patent-antitrust conflict

I examine antitrust policy in a model of cumulative innovation, arguing that collusion between successive patentees (e.g. through patent pools or cross-licensing agreements) may be socially beneficial under certain circumstances, even if the patents involved are competing rather than complementary or blocking. Collusion stimulates investment in second-generation innovations, which is welfare-improving if their social returns exceed private returns. However, it discourages investment in first-generation innovations. Thus, for the pooling of subsequent patents to be beneficial, the non-appropriable returns from the second innovation must be large and it must be costly to achieve by comparison with the first. Copyright 2002, Oxford University Press.

Accessing other people’s technology for non–profit research

As patents and other forms of intellectual property become more pervasive in the next generation of biotechnologies, designing policies and practices to ensure sufficient freedom to operate (i.e., the ability to practice or use an innovation) will be crucial for non–profit research agencies, especially those intent on developing technologies destined for commercial release. Are non–profit organisations exempt from intellectual property claims? What constitutes infringement of a patent? How does a non–profit establish its freedom to operate? We address these issues in this paper and evaluate various options for accessing other people’s technologies. Options include cross–licensing agreements, research–only or cost–free licences, market segmentation strategies, mergers or joint ventures, and patent pooling or clearinghouse mechanisms. Responding creatively to the new intellectual property environment will have far reaching consequences for the future of non–profit research.

Research joint ventures vs. cross licensing agreements: an agency approach

In this paper two broad categories of organizing a cooperative R&D project are compared: a Research Joint Venture (RJV) and a Cross Licensing Agreement (CLA). In a non-deterministic R&D setting including asymmetric information, we show that an RJV is more efficient in providing incentives, it allows to capture existing synergies and facilitates the dissemination of the partners’ know-how, which is socially desirable. However, contrary to a CLA, an RJV faces the risk of opportunistic behavior by the partners regarding the provision of their know-how to the venture, which could lead a CLA to perform more efficiently and, in some cases, this organization turns out to be superior.

Moral hazard and optimal contract form for R&D cooperation

This paper aims to explain the use of different governance modes for R&D cooperation. We argue that (ex ante) cross-licensing agreements are preferred to R&D joint ventures if potential synergy effects are negligible and the double moral hazard problem caused by unobservable R&D effort can be solved by an appropriate royalty scheme. It is shown that the first best effort decisions are implementable by a cross-licensing agreement if royalty payments are based on R&D success. However, if the payments have to be based on actual know-how transfer because R&D success is not verifiable, there are cases where joint ventures are necessary to induce optimal R&D effort.

Semiconductor technology flow through formal transfer mechanisms

An attempt was made to identify how much semiconductor technology flows internationally through formal technology transfer mechanisms, which mechanisms are used, and in which direction the technology moves. The formal mechanisms investigated for transferring technology include: interfirm licensing, cross licensing and second source agreements, firm mergers and acquisitions, and direct investment in firm-owned foreign facilities. It is concluded that, in general, large American companies have allowed their technology advantage to be diffused both to smaller US competitors and to foreign competitors, primarily those in Japan, Europe, and Korea.< <ETX xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">&gt;</ETX>

Monopolies. Patents. Validity of Cross-Licensing Agreements under Sherman Anti-Trust Act

Monopolies. Patents. Validity of Cross-Licensing Agreements under Sherman Anti-Trust Act