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Antitrust Limits to Patent Settlements

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  • Carl Shapiro

    (Haas School of Business, University of California, Berkeley)

Abstract

This paper focuses on the class of legal rules that governs intellectual property rights: the antitrust limits imposed on patent settlements. The paper discusses the benefits and costs of settlements and explains why antitrust limits on settlements are needed to prevent abuse of the settlement process. It develops a general rule for evaluating proposed settlements. This paper explores a simple antitrust rule governing settlements of intellectual property disputes: a settlement cannot lead to lower expected consumer surplus than would have arisen from ongoing litigation. It argues that this rule respects intellectual property rights while encouraging efficient settlements. Under extremely general conditions, there exists a settlement that leaves consumers better off and raises the joint profits of the two firms engaged in the dispute. This general test is then applied to several types of settlements: mergers; agreements specifying the timing of entry; and patent pools.

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File URL: http://128.118.178.162/eps/le/papers/0303/0303004.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Law and Economics with number 0303004.

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Length: 42 pages
Date of creation: 27 Mar 2003
Date of revision:
Handle: RePEc:wpa:wuwple:0303004

Note: 42 pages, Adobe.pdf
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Web page: http://128.118.178.162

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References

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  1. Lanjouw, Jean O & Schankerman, Mark, 2001. "Characteristics of Patent Litigation: A Window on Competition," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 129-51, Spring.
  2. 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.
  3. Gilbert, Richard & Tom, Willard K., 2001. "Is Innovation King at the Antitrust Agencies? The Intellectual Property Guidelines Five Years Later," Competition Policy Center, Working Paper Series qt8zv6b8c5, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  4. Kortum, Samuel & Lerner, Josh, 1998. "Stronger protection or technological revolution: what is behind the recent surge in patenting?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 48(1), pages 247-304, June.
  5. Carl Shapiro, 2001. "Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard Setting," NBER Chapters, in: Innovation Policy and the Economy, Volume 1, pages 119-150 National Bureau of Economic Research, Inc.
  6. Lanjouw, Jean Olson, 1998. "Patent Protection in the Shadow of Infringement: Simulation Estimations of Patent Value," Review of Economic Studies, Wiley Blackwell, vol. 65(4), pages 671-710, October.
  7. 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.
  8. Richard J. Gilbert & Willard K. Tom, 2001. "Is Innovation King at the Antitrust Agencies? The Intellectual Property Guidelines Five Years Later," Industrial Organization 0106002, EconWPA.
  9. Richard Gilbert & Carl Shapiro, 1997. "Antitrust Issues in the Licensing of Intellectual Property: The Nine No-No's Meet the Nineties," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1997 Micr), pages 283-349.
  10. Gilbert, Richard & Tom, Willard K, 2001. "Is Innovation King at the Antitrust Agencies? The Intellectual Property Guidelines Five Years Later," Department of Economics, Working Paper Series qt4mf5t2bm, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  11. Wesley M. Cohen & Richard R. Nelson & John P. Walsh, 2000. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not)," NBER Working Papers 7552, National Bureau of Economic Research, Inc.
  12. Josh Lerner, 2004. "Where Does State Street Lead? First Look at Finance Patents, 1971-2000," Levine's Working Paper Archive 122247000000000497, David K. Levine.
  13. Suzanne Scotchmer, 1996. "Protecting Early Innovators: Should Second-Generation Products Be Patentable?," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 322-331, Summer.
  14. Richard J. Gilbert and Willard K. Tom, 2001. "Is Innovation King at the Antitrust Agencies?: The Intellectual Property Guidelines Five Years Later," Economics Working Papers EC01-301, University of California at Berkeley.
  15. Mark Schankerman, 1998. "How Valuable is Patent Protection? Estimates by Technology Field," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 77-107, Spring.
  16. Michael L. Katz & Carl Shapiro, 1985. "On the Licensing of Innovations," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 504-520, Winter.
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Citations

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Cited by:
  1. Robert M. Hunt, 2006. "When Do More Patents Reduce R&D?," Levine's Bibliography 122247000000001065, UCLA Department of Economics.
  2. Stephen M. Maurer & Suzanne Scotchmer, 2006. "Profit Neutrality in Licensing: The Boundary Between Antitrust Law and Patent Law," American Law and Economics Review, Oxford University Press, vol. 8(3), pages 476-522.
  3. Blind, Knut & Cremers, Katrin & Mueller, Elisabeth, 2009. "The influence of strategic patenting on companies' patent portfolios," Research Policy, Elsevier, vol. 38(2), pages 428-436, March.
  4. Siebert, Ralph & von Graevenitz, Georg, 2010. "Jostling for advantage or not: Choosing between patent portfolio races and ex ante licensing," Journal of Economic Behavior & Organization, Elsevier, vol. 73(2), pages 225-245, February.
  5. Langinier, Corinne & Marcoul, Philippe, 2009. "Contributory infringement rule and patents," Journal of Economic Behavior & Organization, Elsevier, vol. 70(1-2), pages 296-310, May.
  6. repec:hal:wpaper:halshs-00595493 is not listed on IDEAS
  7. Yann Ménière & Sarah Parlane, 2004. "A Dynamic Model of Cross Licensing," Working Papers 200424, School Of Economics, University College Dublin.
  8. Mitchell, Matthew & Zhang, Yuzhe, 2012. "Shared Rights and Technological Progress," MPRA Paper 36537, University Library of Munich, Germany.
  9. Ottoz Elisabetta & Cugno Franco, 2012. "Does Banning Side Payments in Patent Settlements Suffice to Fully Protect Consumers?," Department of Economics Working Papers 201201, University of Turin.
  10. Tang, Puay, 2005. "Digital copyright and the "new" controversy: Is the law moulding technology and innovation?," Research Policy, Elsevier, vol. 34(6), pages 852-871, August.
  11. Mark A. Lemley & Carl Shapiro, 2005. "Probabilistic Patents," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 75-98, Spring.
  12. Michael Salinger & Pauline Ippolito & Joel Schrag, 2007. "Economics at the FTC: Pharmaceutical Patent Dispute Settlements and Behavioral Economics," Review of Industrial Organization, Springer, vol. 31(2), pages 85-105, September.
  13. Lemley, Mark A. & Shapiro, Carl, 2004. "Probabilistic Patents," Competition Policy Center, Working Paper Series qt9xf1488p, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  14. Kannan, Srinivasan, 2008. "Information Economics and Intellectual Property Rights," MPRA Paper 13769, University Library of Munich, Germany.
  15. Jay Pil Choi, 2003. "Pools and Cross-Licensing in the Shadow of Patent Litigation," CESifo Working Paper Series 1070, CESifo Group Munich.
  16. Cremers, Katrin & Schliessler, Paula, 2012. "Patent litigation settlement in Germany: Why parties settle during trial," ZEW Discussion Papers 12-084, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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