Option and Licensing Decisions Hinge on Firms' Capabilities and Motivations

Fishing expeditions?

Tailoring options to account for firm differences, says Arvids Ziedonis, assistant professor of strategy at the Ross School, can facilitate the licensing of university inventions to industry yet protect against suitors who seek to absorb knowledge about new technology during the option period without subsequently purchasing licenses.

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The relationship between technological knowledge and the likelihood of licensing tends to be quite different for companies that purchase options prior to making licensing decisions, however. In such cases, firms that hold patent portfolios concentrated in areas related to the university inventions ( i.e., high-focus firms) are less likely to subsequently license the university patent at the end of the option period. Ziedonis suggests several explanations for this.