Optimal value of a patent in an asymmetric Cournot duopoly market

We study how to transfer a patented innovation to competing firms. We consider a Cournot duopoly market with asymmetric pre-innovation costs and an independent patent holder who is not a producer in the market. There are two kinds of cost reducing innovations: “common innovation” and “new technology innovation”. We show that the best way to transfer an innovation for the patent holder is to sell the patent to the efficient firm at a fixed payment who would further license the innovation to its rival. This patent sale dominates all other methods of licensing for both kinds of innovations.