Speakers 
The University of Iowa Licensing a weak patent in the shadow of litigation Abstract This paper explores a licensor's choice between charging a perunit royalty or a …fixed fee when her innovation is covered by a weak patent, i.e. a patent that is likely to be invali dated by a court if challenged. Using a general model where the nature of competition is not speci…ed, we show that the patent holder prefers to use a perunit royalty scheme if the strategic e¤ect of an increase in a potential licensee's unit cost on the aggregate equi librium pro…t is positive. To show the mildness of the latter condition, we establish that it holds in a Cournot (resp. Bertrand) oligopoly with homegenous (resp. heterogenous) products under very general assumptions on the demands faced by …rms. As a byproduct of our analysis, we contribute to the oligopoly literature by o¤ering some new insights of independent interest regarding the e¤ects of cost variations on Cournot and Bertrand equilibria. 
Stony Brook University On the Licensing of a Technology with Unknown use [pdf] (joint work with Biligbaatar Tumendemberel) Abstract Suppose an inventor holds the patent of a technology that could potentially reduce the costs of firms operating in a given industry. Also assume that inventor and licensed firms could each discover, with some probability, the cost reducing use of this technology. The inventor thus face the problem: should he first try to discover the use for the technology and then license it, or should he license the technology before a use has been discovered, leaving the discovery task to the licensees? We show that the answer to this question depends on how discovery by each agent is related to discovery by other agents. If discovery is independent across agents, then the inventor is betteroff choosing the former alternative. If, on the other hand, discovery is fully correlated across agents, then the inventor should optimally choose the latter alternative, even when costs associated to a trial are absent. We also study the effect of these choices on the expected number of firms operating with a reduced cost, our measure of technology diffusion. We show that the inventor\'s choice is not necessarily the alternative leading to the highest diffusion of the technology. 
University of Connecticut Prior Art Search and Settlement Negotiations in Patents Dispute [pdf] Abstract In this paper we study settlement negotiations in the context of patent dispute. In our analysis, a patent holder accuses a firm of infringing her patent, starting negotiations between the patent holder and the alleged infringer. Our model accounts for important characteristics of patent litigation that differ from other legal disputes which motivated much of the existing literature on settlement and litigation. Since the outcome of one dispute can affect interaction with future infringers, a patentee’s benefit from winning a patent suit may be higher than the cost to the alleged infringer. Our model includes two stages of settlement negotiations. In the first stage negotiations are free (or cheap). If the parties do not reach an agreement in the first stage, then before the second stage of negotiations the alleged infringer can invest in costly search for invalidation prior art. The results of prior art search affect the decision to litigate and the amount of settlement. In light of our model, we examine how nonpracticing entities (or patent trolls) differ from practicing entities in the likely outcomes of dispute. 
University of Texas, Austin Patience and impatience [pdf] (joint work with Sergei Levendorskii) Abstract
We design an option pricing model where the observations of the stock dynamics arrive according to the Poisson process with the rate of arrival λ > 0 or, more generally, a doublestochastic Poisson process with the state and time dependent intensity; this allows for updating of the prior distribution of the time of arrival of the next observation. We calculate the option price as the limit of a monotone uniformly bounded explicitly constructed sequence of functions, and derive the optimal exercise rule in terms of the option value. In the case of the Poisson process, we calculate the optimal exercise threshold h_λ under assumption that the option can be exercised at a time of observation τ only, and show that, if λ>0 is sufficiently small and the stock price process is a submartingale, then it is optimal not to exercise the option at time τ unless the observed realization X_τ>h(0), where h(0)> 〖h_λ〗_. For each level x < h(0), it is optimal to wait until time T(x) > 0 or the next time of arrival of a piece of the news whichever happens sooner. Similar results hold in a model with an infinite sequence of embedded options that we use to study optimal technology adoption, and, at a general qualitative level, in the model where the drift of the process is updated at each observation date. 
