Licensing Complementary Patents: 'Patent Trolls,' Market Structure, and 'Excessive' Royalties

摘要

This analysis shows that the presumption that NPEs always charge higher royalties than vertically integrated companies is not warranted. It is true that if firms set linear royalties non-cooperatively, a vertically integrated firm will internalize the vertical double mark-up problem which tends to reduce royalties. However, a vertically integrated firm also has an incentive to raise its royalties in order to raise its rivals' costs and to restrict entry in the downstream market, especially among non-integrated downstream firms. The overall effect on rates is ambiguous. In fact, under some circumstances, a vertically integrated firm may charge higher royalties than its non-integrated counterpart.