Abstract: Considering network externalities and degree of innovation, patent licensing strategies, such as no licensing, fix-fee licensing, and royalty licensing are explored, then the innovator’s optimal licensing strategy is analyzed. It is found that with weak network externalities, royalty licensing strategy is optimal; with strong network externalities, fixed-fee licensing strategy is optimal; when the network externalities are moderate, with low degree of technological innovation, royalty licensing strategy is optimal, and with high degree of technological innovation, the fixed-fee licensing strategy is optimal. New insights for the decisions on patent licensing strategies are given.

Key words: patent licensing, technological innovation, network externality, fulfilled expectation equilibrium