The Effect of Litigation on Intellectual Property and Welfare
AbstractThis paper shows that “wasteful” litigation about intellectual property may be welfare enhancing. The aim of an intellectual property protection system is to solve the trade-off between exante innovation incentive and ex-post monopoly welfare loss. The litigation about intellectual property in court decreases the expected rent from intellectual property, therefore reducing the incentive to innovate in the first place leading to a negative effect on social welfare. Yet the legal contest may have the positive welfare effect of breaking the monopoly and allowing an entrant into the market, thus lowering prices and reducing the welfare loss of monopoly. If the welfare effect of increasing competition outweighs the first effect of reduced research, a litigation contest is welfare increasing.
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Bibliographic InfoPaper provided by University of Vienna, Department of Economics in its series Vienna Economics Papers with number 0511.
Date of creation: Dec 2005
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Web page: http://www.univie.ac.at/vwl
Find related papers by JEL classification:
- K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- O34 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Intellectual Property Rights
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