| By: |
Jay Pil Choi;
Heiko Gerlach |
| Abstract: |
This paper analyzes private and social incentives to levy an ad valorem
licensing fee in a supply chain governed by the legal principle of patent
exhaustion. 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 while
the other one is competitive, 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 implications of this result for the
application of the patent exhaustion principle. |
| Keywords: |
patent licensing, supply chain, first sale doctrine, patent exhaustion, double-dipping |
| JEL: |
D43 L41 L44 |
| Date: |
2024 |
| URL: |
https://d.repec.org/n?u=RePEc:ces:ceswps:_11313 |