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Lost Profits from Patent Infringement: The Simulation Approach

Author

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  • Gregory Werden
  • Luke Froeb
  • James Langenfeld

Abstract

A patent owner is entitled to recover any additional profits that would have been earned but for infringement. This paper suggests the use of an adaptation of merger simulation to assess lost profits in patent infringement cases. A model of the industry with infringement is calibrated to observed prices and quantities and estimated demand elasticities. Lost profits are then estimated by calculating a new equilibrium without the infringing product(s).

Suggested Citation

  • Gregory Werden & Luke Froeb & James Langenfeld, 2000. "Lost Profits from Patent Infringement: The Simulation Approach," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 7(2), pages 213-227.
    • Handle: RePEc:taf:ijecbs:v:7:y:2000:i:2:p:213-227
    DOI: 10.1080/13571510050084541
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    References listed on IDEAS

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    1. Gregory Werden & Luke Froeb & Timothy Tardiff, 1996. "The Use of the Logit Model in Applied Industrial Organization," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 3(1), pages 83-105.
    2. Werden, G.J. & G.J. & Froeb, L.M., 1995. "Simulation as an Alternative to Structural Merger Policy in Differentiated Products Industries," Papers 95-02, U.S. Department of Justice - Antitrust Division.
    3. Brownstone, David & Train, Kenneth, 1998. "Forecasting new product penetration with flexible substitution patterns," Journal of Econometrics, Elsevier, vol. 89(1-2), pages 109-129, November.
    4. Werden, Gregory J., 1997. "Simulating The Effects Of Differentiated Products Mergers: A Practitioners' Guide," Strategy and Policy in the Food System: Emerging Issues, June 20-21, 1996, Washington, D.C. 25942, Regional Research Project NE-165 Private Strategies, Public Policies, and Food System Performance.
    5. Lance Brannman & Luke M. Froeb, 2000. "Mergers, Cartels, Set-Asides, and Bidding Preferences in Asymmetric Oral Auctions," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 283-290, May.
    6. Philip Crooke & Luke Froeb & Steven Tschantz & Gregory Werden, 1999. "Effects of Assumed Demand Form on Simulated Postmerger Equilibria," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 15(3), pages 205-217, November.
    7. Steven Tschantz & Philip Crooke & Luke Froeb, 2000. "Mergers in Sealed versus Oral Auctions," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 7(2), pages 201-212.
    8. Werden, Gregory J & Froeb, Luke M, 1994. "The Effects of Mergers in Differentiated Products Industries: Logit Demand and Merger Policy," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 10(2), pages 407-426, October.
    9. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    10. Werden, G.J., 1992. "The History of Antitrust Market Delineation," Papers 92-8, U.S. Department of Justice - Antitrust Division.
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    Citations

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    Cited by:

    1. David Weiskopf, 2000. "The Impact of Omitting Promotion Variables on Simulation Experiments," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 7(2), pages 159-166.
    2. Matthew D. Henry & John L. Turner, 2010. "Patent Damages And Spatial Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 58(2), pages 279-305, June.
    3. Dubin, Jeffrey A., 2007. "Valuing intangible assets with a nested logit market share model," Journal of Econometrics, Elsevier, vol. 139(2), pages 285-302, August.

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    Keywords

    Simulation; Patents; Damages;
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