Shirking, Sharing Risk, and Shelving: The Role of University License Contracts / Marie Thursby, Jerry Thursby, Emmanuel Dechenaux.

Format:

Book

Author/Creator:

Thursby, Marie.

Contributor:

National Bureau of Economic Research.

Thursby, Jerry.

Dechenaux, Emmanuel.

Series:

Working Paper Series (National Bureau of Economic Research) no. w11128.

NBER working paper series no. w11128

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Shirking, Sharing Risk, and Shelving

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2005.

Summary:

In this paper, we develop a theoretical model of university licensing to explain why university license contracts often include payment types that differ from the fixed fees and royalties typically examined by economists. Our findings suggest that milestone payments and annual payments are common because moral hazard, risk sharing, and adverse selection all play a role when embryonic inventions are licensed. Milestones address inventor moral hazard without the inefficiency inherent in royalties. The potential for a licensee to shelve inventions is an adverse selection problem which can be addressed by annual fees if shelving is unintentional, but may require an upfront fee if the firm licenses an invention with the intention to shelve it. Whether the licensing contract prevents shelving depends in part on the university credibly threatening to take the license back from a shelving firm. This supports the rationale for Bayh-Dole march-in rights but also shows the need for the exercise of these rights can be obviated by contracts.

Notes:

Print version record

February 2005.