In this paper, we develop a theoretical model of university licensing to explain why university license contracts often include payment types that differ from the fixed fees and royalties typically examined by economists. Our findings suggest that milestone payments and annual payments are...

We examine commonly observed forms of payment, such as milestones, royalties, or consulting contracts as ways of engaging inventors in the development of licensed inventions. Our theoretical model shows that when milestones are feasible, royalties are not optimal unless the licensing firm is...