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Antitrust Limits to Patent Settlements

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  • Shapiro, Carl

Abstract

Patents, patent litigation, and patent settlements increasingly influence competition. Settlements of patent disputes come in many forms, including licensing and cross-licensing agreements, patent pools, mergers, and joint ventures. While frequently procompetitive, such settlements can stifle competition and harm consumers. I propose a specific antitrust rule limiting such settlements: a settlement must leave consumers at least as well off as they would have been from ongoing patent litigation. After establishing that profitable settlements satisfying this constraint generally exist, I show how this antitrust rule can be used to evaluate three types of settlements: mergers, patent pools, and negotiated entry dates. Copyright 2003 by the RAND Corporation.

Suggested Citation

  • Shapiro, Carl, 2003. "Antitrust Limits to Patent Settlements," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 391-411, Summer.
    • Handle: RePEc:rje:randje:v:34:y:2003:i:2:p:391-411
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    References listed on IDEAS

    as
    1. 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 129-151, Spring.
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    5. Carl Shapiro, 2001. "Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard Setting," NBER Chapters, in: Innovation Policy and the Economy, Volume 1, pages 119-150, National Bureau of Economic Research, Inc.
    6. Suzanne Scotchmer, 1996. "Protecting Early Innovators: Should Second-Generation Products Be Patentable?," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 322-331, Summer.
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    9. Michael L. Katz & Carl Shapiro, 1985. "On the Licensing of Innovations," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 504-520, Winter.
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    12. Jean Olson Lanjouw, 1998. "Patent Protection in the Shadow of Infringement: Simulation Estimations of Patent Value," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 65(4), pages 671-710.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • K2 - Law and Economics - - Regulation and Business Law
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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