Patent Litigation When Innovation is Cumulative
CEMFI Working Paper No. 0102
42 Pages Posted: 21 Feb 2001
Date Written: January 2001
Abstract
This paper studies the effect of litigation as a way to enforce patents when firms hold private information. A structure to the legal system is provided, allowing a better understanding of the settlement and litigation decisions taken by entrepreneurs. The model is broadly consistent with recent empirical evidence. We show that the optimal license consists of a fixed fee and no royalties and that in some cases too much protection might be detrimental to the patentholder. We finally compare different legal systems and their effect on innovation and litigation.
Keywords: Patent Litigation, Licensing, Contracts
JEL Classification: D23, K41, 034
Suggested Citation: Suggested Citation
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