Optimal Licensing in a Spatial Model

This paper studies, in a spatial model. optimal licensing policies by first, comparing our results with the standard (non-spatial) licensing literature, and second, how results are affected if the patent holder can introduce a vertical restraint (exclusive territories). Contrary to standard results we find that royalties are superior to fees. Once the licensor introduces an ET clause, his profits are higher than when he uses either fees or royalties only. A conflict between private and social interests arises since consumers are better off when the technology is licensed via fees.