Mines ParisTech Defensive and offensive acquisition services in the market for patents [pdf] (joint work with Henry Delcamp, Aija Leiponen and Yann Ménière) Abstract We theoretically and empirically examine recent business models of defensive and offensive patent trading by specialized service firms also called nonpracticing entities (NPEs). We develop a theoretical model of competition between NPEs and operating firms to win a patent auction, wherein operating firms have private information on their exposure to infringement. We show that an offensive NPE can nevertheless outbid operating firms due to a greater ability to extract damages from infringers. Defensive acquisition services yet obtain even better results by using a combination of private information aggregation and “catchandrelease" strategy to preempt the most valuable patents. Using patent reassignment and litigation data, we then provide evidence that patents acquired by defensive entities are significantly more valuable than patents acquired by offensive NPEs (patent assertion entities). We also find clear evidence that defensive NPEs do implement the catchandrelease policy in practice. 
Federal Reserve Bank of Philadelphia The Agglomeration of R&D Labs (joint work with Gerald A. Carlino, Jake K. Carr and Tony E. Smith)

University of Zurich Technology Cycles in Dynamic R&D Networks [pdf] Abstract In this paper we study the coevolutionary dynamics of knowledge creation, diffusion and the formation of R&D collaboration networks. Differently to previous works, knowledge is not treated as an abstract scalar variable but represented by a portfolio of ideas that changes over time through innovations and knowledge spillovers between collaborating firms. The collaborations between firms, in turn, are dynamically adjusted based on the firms' expectations of learning a new technology from their collaboration partners. We analyze the behavior of this dynamic process and its convergence to a stationary state, in relation to the rates at which innovations and costly R&D collaboration opportunities arrive, and the rate of creative destruction leading to the obsolescence of existing technologies. We quantify the innovation gains from collaborations, and show that there exists a critical level for the technology learning success probability in collaborations below which an economy with weak inhouse R&D capabilities does not innovate even in the presence of R&D collaborations. Moreover, we show that the interplay between knowledge diffusion and network formation can give rise to a cyclical pattern in the collaboration intensity, which can be described as a damped oscillation. We confirm this novel observation using an empirical sample of a large R&D collaboration network over the years 1985 to 2011. We then study the efficient network structure, compare it to the decentralized equilibrium structures generated, and design an optimal network policy to maximize welfare in the economy. Our efficiency analysis further allows us to study the effect of competition on innovation in R&D intensive industries where R&D collaborations between firms are commonly observed. 
Toulouse School of Economics CrossLicensing and Competition [pdf] (joint work with DohShin Jeon) Abstract We study bilateral crosslicensing agreements among N (>2) competing firms. We find that the fully cooperative royalty, i.e., the one that allows them to achieve the monopoly profit, can be sustained as the outcome of bilaterally efficient agreements. In a symmetric setting, if the terms of crosslicensing agreements are not observable or firms engage in Bertrand competition, the fully cooperative royalty is the unique symmetric bilaterally efficient royalty. However, when the terms of agreements are public and firms engage in Cournot competition, zero royalty can also be bilaterally efficient. Policy implications regarding the antitrust treatment of crosslicensing agreements are derived from these findings. Finally, we extend our analysis to a general class of twostage games in which firms bilaterally agree in the first stage to make each other payments that depend on their secondstage noncooperative actions. 
Universite catholique de Louvain Licensing downstream technology when upstream firms are capacity constrained [pdf] Abstract The market conditions in unlicensed, but economically connected industry sectors may have an important influence on the design of a licensing contract. To analyse this issue we study the licensing behaviour of an outside patentee who licenses a costreducing technology to the downstream sector of a vertical Cournot oligopoly via either a perunit royalty or a fixedfee contract. Downstream firms source their input requirements from an upstream industry and it is assumed that some of the upstream firms are unable to expand their production levels in reaction to the increased degree of downstream efficiency which follows the technology transfer. In this framework we show that as a consequence of such upstream capacity constraints a perunit royalty contract may dominate a fixedfee contract in terms of licensing revenues. Here we further explore the welfare implications of the optimal licensing contract and analyse how the latter depend on the number of capacity constrained upstream firms. As a final point we study the optimal long run licensing contract in a twoperiod setting and discuss its static and dynamic welfare properties. 
