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JOHN W. SCHLICHER |
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PATENTS, PATENT LITIGATION, PATENT DISPUTE RESOLUTION AND SETTLEMENT, LICENSING, ANTITRUST, LAW AND ECONOMICS |
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John W. Schlicher, Licensing Intellectual Property, Legal, Business and Market Dynamics, John Wiley & Sons (1996)(427 pages) and Licensing Intellectual Property, 1999 Cumulative Supplement (John Wiley & Sons 1999)(303 pages) PREFACE (excerpts) This book and its supplement are designed to help people understand and take advantage of the business and legal environment for licensing. The goal is to understand and adapt to the contractual incentives, the market forces, and the law that determine the profits or other advantages gained from alternative licensing strategies. The book uses economic analysis to explain these business and legal issues. The book is designed for business people, lawyers, licensing consultants and accountants. The main volume provides a framework for making business decisions to license, define specific licensing objectives, and design license terms to accomplish those objectives at minimum legal risk. That analysis is applicable to all licensing decisions, domestic and international. The main volume also discussed licensing options in the context of modern United States law. Chapter 1 describes the framework for business decisions. Chapter 1 describes how the value of intellectual property rights are derived from the demand and costs facing commercial producers using the rights. That chapter outlines how an intellectual property owner should make the decision to vertically integrate, licensing, or do both. It shows how royalty rates and structure will affect industry output, price and profits. It tries to take some of the mystery out of the relationship between the licensee profits and royalty rates. It sets out the incentives created by various rate bases for royalties. It describes a model, using a specific example, how license royalty negotiations are influenced by bargaining problems, alternative technologies available to a potential licensee, the transaction costs of licensing, the realities of potential infringement litigation, and the many sources of risk. Chapter 1 also provides an overview of licensing strategy and lists many of the factors that most strongly influence license terms, including (1) implementing economic discrimination, (2) inducing licensee and customer investments in the face of free-rider and asset specificity problems, (3) controlling licensee market power and incentives to limit output below, and increase price above the level a licensor desires, (4) limiting the licensee's incentives to produce inefficiently by substituting other components and materials against a licensed component or material, (5) creating incentives for the development and use of improved technology, (6) reducing license administration, monitoring and other transaction costs, (7) reducing the effects of litigation and other sources of risk and uncertainty, and (8) , in theory, constraining the supply of substitute rights and products. Chapter 1 describes the types of provisions often used to address those issues, and identifies the corresponding legal issues. Chapter 2 describes the United States antitrust, misuse and public policy constraints on licensing. Chapter 2 describes the basic strategic options of intellectual property owners and how the law limits those options. This chapter also discusses the legal concepts of markets, competition, monopoly, and the competitive effects of agreements. Chapters 3 through 7 describe how particular licensing and sales practices are influenced by United States legal limitations. Chapter 3 discusses decisions on whether, when and who to license, and on the payments and other forms of consideration by licensees. Chapter 4 describes when the intellectual property rights and tangible products should and may be supplied together. This involves the grandfather of all U.S. licensing rules - the limit on tying arrangements. Chapter 5 addresses decisions on the nature and scope of licensed rights. When should a licensee should be granted exclusive rights, and when should the licensee agree to deal exclusively in the licensed rights? When should the owner limit the licensee's field of operations, product price, quantity, customers and territory? When is cross licensing wise and lawful? Chapter 6 is devoted to two rules that create licenses the owner may not have intended to create - the implied license rule and the exhaustion doctrine. Chapter 7 explains the influence of federal preemption on payment terms and agreements about litigation. The supplement is directed primarily to the antitrust enforcement policy of the United States government as set out in the guidelines of the Antitrust Division of the Department of Justice and the Federal Trade Commission and the antitrust and competition policy limits on licensing practices in the European Union and Japan. The supplement summarizes the different governmental enforcement approaches, and the different legal limits on licensing provisions in the European Union, Japan, and the United States. The supplement adds six new chapters 8 through 13. Chapter 8 describes the current United States government antitrust enforcement policy on licensing, as well as the ideas that have most strongly influenced that policy at different times. Chapter 9 describes the different purposes, and different methods of enforcing antitrust and competition policy limits on licensing practices in the United States, European Union and Japan. Chapters 10 and 11 describe the antitrust and competition policy limits on particular licensing practices in the European Union and Japan. Chapter 12 compares and summarizes the different legal limits on specific licensing practices in the European Union, Japan, and the United States. Chapter 13 describes recent developments in the antitrust and misuse doctrines applied to licensing. CITATION Cook Inc. v Boston Scientific Corp., 333 F.3d 737, 740 (7th Cir. 2003)(Posner, J.)(“Thus a patentee can ordinarily be expected either to grant nonexclusive licenses in order to exploit the effect of competition in minimizing the licensees' margins or to grant an exclusive license in order to encourage the licensee to invest in the further development of the licensed process or product by protecting the licensee from the competition of other licensees, which might prevent the licensee from recouping his investment. John W. Schlicher, Licensing Intellectual Property: Legal, Business, and Market Dynamics 69-71 (1996). *** The second goal that we have mentioned, that of encouraging investment by the licensee, is the relevant one in this case.”) |