Preliminary Injunctions and Damage Rules in Patent Law

This paper shows that preliminary injunctions may be sought in patent cases to obtain market power during the period of the injunction and are likely to be sought only where there is a small probability that the patent will be ultimately found valid. Both patentee and alleged infringer benefit from a preliminary injunction. This is an artifact of the asymmetry of current damage rules. Altering the rules so that an innovator who wins a preliminary injunction on a patent ultimately declared invalid pays both lost profits to the imitator and a fine equal to lost consumer surplus creates efficient incentives.