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Contributory Infringement Rule and Patents

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Author Info
Langinier, Corinne
Marcoul, Philippe

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Abstract

The contributory infringement rule assesses liability to a third party that contributes to the infringement of a patent. Not only are firms that directly infringe liable, those who indirectly contribute are also liable. In the e-commerce world, this rule takes on an important dimension because of the network structure of the Internet. We investigate how the contributory infringement rule affects the creation of a network of members (membership program) and whether this rule is harmful to consumers and firms. We find that the enforcement of the contributory infringement rule does not induce more trials in equilibrium. However, because of the threat of trial, it decreases the network size, and then reduces the social welfare. Surprisingly we find that if the compensation paid by the indirect infringers is high, the contributory infringement rule does not benefit the patentholder and does not give enough R&D incentives ex ante. It is even possible to find a direct compensation for the patentholder that is socially preferable (as it increases the network size).

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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12268.

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Date of creation: 11 Apr 2005
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Publication status: Forthcoming in Journal of Economic Behavior and Organization
Handle: RePEc:isu:genres:12268

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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K0 - Law and Economics - - General

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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. Crémer, Jacques & Rey, Patrick & Tirole, Jean, 1999. "Connectivity in the Commercial Internet," IDEI Working Papers 87, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2000. [Downloadable!]
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  3. Louis Kaplow & Steven Shavell, 1996. "Accuracy in the Assessment of Damages," NBER Working Papers 4287, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Michael J. Meurer, 1989. "The Settlement of Patent Litigation," RAND Journal of Economics, The RAND Corporation, vol. 20(1), pages 77-91, Spring. [Downloadable!] (restricted)
  5. 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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  6. Cremer, Jacques & Hariton, Cyril, 1999. "The Pricing of Critical Applications in the Internet," Journal of the Japanese and International Economies, Elsevier, vol. 13(4), pages 281-310, December. [Downloadable!] (restricted)
  7. Mackie-Mason, J.K. & Varian, H.R., 1994. "Economic FACs about the Internet," Papers 94-05, Michigan - Center for Research on Economic & Social Theory.
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  8. James Bessen & Eric Maskin, 2006. "Sequential Innovation, Patents, and Imitation," Economics Working Papers 0025, Institute for Advanced Study, School of Social Science. [Downloadable!]
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  9. 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)
  10. Cremer, Jacques, 2000. "Network externalities and universal service obligation in the internet," European Economic Review, Elsevier, vol. 44(4-6), pages 1021-1031, May. [Downloadable!] (restricted)
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