Ryerson University Patent licensing in a Cournot oligopoly: some general results (joint work with Yair Tauman) Abstract This paper studies patent licensing in a Cournot oligopoly under a class of general demand functions. We consider two scenarios, one where the innovator is an outsider and the case where it is one of the incumbent firms. The licensing policies considered are upfront fees, royalties and combinations of the two. It is shown that (i) the diffusion of the innovation is almost total under royalties and combinations, while diffusion maybe limited under upfront fees, (ii) for generic values of magnitudes of the innovation, a royalty policy is better than fee or auction provided the industry size is relatively large and (iii) under combinations of fees and royalties, provided the innovation is relatively significant (or the industry size is relatively large), any optimal combination must include a positive royalty component. 
Carlos III University Strategic information rigging in innovationcontests [pdf] Abstract A contestant exerts more effort the more his rival is of similar type. Hence, a rentseeking contestadministrator would like contestants (not) to know their rival’s types when types are the similar (different). What is the optimal information policy from an exante point of view (i.e., if the administrator chooses before getting to know contestants’ types)? We show that the private (public) information induces contestants to exert more effort if the distribution of types is nondegenerate and strictlynegatively (positively) skewed. If partial information censoring is possible, expected overall effort is maximum in case of public information for the most favorable information only  i.e., symmetric contest with hightypes. 
IIT Stuart School of Business The 80/20 Rule: A firm's support for employee innovations [pdf] (joint work with Silvana Krasteva, Liad Wagman) Abstract We model a research employee's decision to pursue an innovative idea at his employing firm (internally) or via a startup (externally). An idea is characterized by its market profitability and the degree of (positive or negative) externality that it imposes on the employing firm's profits. The innovation process consists of exploration and development. Exploring an idea internally grants the employee access to the exploration support by the firm, but reduces his appropriability of the idea. We demonstrate that ideas exhibiting weak externalities are explored and developed externally while ideas exhibiting strong externalities are explored and developed internally. Moderate externalities are associated with internal exploration, but subsequent external development. An increase in the firm's exploration support attracts internal exploration of a wider range of ideas, but increases the likelihood of subsequent external development. Moreover, the firm's exploration support and profitability respond nonmonotonically to policies that improve its appropriability of the idea 
University of Crete Licensing under general cost functions [pdf] (joint work with Debapriya Sen) Abstract We consider licensing between a patentee firm and its rival in a Cournot duopoly under general demand and cost functions, where licensing takes place through twopart tariffs (i.e., combinations of upfront fees and unit royalties). It is shown that for drastic technologies: (a) if the resulting cost function is superadditive then licensing occurs and both firms stay active and (b) if it is subadditive then licensing does not occur and the patentee firm becomes a monopolist. For non drastic technologies, licensing occurs provided the average efficiency gain from the technology is not lower than the marginal gain at the disagreement level of output of the licensee. Optimal licensing policies always have positive royalties irrespective of the nature of cost functions. For drastic as well as significant nondrastic technologies, optimal policies also involve positive fees if the resulting cost function is superadditive. 
Stony Brook University and IDC Licensing with multiple competing innovators

University of Toronto Market Outcomes and Dynamic Patent Buyouts [pdf] (joint work with Alberto Galasso and Matthew Mitchell) Abstract Patents are a useful but imperfect reward for innovation. In sectors like pharmaceuticals, where monopoly distortions seem particularly severe, there is growing international political pressure to identify alternatives to patents that could lower prices. Innovation prizes and other non patent rewards are becoming more prevalent in government’s innovation policy, and are also widely implemented by private philanthropists. In this paper we describe situations in which a patent buyout is effective, using information from market outcomes as a guide to the payment amount. We allow for the fact that sales may be manipulable by the innovator in search of the buyout payment, and show that in a wide variety of cases the optimal policy still involves some form of patent buyout. The buyout uses two key pieces of information: market outcomes observed during the patent’s life, and the competitive outcome after the patent is bought out. We show that such dynamic market information can be effective at determining both marginal and total willingness to pay of consumers in many important cases, and therefore can generate the right innovation incentives. 