Financing and the Protection of Innovators
Centre for Monetary and Financial Studies (CEMFI)
Centre for Monetary and Financial Studies (CEMFI); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)
The protection that innovators obtain through intellectual property rights crucially depends on their incentives and ability to litigate infringers. Taking patents as a notable example, we study how the financing of legal costs can alter the incentives to litigate in defense of a patent and, thus, the prospects of infringement and the effective protection of the innovator. We compare the resort to a financier once the infringement has occurred (ex-post financing) with patent litigation insurance (PLI) as well as other ex-ante arrangements based on leverage. We show that the ex-ante arrangements can be designed (for instance, in the case of PLI, by including an appropriate deductible) so as to implement the innovator's second-best outcome: a situation in which patent predation is deterred without inducing excessive litigation.
Number of Pages in PDF File: 40
Keywords: Financial strategy, intellectual property, litigation, predation
JEL Classification: G32, O34working papers series
Date posted: February 24, 2005
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo7 in 0.625 seconds