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Damage rules and the patent hold-up problem : An analysis of Article L. 615-7

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  • Bertrand Chopard
  • Thomas Cortade
  • Eric Langlais

Abstract

This paper provides an analysis of two damage rules (Lost Pro fit versus Unjust Enrichment) introduced in the French Code de la Propriété Intellectuelle in 2007 (Loi du 27 Octobre 2007, Art. L. 615-7). We use a simple sequential game where both the decisions to infringe and to enforce the patent, as well as the decisions to accomodate, settle or litigate the case, and the outputs decisions (Cournot competition) are endogenous. We characterize the equilibria associated with each rule, and compare their properties. We show that: 1/ the Unjust Enrichment rule provides Patentees with higher damages compensation than the Lost Pro fit one; however, 2/ Lost Profi t induces more deterrence of infringement, and is associated with less trials than Unjust Enrichment; 3/ Unjust Enrichment may deter the Patentee to enforce his right; 4/ when there is a positive probability that the case settles, Patentee'’s expected utility is higher under Lost Profi t than under Unjust Enrichment.

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File URL: http://economix.fr/pdf/dt/2013/WP_EcoX_2013-37.pdf
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Bibliographic Info

Paper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2013-37.

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Length: 16 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:drm:wpaper:2013-37

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Related research

Keywords: lost profi t rule; unjust enrichment rule; intellectual property rights; patent litigations; pretrial negotiations;

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  1. 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.
  2. Carl Shapiro, 2010. "Injunctions, Hold-Up, and Patent Royalties-super-1," American Law and Economics Review, Oxford University Press, vol. 12(2), pages 509-557.
  3. Michael J. Meurer, 1989. "The Settlement of Patent Litigation," RAND Journal of Economics, The RAND Corporation, vol. 20(1), pages 77-91, Spring.
  4. Chopard, Bertrand & Cortade, Thomas & Langlais, Eric, 2008. "Trial and settlement negotiations between asymmetrically skilled parties," MPRA Paper 8995, University Library of Munich, Germany.
  5. James J. Anton & Dennis A. Yao, 2003. "Patents, Invalidity, and the Strategic Transmission of Enabling Information," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(2), pages 151-178, 06.
  6. Farrell, Joseph & Shapiro, Carl, 2007. "How Strong Are Weak Patents?," Competition Policy Center, Working Paper Series qt8vg425vj, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  7. Osborne, Evan, 1999. "Who should be worried about asymmetric information in litigation?," International Review of Law and Economics, Elsevier, vol. 19(3), pages 399-409, September.
  8. 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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