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Patent Litigation When Innovation Is Cumulative

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  • Gerard Llobet

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 enterpreneurs. 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.

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  • Gerard Llobet, 2001. "Patent Litigation When Innovation Is Cumulative," Working Papers wp2001_0102, CEMFI.
    • Handle: RePEc:cmf:wpaper:wp2001_0102
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    References listed on IDEAS

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    Cited by:

    1. Andreas Panagopoulos & In-Uck Park, 2008. "Patent Protection, Takeovers, and Startup Innovation: A Dynamic Approach," The Centre for Market and Public Organisation 08/201, The Centre for Market and Public Organisation, University of Bristol, UK.
    2. Alberto Galasso & Mark Schankerman, 2010. "Patent thickets, courts, and the market for innovation," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 472-503, September.
    3. Youngho Kim & Sangsung Park & Junseok Lee & Dongsik Jang & Jiho Kang, 2021. "Integrated Survival Model for Predicting Patent Litigation Hazard," Sustainability, MDPI, vol. 13(4), pages 1-15, February.
    4. Gerard Llobet & Jorge Padilla, 2016. "The Inverse Cournot Effect in Royalty Negotiations with Complementary Patents," Working Papers wp2016_1608, CEMFI.
    5. Jeon, Haejun, 2015. "Patent infringement, litigation, and settlement," Economic Modelling, Elsevier, vol. 51(C), pages 99-111.
    6. Jeon, Haejun, 2019. "Patent protection and R&D subsidy under asymmetric information," International Review of Economics & Finance, Elsevier, vol. 62(C), pages 332-354.
    7. Buzzacchi, Luigi & Scellato, Giuseppe, 2008. "Patent litigation insurance and R&D incentives," International Review of Law and Economics, Elsevier, vol. 28(4), pages 272-286, December.
    8. Wen Wen & Marco Ceccagnoli & Chris Forman, 2012. "Patent Pools, Thickets, and Open Source Software Entry by Start-Up Firms," NBER Chapters, in: Standards, Patents and Innovations, National Bureau of Economic Research, Inc.
    9. KOU Zonglai & ZHANG Jian, 2007. "Endogenous licensing in cumulative innovation," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 2(3), pages 424-457, September.
    10. Hernandez-Murillo, Ruben & Llobet, Gerard, 2006. "Patent licensing revisited: Heterogeneous firms and product differentiation," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 149-175, January.
    11. Trommetter, M. & Tropéano, J.P., 2009. "Do broad patents deter research cooperation ?," Working Papers 200904, Grenoble Applied Economics Laboratory (GAEL).
    12. Jeon, Haejun & Nishihara, Michi, 2018. "Optimal patent policy in the presence of vertical separation," European Journal of Operational Research, Elsevier, vol. 270(2), pages 682-697.
    13. Gerard Llobet & Javier Suarez, 2005. "Financing and the Protection of Innovators," Working Papers wp2005_0502, CEMFI.
    14. Haejun Jeon, 2016. "Patent litigation and cross licensing with cumulative innovation," Journal of Economics, Springer, vol. 119(3), pages 179-218, November.
    15. Llobet, Gerard, 2003. "Patent litigation when innovation is cumulative," International Journal of Industrial Organization, Elsevier, vol. 21(8), pages 1135-1157, October.
    16. Yann Ménière & Sarah Parlane, 2008. "Innovation in the Shadow of Patent Litigation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 32(2), pages 95-111, March.
    17. Josep Pijoan-Mas, 2006. "Precautionary Savings or Working Longer Hours?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(2), pages 326-352, April.
    18. Elisabetta Ottoz & Franco Cugno, 2015. "Different Rules of Legal-Cost Allocation and Patent Holdup," Research in Law and Economics, in: Economic and Legal Issues in Competition, Intellectual Property, Bankruptcy, and the Cost of Raising Children, volume 27, pages 143-159, Emerald Group Publishing Limited.
    19. Krasteva, Silvana & Sharma, Priyanka & Wang, Chu, 2020. "Patent policy, imitation incentives, and the rate of cumulative innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 178(C), pages 509-533.

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