2010): “Intellectual Property Clearinghouses: The Effects of Reduced Transaction

We examine the effects of third-party clearinghouses that license in-tellectual property on behalf of inventors when downstream uses of IP require licenses to multiple complementary innovations. We consider different simple clearinghouse royalty redistribution schemes, and dif-ferent innovation environments. We show that clearinghouses generally increase incentives to invest in R&D as they increase efficiency in li-censing. However, they may reduce expected profits of inventors who have the unique ability to develop a crucial component. We also show that clearinghouses also may increase or decrease expected welfare, and are more likely to be beneficial when R&D costs are relatively high, and/or the probability of success for inventors is relatively low