We analyse the effect of grantback clauses in licensing contracts. While competition authorities fear that grantback clauses might decrease the licensee’s ex post incentives to innovate, a standard defence is that grantback clauses are required for the patent-owner to agree to license its technology in the first place. We examine the validity of this “but for” defence and the equilibrium effect of grantback clauses on the innovation incentives of the licensee for both infringing and non-infringing innovations. We show that grantback clauses do not increase the patent-holder’s incentives to license when infringing innovations are at stake but they do when non-infringing innovations are concerned – suggesting that the “but for” defence might be valid for non-infringing innovations but not for infringing ones. Moreover we show that, for non-infringing innovations, grantback clauses can increase the range of parameters for which follow-on innovation by the licensee occurs. Our work extends the large literature on sequential innovation to an environment where information diffuses through licensing rather than through the mere act of patenting. In this different informational set up we show that Green and Scotchmer (1995)’s conclusion that the initial innovator should have a patent of infinite breadth no longer holds.
About the speaker
Katharine Rockett earned her PhD in Economics from Berkeley in 1988. After working in the US and Spain, she joined Essex University in the UK in 1999. She now serves as head of department. Her research interests include the economics of new technologies, firm organisation and licensing. Her most recent publication is on the design and use of metrics in research excellence frameworks.
Venue: Conference room (0.16 & 0.17)
Date: 02 November 2017
Time: 12:00 - 13:00