Companies that use a “razors and razor blades” business model typically sell a primary good (e.g., razors) that generates a profitable recurring revenue stream from the sale of complementary “aftermarket” parts or services (e.g., razor blades). Profitable aftermarket sales attract competitors, and consumers often expect aftermarket competition and choices (e.g., generic razor blades). Companies that attempt to limit aftermarket competition face a number of complex legal issues.

For example, companies often use patents, copyrights, contract rights or technical locks to limit third-party competitors from offering aftermarket goods or services. On the surface, these tactics may appear downright un-American to consumers, who tend to value lower prices and more options and often believe they have full ownership rights over any device they purchase. But many companies have intellectual property or contract rights over the technology and software they create and sell, and they often rely on aftermarket revenues to fund ongoing investments in research and development. In this way, aftermarket revenues can be the lifeblood of innovation that advances technology in highly competitive industries. Third parties may offer competing aftermarket products or services at lower prices, but they do not invest in developing technology in the long run. This tension is at the heart of challenges (legal and otherwise) facing companies that use the razors and razor blades business model.

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