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Patent protection and threat of litigation in oligopoly

Author

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  • Carlo Capuano

    (University of Naples Federico II - Complesso Universitario di Monte S.Angelo)

  • Iacopo Grassi

    (University of Naples Federico II)

  • Riccardo Martina

    (University of Naples Federico II - Complesso Universitario di Monte S.Angelo)

Abstract

In a context of imperfect patent protection, this paper analyses the strategic use of patents from a novel perspective; patents are seen as a means available to the incumbent firm to control entry and, more importantly, to influence the post-entry market interaction process effectively, by creating the conditions that favour collusion. The level of patent protection chosen by the incumbent affects the likelihood that a potential entrant will be found guilty of patent infringement. This mechanism can operate as a punishment device that eases the conditions for collusion sustainability. Therefore, in a sense, patent protection can be regarded as an instrument allowing replication of the monopoly outcome in the context of a contestable market.

Suggested Citation

  • Carlo Capuano & Iacopo Grassi & Riccardo Martina, 2020. "Patent protection and threat of litigation in oligopoly," Journal of Economics, Springer, vol. 130(2), pages 109-131, July.
    • Handle: RePEc:kap:jeczfn:v:130:y:2020:i:2:d:10.1007_s00712-019-00685-5
    DOI: 10.1007/s00712-019-00685-5
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    2. Nie, Pu-yan & Chen, Zi-rui & Wang, Chan, 2021. "Intellectual property pricing under asymmetric duopoly," Journal of Retailing and Consumer Services, Elsevier, vol. 58(C).

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    More about this item

    Keywords

    Patents; Patent portfolio; Litigation; Collusion; Foreclosing; Entry game;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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