Contributory Infringement Rule and Patents
AbstractThe 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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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12268.
Date of creation: 10 Apr 2005
Date of revision:
Publication status: Published in Journal of Economic Behavior and Organization, May 2009, vol. 70 no. 1-2, pp. 296-310
Contact details of provider:
Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
More information through EDIRC
patents; network; infringement;
Other versions of this item:
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- K11 - Law and Economics - - Basic Areas of Law - - - Property Law
- K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
- O34 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-16 (All new papers)
- NEP-LAW-2005-04-16 (Law & Economics)
- NEP-TID-2005-04-16 (Technology & Industrial Dynamics)
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