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Strategic patents and asymmetric litigation costs as entry deterrence instruments

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  • Julio R. Robledo

    ()
    (University of Vienna)

Abstract

To spur innovation, the patent protection system grants the patentee limited monopoly power to recoup his R&D investment, although, in general, allowing the use of the public good "innovation" is socially efficient. But patents and patent threats can also be used strategically, e.g. to deter entry from competitors. This note shows that, besides incumbency, the present patent protection system constitutes an additional strategic instrument that favors the incumbent, because asymmetric litigation costs may deter entry from potential rivals.

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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 15 (2005)
Issue (Month): 2 ()
Pages: 1-9

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Handle: RePEc:ebl:ecbull:eb-04o30005

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Keywords: Entry deterrence;

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References

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  1. Wesley M. Cohen & Richard R. Nelson & John P. Walsh, 2000. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not)," NBER Working Papers 7552, National Bureau of Economic Research, Inc.
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  4. Reinganum, Jennifer R., 1982. "Uncertain Innovation and the Persistence of Monopoly," Working Papers 431, California Institute of Technology, Division of the Humanities and Social Sciences.
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  7. Lanjouw, Jean O & Schankerman, Mark, 2001. "Characteristics of Patent Litigation: A Window on Competition," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 129-51, Spring.
  8. Klemperer, Paul, 1990. "How Broad Should the Scope of Patent Protection Be?," CEPR Discussion Papers 392, C.E.P.R. Discussion Papers.
  9. Tuomas Takalo, 2001. "On the optimal patent policy," Finnish Economic Papers, Finnish Economic Association, vol. 14(1), pages 33-40, Spring.
  10. Waterson, Michael, 1990. "The Economics of Product Patents," American Economic Review, American Economic Association, vol. 80(4), pages 860-69, September.
  11. Denicolo, Vincenzo, 1996. "Patent Races and Optimal Patent Breadth and Length," Journal of Industrial Economics, Wiley Blackwell, vol. 44(3), pages 249-65, September.
  12. William D. Nordhaus, 1969. "An Economic Theory of Technological Change," Cowles Foundation Discussion Papers 265, Cowles Foundation for Research in Economics, Yale University.
  13. Yi, Sang-Seung, 1995. "Uncertain innovation and persistence of monopoly revisited," Economics Letters, Elsevier, vol. 49(3), pages 319-322, September.
  14. Nordhaus, William D, 1972. "The Optimum Life on a Patent: Reply," American Economic Review, American Economic Association, vol. 62(3), pages 428-31, June.
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