IDEAS home Printed from https://ideas.repec.org/a/kap/revind/v56y2020i4d10.1007_s11151-020-09756-0.html
   My bibliography  Save this article

Patents, Litigation Strategy and Antitrust in Innovative Industries

Author

Listed:
  • Steffen Juranek

    (Norwegian School of Economics)

  • Thomas Quan

    (University of Georgia)

  • John L. Turner

    (University of Georgia)

Abstract

In a patent infringement suit, the alleged infringer wins with a ruling of either invalidity or non-infringement, and may strictly prefer either outcome. Invalidity may increase current-period competition, but removes constraints to future innovation. We adapt the Segal and Whinston (Am Econ Rev 97(5):1703–1730, 2007) model, and show that a legal regime that considers infringement before validity maximizes the entrant patentee’s innovation incentives. But the incumbent alleged infringer may prefer litigating validity first if the future blocking effect of validity is strong. This litigation strategy effect may reduce innovation levels. Antitrust policy should seek to attenuate this effect by reducing the advantage to incumbency.

Suggested Citation

  • Steffen Juranek & Thomas Quan & John L. Turner, 2020. "Patents, Litigation Strategy and Antitrust in Innovative Industries," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 56(4), pages 667-696, June.
    • Handle: RePEc:kap:revind:v:56:y:2020:i:4:d:10.1007_s11151-020-09756-0
    DOI: 10.1007/s11151-020-09756-0
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11151-020-09756-0
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11151-020-09756-0?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Katrin Cremers & Max Ernicke & Fabian Gaessler & Dietmar Harhoff & Christian Helmers & Luke McDonagh & Paula Schliessler & Nicolas Zeebroeck, 2017. "Patent litigation in Europe," European Journal of Law and Economics, Springer, vol. 44(1), pages 1-44, August.
      • Cremers, Katrin & Ernicke, Max & Gaessler, Fabian & Harhoff, Dietmar & Helmers, Christian & McDonagh, Luke & Schliessler, Paula & Van Zeebroeck, Nicolas, 2013. "Patent litigation in Europe," ZEW Discussion Papers 13-072, ZEW - Leibniz Centre for European Economic Research.
      • Katrin Cremers & Max Ernicke & Fabian Gaessler & Dietmar Harhoff & Christian Helmers & Luke Mc Donagh & Paula Schliessler & Nicolas van Zeebroeck, 2017. "Patent litigation in Europe," ULB Institutional Repository 2013/226239, ULB -- Universite Libre de Bruxelles.
    2. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    3. Heidi L. Williams, 2013. "Intellectual Property Rights and Innovation: Evidence from the Human Genome," Journal of Political Economy, University of Chicago Press, vol. 121(1), pages 1-27.
    4. Gene M. Grossman & Elhanan Helpman, 1991. "Quality Ladders in the Theory of Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(1), pages 43-61.
    5. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626, National Bureau of Economic Research, Inc.
    6. Katrin Cremers & Max Ernicke & Fabian Gaessler & Dietmar Harhoff & Christian Helmers & Luke McDonagh & Paula Schliessler & Nicolas Zeebroeck, 2017. "Erratum to: Patent litigation in Europe," European Journal of Law and Economics, Springer, vol. 44(1), pages 45-46, August.
    7. Galasso, Alberto & Schankerman, Mark, 2015. "Patents and cumulative innovation: causal evidence from the courts," LSE Research Online Documents on Economics 61614, London School of Economics and Political Science, LSE Library.
    8. Joshua S. Gans & Lars Persson, 2013. "Entrepreneurial commercialization choices and the interaction between IPR and competition policy," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 22(1), pages 131-151, February.
    9. Tom Lee & Louis L. Wilde, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(2), pages 429-436.
    10. Cremers, Katrin & Gaessler, Fabian & Harhoff, Dietmar & Helmers, Christian & Lefouili, Yassine, 2016. "Invalid but infringed? An analysis of the bifurcated patent litigation system," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PA), pages 218-242.
    11. Ilya Segal & Michael D. Whinston, 2007. "Antitrust in Innovative Industries," American Economic Review, American Economic Association, vol. 97(5), pages 1703-1730, December.
    12. Glenn C. Loury, 1979. "Market Structure and Innovation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(3), pages 395-410.
    13. Murray, Fiona & Stern, Scott, 2007. "Do formal intellectual property rights hinder the free flow of scientific knowledge?: An empirical test of the anti-commons hypothesis," Journal of Economic Behavior & Organization, Elsevier, vol. 63(4), pages 648-687, August.
    14. Fiona E. Murray & Scott Stern, 2007. "Do Formal Intellectual Property Rights Hinder the Free Flow of Scientific Knowledge?: An Empirical Test of the Anti-Commons Hypothesis," NBER Chapters, in: Academic Science and Entrepreneurship: Dual Engines of Growth, National Bureau of Economic Research, Inc.
    15. David S. Evans & Richard Schmalensee, 2002. "Some Economic Aspects of Antitrust Analysis in Dynamically Competitive Industries," NBER Chapters, in: Innovation Policy and the Economy, Volume 2, pages 1-50, National Bureau of Economic Research, Inc.
