The issue of optimal patent protection is of great importance since the inclusion of the trade related aspects of intellectual property rights accord into the purview of the World Trade Organization. Hitherto, the literature has focused on the optimal patent regimes from the perspective of...

We show the impact of technology licensing on optimal patent policy. Strong patent protection that eliminates imitation may not be the equilibrium outcome in the presence of licensing. Depending on the cost of innovation, licensing may either increase or reduce the strength of the patent protection

This article considers the sale by a research lab of licenses for a cost-reducing innovation. The marginal cost of a firm that wins a license is private information and the acquisition of a license imposes a negative externality on the other firms. The lab's optimal revenue is determined from a...