Cross-Licensing and Collusive Behaviour

Exchange of patents between firms increasingly influence competition. Such cross-licensing deals have traditionally raised antitrust concerns, since they can be used to control market shares and prices, and create entry barriers. We argue that cross-licensing is a device to establish multimarket contact and is likely to raise antitrust concerns only in so far as multimarket contact does. Since cross-licensing typically occurs between similar firms in similar markets it is, as a first approximation, irrelevant for sustaining tacit collusion. We also point out the importance of incorporating the incentive to innovate into the analysis of the subtle relation between intellectual property and competition policies. JEL Classification L49, O34