Decentralized licensing of complementary patents: Comparing the royalty, fixed-fee and two-part tariff regimes

This paper explores the decentralized licensing of complementary patents reading on a technology standard. We develop a model in which manufacturers must buy licenses from di¤erent patent owners in order to enter the market for di¤erentiated standard-compliant products. We consider three di¤erent types of licensing, namely, the …xed-fee, per-unit royalty and two-part tari¤ regimes, and compare their performances in terms of licensing revenue, price, product variety and welfare. We show that each regime entails di¤erent types of coordination failures. We establish that each of them may maximize the licensing revenue depending on the number of licensors, number of potential entrants and product di¤erentiation. 1Dr. Yann Ménière, Cerna, MINES ParisTech, 60 bd St Michel, 75006 Paris, France. (email: [email protected]) 2Dr. Sarah Parlane, School of Economics, University College Dublin, Bel…eld, Dublin 4, Ireland. (email: [email protected]) 1 ha l-0 04 60 75 4, v er si on 1 2 M ar 2 01 0 Author manuscript, published in "Information Economics and Policy 22, 2 (2010) 178-191" DOI : 10.1016/j.infoecopol.2009.10.003