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How Reasonable is the ‘Reasonable’ Royalty Rate? Damage Rules and Probabilistic Intellectual Property Rights

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Jay Pil Choi ()

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Abstract

This paper investigates how different damage rules in patent infringement cases shape competition when intellectual property rights are probabilistic. I develop a simple model of oligopolistic competition to compare two main liability doctrines that have been used in the US to assess infringement damages – the unjust enrichment rule and the lost profit rule. It also points out the logical inconsistency in the concept of the “reasonable royalty rates” when intellectual property rights are not ironclad.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1778.

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Date of creation: 2006
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Handle: RePEc:ces:ceswps:_1778

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Related research
Keywords: probabilistic intellectual property rights; damage rules; reasonable royalty rates;

Find related papers by JEL classification:
D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General
L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
O30 - Economic Development, Technological Change, and Growth - - Technological Change - - - General

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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. Kwoka, John E, Jr, 1992. "The Output and Profit Effects of Horizontal Joint Ventures," Journal of Industrial Economics, Blackwell Publishing, vol. 40(3), pages 325-38, September. [Downloadable!] (restricted)
  2. Joseph Farrell & Carl Shapiro, 2008. "How Strong Are Weak Patents?," American Economic Review, American Economic Association, vol. 98(4), pages 1347-69, September. [Downloadable!]
  3. Mark A. Lemley & Carl Shapiro, 2005. "Probabilistic Patents," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 75-98, Spring. [Downloadable!] (restricted)
  4. Crampes, Claude & Langinier, Corinne, 2002. "Litigation and Settlement in Patent Infringement Cases," Staff General Research Papers 5231, Iowa State University, Department of Economics.
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  5. Joseph Farrell & Carl Shapiro, 1990. "Asset Ownership and Market Structure in Oligopoly," RAND Journal of Economics, The RAND Corporation, vol. 21(2), pages 275-292, Summer. [Downloadable!] (restricted)
  6. Reynolds, Robert J. & Snapp, Bruce R., 1986. "The competitive effects of partial equity interests and joint ventures," International Journal of Industrial Organization, Elsevier, vol. 4(2), pages 141-153, June. [Downloadable!] (restricted)
  7. Reinganum, Jennifer F., 1989. "The timing of innovation: Research, development, and diffusion," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 14, pages 849-908 Elsevier. [Downloadable!] (restricted)
  8. Reitman, David, 1994. "Partial Ownership Arrangements and the Potential for Collusion," Journal of Industrial Economics, Blackwell Publishing, vol. 42(3), pages 313-22, September. [Downloadable!] (restricted)
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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. Vargas Barrenechea, Martin, 2008. "Licensing Probabilistic Patents and Liability Rules: The Duopoly Case," MPRA Paper 9925, University Library of Munich, Germany. [Downloadable!]
    Other versions:
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