Fixed-fee licensing of innovations and collusion

Unlike other types of licensing agreements such as those with output restrictions, market division clauses, or output royalties, licensing contracts with only a fixed-fee have been perceived as having no anticompetitive consequences. This paper illustrates that fixed-fee licensing may facilitate collusion by enhancing the licensee's ability to credibly punish deviations from the collusive outcome on the part of the licenser. Antitrust implications of the result and potential ways of detecting collusion-motivated licenses are discussed.