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Patent litigation settlement in Germany: Why parties settle during trial

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  • Cremers, Katrin
  • Schliessler, Paula
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    Abstract

    This paper looks at the decision to settle patent litigation in Germany from a new angle by focusing on detailed data on within-trial actions and motivations by plain-tiff, defendant and the courts. Using a new dataset covering about 80% of all patent litigation cases in Germany between 2000 and 2008 we estimate the likelihood of within-trial settlement. We find that the within-trial settlement decision is to some degree driven by the proceedings that change the pre-trial setting of the negotiations in terms of information and stakes and make previously refused settlement a new option. Additionally, firm-specific stakes as measured by the relation of the involved parties to the disputed patent as well as firm-specific strategies are found to affect the general willingness to settle after the filing of a court case. The results suggest that pre-trial failure of settlement negotiations can to some extent be offset by within-trial settlement through efforts made by court and involved parties, but that the disposition to settle is to a larger degree determined by firm-specific stakes and strategies in the case. --

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    Bibliographic Info

    Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 12-084.

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    Date of creation: 2012
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    Handle: RePEc:zbw:zewdip:12084

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    Keywords: Patent; Patent Litigation; Settlement;

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    1. Cooter, Robert D & Rubinfeld, Daniel L, 1989. "Economic Analysis of Legal Disputes and Their Resolution," Journal of Economic Literature, American Economic Association, vol. 27(3), pages 1067-97, September.
    2. Graham, Stuart J.H. & Harhoff, Dietmar, 2006. "Can Post-Grant Reviews Improve Patent System Design? A Twin Study of US and European Patents," CEPR Discussion Papers 5680, C.E.P.R. Discussion Papers.
    3. 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.
    4. Waldfogel, Joel, 1998. "Reconciling Asymmetric Information and Divergent Expectations Theories of Litigation," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 451-76, October.
    5. Carl Shapiro, 2003. "Antitrust Limits to Patent Settlements," Law and Economics 0303004, EconWPA.
    6. George L. Priest & Benjamin Klein, 1984. "The Selection of Disputes for Litigation," The Journal of Legal Studies, University of Chicago Press, vol. 13(1), pages 1-56, January.
    7. Lanjouw, Jean O & Schankerman, Mark, 2004. "Protecting Intellectual Property Rights: Are Small Firms Handicapped?," Journal of Law and Economics, University of Chicago Press, vol. 47(1), pages 45-74, April.
    8. Katrin Cremers, 2009. "Settlement during patent litigation trials. An empirical analysis for Germany," The Journal of Technology Transfer, Springer, vol. 34(2), pages 182-195, April.
    9. Lucian Arye Bebchuk, 1984. "Litigation and Settlement under Imperfect Information," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 404-415, Autumn.
    10. B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring.
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