Intellectual property disclosure as ‘threat’
Baker, Scott, Leech, Pak Yee and Mezzetti, Claudio (2008) Intellectual property disclosure as ‘threat’. Working Paper. Coventry: University of Warwick, Department of Economics. (Warwick economic research papers).
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This paper models the disclosure of knowledge via licensing to outsiders or fringe firms as a threat, useful in ensuring firms keep their commitments. We show that firms holding intellectual property are better able to enforce agreements than firms that don't. In markets requiring innovation to make a product, IP disclosure presents a more powerful threat than entry by the punishing firm alone. Occasionally, a punishing firm won't be able to translate its intellectual property into a full-blown product, making it impossible for it to enter the cheating firm's market and punish. Even if it can't make a product itself, the punishing firm can always credibly threaten to license the intellectual property it has on hand to someone else. With this intellectual property as a springboard, chances are at least one fringe firm will be able to do the translation, make the product and enter the cheating firm's market. In short, the potential for licensing increases the likelihood of punishment for uncooperative behavior.In the model, firms contract explicitly to ex-change knowledge and tacitly to coordinate the introduction of innovations to the marketplace. We find conditions under which firms can self-enforce both agreements. The enforcement conditions are weaker when (1) firms possess knowledge and (2) knowledge is easily transferable to other firms. The disclosure threat has implications for antitrust law generally, which are considered.
|Item Type:||Working or Discussion Paper (Working Paper)|
|Subjects:||H Social Sciences > HD Industries. Land use. Labor
K Law > K Law (General)
|Divisions:||Faculty of Social Sciences > Economics|
|Library of Congress Subject Headings (LCSH):||Intellectual property, Subsidiary corporations, Competition, Organizational behavior|
|Series Name:||Warwick economic research papers|
|Publisher:||University of Warwick, Department of Economics|
|Place of Publication:||Coventry|
|Date:||3 December 2008|
|Number of Pages:||25|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
|Version or Related Resource:||Baker, S., et al. (2011). Intellectual property disclosure as threat. International Journal of Economic Theory, 7(1), pp. 21-38. http://wrap.warwick.ac.uk/id/eprint/41373|
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