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A Dynamic Analysis of Licensing: The "Boomerang" Effect and Grant-Back Clauses

Choi, Jay Pil

This paper develops an incomplete contract model of the licensing relationship to analyze the dynamic effects of licensing on R&D competition in the innovation market and to examine the rationale for often observed grant-back clauses. Of particular concern are how the consideration of future competition distorts the licensing relationship and how the "grant-back" clause can mitigate this distortion. I also evaluate the validity of the casual antitrust argument that grantback clauses may adversely affect competition because they reduce the licensee's incentive to engage in R&D and thereby limit rivalry in innovation markets.

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Academic Units
Economics
Publisher
Department of Economics, Columbia University
Series
Department of Economics Discussion Papers, 9697-16
Published Here
March 3, 2011

Notes

April 1997