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Antitrust Limits to Patent Settlements

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Author Info
Carl Shapiro (Haas School of Business and Economics Department, University of California, Berkeley)

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Abstract

This paper focuses on the class of legal rules that governs intellectual property rights: the antitrust limits imposed on patent settlements.The paper discusses the benefits and costs of settlements and explains why antitrust limits on settlements are needed to prevent abuse of the settlement process. A general rule for evaluating proposed settlements is developed.This paper explores a simple antitrust rule governing settlements of intellectural property disputes: a settlement cannot lead to lower expected consumer surplus than would have arisen from ongoing litigation. It argues that this rule respects intellectural property rights while encouraging efficient settlements. Under extremely general conditions, there exists a settlement that leaves consumers better off and raises the joint profits of the two firms engaged in the dispute. This general test is then applied to several types of settlements: mergers; agreements specifying the timing of entry; and patent pools.

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Publisher Info
Paper provided by Competition Policy Center, Institute for Business and Economic Research, UC Berkeley in its series Competition Policy Center, Working Paper Series with number CPC01-18.

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Date of creation: 01 May 2001
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Handle: RePEc:cdl:compol:cpc01-18

Note: oai:cdlib1:iber/cpc-1008
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Related research
Keywords: intellectual property rights; antitrust; patents; mergers; settlements; patent pools;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  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 129-51, Spring.
  2. Schankerman, Mark & Scotchmer, Suzanne, 2001. "Damages and Injunctions in Protecting Intellectual Property," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 199-220, Spring.
  3. Josh Lerner, 2000. "Where Does State Street Lead? A First Look at Finance Patents, 1971-2000," NBER Working Papers 7918, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Mark Schankerman, 1998. "How Valuable is Patent Protection? Estimates by Technology Field," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 77-107, Spring. [Downloadable!] (restricted)
  5. 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. [Downloadable!] (restricted)
  6. Kortum, Samuel & Lerner, Josh, 1998. "Stronger protection or technological revolution: what is behind the recent surge in patenting?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 48(1), pages 247-304, June. [Downloadable!] (restricted)
    Other versions:
  7. 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. [Downloadable!] (restricted)
    Other versions:
  8. 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. [Downloadable!]
    Other versions:
  9. Richard Gilbert & Willard Tom, 2001. "Is Innovation King at the Antitrust Agencies? The Intellectual Property Guidelines Five Years Later," Department of Economics, Working Paper Series 1012, Department of Economics, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
    Other versions:
  10. Lanjouw, Jean Olson, 1998. "Patent Protection in the Shadow of Infringement: Simulation Estimations of Patent Value," Review of Economic Studies, Blackwell Publishing, vol. 65(4), pages 671-710, October. [Downloadable!] (restricted)
  11. Howard F. Chang, 1995. "Patent Scope, Antitrust Policy, and Cumulative Innovation," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 34-57, Spring. [Downloadable!] (restricted)
  12. David M. Cutler & Elizabeth Richardson, 1997. "Measuring the Health of the U.S. Population," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1997-1), pages 217-282. [Downloadable!]
  13. Richard J. Gilbert and Willard K. Tom, 2001. "Is Innovation King at the Antitrust Agencies?: The Intellectual Property Guidelines Five Years Later," Economics Working Papers EC01-301, University of California at Berkeley. [Downloadable!]
  14. 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. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Robert M. Hunt, 2006. "When Do More Patents Reduce R&D?," Levine's Bibliography 122247000000001065, UCLA Department of Economics. [Downloadable!]
    Other versions:
  2. Blind, Knut & Cremers, Katrin & Mueller, Elisabeth, 2007. "The Influence of Strategic Patenting on Companies? Patent Portfolios," ZEW Discussion Papers 07-013, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
    Other versions:
  3. Philipp N. Baecker, 2006. "An Option-Based View of Imperfect Patent Protection," ebs Working Papers on Finance and Accounting 060601, Department of Finance and Accounting, EUROPEAN BUSINESS SCHOOL (ebs), International University Schloß Reichartshausen, revised 10 Jan 2007. [Downloadable!]
  4. Robert E. Litan & Carl Shapiro, 2003. "Antitrust Policy During the Clinton Administration," Law and Economics 0303003, EconWPA. [Downloadable!]
  5. Pierre Regibeau & Katharine Rockett, 2004. "The Relationship Between Intellectual Property Law and Competition Law: An Economic Approach," Economics Discussion Papers 581, University of Essex, Department of Economics. [Downloadable!]
  6. Kannan, Srinivasan, 2008. "Information Economics and Intellectual Property Rights," MPRA Paper 13769, University Library of Munich, Germany. [Downloadable!]
  7. Stephen Maurer & Suzanne Scotchmer, . "Profit Neutrality in Licensing: The Boundary Between Antitrust Law and Patent Law," American Law & Economics Association Annual Meetings 1090, American Law & Economics Association. [Downloadable!]
  8. Jay Pil Choi, 2003. "Pools and Cross-Licensing in the Shadow of Patent Litigation," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  9. Yann Ménière & Sarah Parlane, 2004. "A Dynamic Model of Cross Licensing," Working Papers 200424, School Of Economics, University College Dublin. [Downloadable!]
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