Patent Transactions and Markets for Patents : Dealing with Uncertainty

Abstract

The last decade was characterized by a growing awareness for markets for intellectual property rights, notably patents. Recent economic studies detect growing markets for technologies and patents and provide evidence for increasing international IP licensing activities during the past decades. Parallel, results from international surveys indicate imperfect markets and high transaction costs in IP transactions (Teece 1981; Gambardella/Giuri/Luzzi 2007; Motohashi 2005). One transaction-related obstacle in a market refers to uncertainty (Williamson 1979). Based on the aforementioned studies, this thesis investigates different facets and sources of uncertainties in patent transactions. The overarching research question is: Which uncertainties exist in patent transactions and how do managers cope with uncertainties in bilateral patent licensing and patent auctions? Using a sociological framework, the example of patent licensing on early stage drug compounds and drugs in the clinical stage IIa is studied. More precisely, the effects of high fundamental uncertainty about the innovation and patenting process on patent licensing transactions between US universities and German pharmaceutical companies are examined. Markets for patents imply typical market transactions which are standardized and do not require long negotiations between the parties (‘arm’s length transactions’ (Williamson 1979; 1981)). The thesis inspects valuation-pricing and cooperation problems (Beckert 2009) in market sales transactions of patents, notably IP auctions. It delves into the contribution of IP auctions to the formation and constitution of secondary markets for patents (Chesbrough 2006). Furthermore, the thesis explores different functions of patent market intermediaries in the secondary market for patents in the US and attempts to reconstruct the structure of this market.