This chapter examines the much misunderstood topic of post-sale and related vertical restrictions on the licensing of IP rights and the sale of IP-protected goods. In IP rights, more than in any other area, the classical conception of contract as a series of single-shot transactions has disappeared. For a rights holder, downstream control has many values, and most instances are socially beneficial. The large number of legal doctrines dealing with downstream restraints includes tying and resale price maintenance in antitrust doctrine, and “exhaustion” and licensing restrictions in IP law. The economic rationales include price discrimination, transaction cost savings, elimination of double monopoly markups, strategic exclusion of rivals, limiting reverse engineering, and even controlling the development of secondhand markets.
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