A dynamic model of cross licensing

In sectors with cumulative and complementry technologies, some firms build patent portfolios in order to block their competitors' access to the technology and/or to negociate cross licensing agreements. We propose a dynamic model that captures this behaviour in an integrated duopoly where the firms invest successively in upstream patentable technologies and downstream marketable products. We study the impact of legal patent strength on competition and investment. We then consider two alternative settings. One where the firms cross license or pool their patents and another where the patent strength is restricetd. We verify whether and when such alternatives are socially efficient.