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Licensing probabilistic Patents and Liability Rules: The Duopoly case

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Author Info
Vargas Barrenechea, Martin

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Abstract

In this paper a dynamic game is used to compare licensing of a cost reduction innovations under lost profits (LP) and unjust enrichment (UE), both damage rules used by courts in the calculation of damages when a patent has been infringed. The innovation, whose property right belongs to a firm (patent holder) has a positive probability to be declared invalid in a court. The market is composed by two homogeneous firms that compete in quantities (Cournot). Licensing by using royalty rates is preferred compared with fixed fees, it is observable little licensing (just big innovations). LP is better (almost all cases) than UE for the industry and society. However in the major of the cases consumers are better off under UE and in the major of cases LP benefits more to the patent holder.

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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 16872.

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Date of creation: 2009
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Handle: RePEc:pra:mprapa:16872

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Related research
Keywords: innovation; law; damage rules; patent; licensing games;

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Find related papers by JEL classification:
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
O34 - Economic Development, Technological Change, and Growth - - Technological Change - - - Intellectual Property Rights
P48 - Economic Systems - - Other Economic Systems - - - Other Economic Systems: Political Economy; Legal Institutions; Property Rights
K11 - Law and Economics - - Basic Areas of Law - - - Property Law

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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. 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. 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. Jay Pil Choi, 2006. "How Reasonable is the ‘Reasonable’ Royalty Rate? Damage Rules and Probabilistic Intellectual Property Rights," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  4. Kamien, Morton I & Tauman, Yair, 2002. "Patent Licensing: The Inside Story," Manchester School, University of Manchester, vol. 70(1), pages 7-15, January. [Downloadable!] (restricted)
  5. Wang, X. Henry, 1998. "Fee versus royalty licensing in a Cournot duopoly model," Economics Letters, Elsevier, vol. 60(1), pages 55-62, July. [Downloadable!] (restricted)
  6. Sen, Debapriya & Tauman, Yair, 2007. "General licensing schemes for a cost-reducing innovation," Games and Economic Behavior, Elsevier, vol. 59(1), pages 163-186, April. [Downloadable!] (restricted)
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This page was last updated on 2009-11-26.

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