Fee versus royalty licensing in an endogenous R&D model

Abstract

The past researches study on the technology licensing considering a fixed-fee and a royalty by utilizing an exogenous research and development (R&D) model with the patentee has a cost-reducing innovation. In this paper, we discuss the patentee's R&D investment licensing under a fixed-fee licensing versus a royalty licensing with an outsider patentee. Two conclusions are: (1) the R&D investment with the fixed-fee licensing is always no less than with the royalty licensing, (2) the fixed-fee licensing is still the best strategy for the patentee himself and for the whole society.