ATTRACTING SKEPTICAL BUYERS: NEGOTIATING FOR INTELLECTUAL PROPERTY RIGHTS* |
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| Authors: | James J Anton Dennis A Yao |
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| Institution: | 1. Duke University, U.S.A;2. Harvard University and University of Pennsylvania, U.S.A.;3. The authors thank Juan Carrillo, Sven Feldmann, Rui de Figuereido, Michael Katz, David Myatt, Michael Riordan, Yossi Spiegel, Kathy Spier, and seminar participants at Berkeley, Carnegie‐Mellon, Colorado, Columbia, Iowa, Iowa State, Michigan State, Northwestern, NYU, UBC, UCLA, UCSD, Washington, Wesleyan, and the Stanford GSB Conference on Strategy and the Business Environment, the 2004 AEA Meetings, and the Toulouse Conference on the Economics of the Internet for helpful comments and the Wharton Emerging Technologies Research Program, the Fuqua Business Associates Fund, and the GE Fund for research support. Initial work on this project was done while Anton was a Visiting Scholar at the Economics Department, University of North Carolina, Chapel Hill and Yao was a Visiting Scholar at the Haas School, University of California, Berkeley. Please address correspondence to: James J. Anton, Fuqua School of Business, Duke University, Box 90120, Durham, NC 27708‐1020. E‐mail: . |
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| Abstract: | Expropriable disclosures of knowledge to prospective buyers may be necessary to facilitate the sale of intellectual property (IP). In principle, confidentiality agreements can protect disclosures by granting the seller rights to sue for unauthorized use. In practice, sellers often waive confidentiality rights. We provide an incomplete information explanation for the waiver of confidentiality rights that are valuable in complete information settings. Waiving sacrifices the protective value of confidentiality to gain greater buyer participation. Buyer skepticism, which reduces participation, arises endogenously from three elements: asymmetric information regarding seller IP, rent dissipation from competition for IP, and ex post costs from expropriation lawsuits. |
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