Role of Third Parties in Licensing Agreements

Abstract: While the existing research on licensing agreements is rather abundant, the role of third parties in these agreements has received very limited attention. However, although licensing agreements are essentially dyadic agreements, licensors and licensees frequently decide to resort to services proposed by third parties in order to secure and ease their relationships. Third parties that may intervene in the licensing context are technology brokers, consulting firms, collective research centers, patent attorneys, auditing firms, law firms, or professional associations. Our intent in this paper is to shed light on the existence of these third parties, which have almost been ignored in the literature up to now, and to understand the factors motivating firms to resort to these third parties' services in the licensing context. We argue that the main motive for the use of third-party services is their ability to help partners face two main managerial imperatives: the need to control and the need to cooperate. In other words, these third parties may enable the licensing partners to reduce the ‘costs of control’ and/or the ‘costs of cooperation’ associated with managing their licensing agreement. To test our conceptual framework, we use a detailed database of 112 licensing agreements negotiated in the Belgian technology industry.