    16. Philippe Aghion & Christopher Harris & Peter Howitt & John Vickers, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(3), pages 467-492.
    17. Alberto Galasso & Mark Schankerman, 2015. "Patents and Cumulative Innovation: Causal Evidence from the Courts," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 130(1), pages 317-369.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chenqian Xu & Cheng Hu, 2024. "Understanding the Rivalry Among Telecommunication Companies in the Cross-Border Patent Infringement: An Evolutionary Social Network Analysis," SAGE Open, , vol. 14(2), pages 21582440241, April.
    2. Roger D. Blair, 2020. "The Intellectual Property-Antitrust Interface," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 56(4), pages 557-561, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gaessler, Fabian & Harhoff, Dietmar & Sorg, Stefan, 2019. "Bargaining Failure and Freedom to Operate: Re-evaluating the Effect of Patents on Cumulative Innovation," Rationality and Competition Discussion Paper Series 220, CRC TRR 190 Rationality and Competition.
    2. Fabian Gaessler & Dietmar Harhoff & Stefan Sorg & Georg von Graevenitz, 2024. "Patents, Freedom to Operate, and Follow-on Innovation: Evidence from Post-Grant Opposition," Rationality and Competition Discussion Paper Series 494, CRC TRR 190 Rationality and Competition.
    3. Yin, Nina, 2023. "Pharmaceuticals, incremental innovation and market exclusivity," International Journal of Industrial Organization, Elsevier, vol. 87(C).
    4. Alberto Galasso & Mark Schankerman, 2015. "Patent Rights, Innovation and Firm Exit," NBER Working Papers 21769, National Bureau of Economic Research, Inc.
    5. Freilich, Janet & Shahshahani, Sepehr, 2023. "Measuring follow-on innovation," Research Policy, Elsevier, vol. 52(9).
    6. Laurina Zhang, 2018. "Intellectual Property Strategy and the Long Tail: Evidence from the Recorded Music Industry," Management Science, INFORMS, vol. 64(1), pages 24-42, January.
    7. Schankerman, Mark & Galasso, Alberto, 2015. "Patents Rights, Innovation and Firm Exit," CEPR Discussion Papers 10968, C.E.P.R. Discussion Papers.
    8. Kwon, Seokbeom & Marco, Alan C., 2021. "Can antitrust law enforcement spur innovation? Antitrust regulation of patent consolidation and its impact on follow-on innovations," Research Policy, Elsevier, vol. 50(9).
    9. Mark Schankerman, 2015. "Patents Rights and Innovation by Small and Large Firms," STICERD - Economics of Industry Papers 54, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    10. Marshall, Guillermo & Parra, Álvaro, 2019. "Innovation and competition: The role of the product market," International Journal of Industrial Organization, Elsevier, vol. 65(C), pages 221-247.
    11. Nancy Gallini, 2017. "Do patents work? Thickets, trolls and antibiotic resistance," Canadian Journal of Economics, Canadian Economics Association, vol. 50(4), pages 893-926, November.
    12. Aydogmus, Ozgur, 2022. "Increasing returns and path dependence in knowledge creation and their effects on the dynamics of patent pools," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 467-477.
    13. Jeroen Hinloopen & Grega Smrkolj & Florian Wagener, 2016. "R&D Cooperatives and Market Collusion: A Global Dynamic Approach," Tinbergen Institute Discussion Papers 16-048/II, Tinbergen Institute.
    14. Leibowicz, Benjamin D., 2018. "Welfare improvement windows for innovation policy," Research Policy, Elsevier, vol. 47(2), pages 390-398.
    15. Markus Nagler & Monika Schnitzer & Martin Watzinger, 2022. "Fostering the Diffusion of General Purpose Technologies: Evidence from the Licensing of the Transistor Patents," Journal of Industrial Economics, Wiley Blackwell, vol. 70(4), pages 838-866, December.
    16. Filippo Mezzanotti, 2021. "Roadblock to Innovation: The Role of Patent Litigation in Corporate R&D," Management Science, INFORMS, vol. 67(12), pages 7362-7390, December.
    17. Bhaven Sampat & Heidi L. Williams, 2019. "How Do Patents Affect Follow-On Innovation? Evidence from the Human Genome," American Economic Review, American Economic Association, vol. 109(1), pages 203-236, January.
    18. Ronald Goettler & Brett Gordon, 2014. "Competition and product innovation in dynamic oligopoly," Quantitative Marketing and Economics (QME), Springer, vol. 12(1), pages 1-42, March.
    19. Philippe Aghion & Stefan Bechtold & Lea Cassar & Holger Herz, 2018. "The Causal Effects of Competition on Innovation: Experimental Evidence," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 34(2), pages 162-195.
    20. Abhishek Nagaraj, 2018. "Does Copyright Affect Reuse? Evidence from Google Books and Wikipedia," Management Science, INFORMS, vol. 64(7), pages 3091-3107, July.

    More about this item

    Keywords

    Antitrust; Innovation; Invalidity; Litigation; Non-infringement; Patents;
    All these keywords.

    JEL classification:

    • K2 - Law and Economics - - Regulation and Business Law
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:revind:v:56:y:2020:i:4:d:10.1007_s11151-020-09756-0. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.