IDEAS home Printed from https://ideas.repec.org/a/bpj/rlecon/v3y2007i2n14.html
   My bibliography  Save this article

The Division of Profit in Sequential Innovation for Probabilistic Patents

Author

Listed:
  • Chou Teyu

    (Department of Public Finance, National ChengChi University)

  • Haller Hans

    (Department of Economics, Virginia Polytechnic Institute and State University)

Abstract

Sequential innovation with actual patent infringement and uncertainty in litigation is analyzed. Comparative statics shows that within a wide range of model parameters, a basic researcher holding a patent is able to extract all of the profit facilitated by the basic innovation. The patent holder achieves this by offering a licensing contract which the subsequent innovator accepts in the shadow of paying infringement damages. It is further demonstrated that, under rather general circumstances, broader patent breadth may diminish the patent holders incentive to innovate: that is to extract all of the profit from the subsequent innovator commercializing the innovation.

Suggested Citation

  • Chou Teyu & Haller Hans, 2007. "The Division of Profit in Sequential Innovation for Probabilistic Patents," Review of Law & Economics, De Gruyter, vol. 3(2), pages 581-609, December.
  • Handle: RePEc:bpj:rlecon:v:3:y:2007:i:2:n:14
    as

    Download full text from publisher

    File URL: https://www.degruyter.com/view/j/rle.2007.3.2/rle.2007.3.2.1164/rle.2007.3.2.1164.xml?format=INT
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-1158, December.
    2. Patrick W. Schmitz, 2005. "Should Contractual Clauses that Forbid Renegotiation Always be Enforced?," Journal of Law, Economics, and Organization, Oxford University Press, vol. 21(2), pages 315-329, October.
    3. Williamson, Oliver E, 1979. "Transaction-Cost Economics: The Governance of Contractural Relations," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 233-261, October.
    4. Putterman, Louis & Skillman, Gilbert L., 1992. "The role of exit costs in the theory of cooperative teams," Journal of Comparative Economics, Elsevier, vol. 16(4), pages 596-618, December.
    5. Burch, Timothy R., 2001. "Locking out rival bidders: The use of lockup options in corporate mergers," Journal of Financial Economics, Elsevier, vol. 60(1), pages 103-141, April.
    6. Patrick W. Schmitz, 2005. "Should Contractual Clauses that Forbid Renegotiation Always be Enforced?," Journal of Law, Economics, and Organization, Oxford University Press, vol. 21(2), pages 315-329, October.
    7. Brigitte C. Madrian, 1994. "Employment-Based Health Insurance and Job Mobility: Is there Evidence of Job-Lock?," The Quarterly Journal of Economics, Oxford University Press, vol. 109(1), pages 27-54.
    8. Schwartz, Alan & Watson, Joel, 2000. "Economic and Legal Aspects of Costly Recontracting," University of California at San Diego, Economics Working Paper Series qt4jr3g3h7, Department of Economics, UC San Diego.
    9. Sergio G. Lazzarini, 2004. "Order with Some Law: Complementarity versus Substitution of Formal and Informal Arrangements," Journal of Law, Economics, and Organization, Oxford University Press, vol. 20(2), pages 261-298, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mitchell, Matthew & Zhang, Yuzhe, 2012. "Shared Rights and Technological Progress," MPRA Paper 36537, University Library of Munich, Germany.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:rlecon:v:3:y:2007:i:2:n:14. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla). General contact details of provider: https://www.degruyter.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.