Alternative damage rules and probabilistic intellectual property rights: Unjust enrichment, lost profits, and reasonable royalty remedies
This paper investigates how alternative damage rules in patent infringement cases shape competition when intellectual property rights are probabilistic. More specifically, I develop a simple model of oligopolistic competition to compare two main liability doctrines that have been used in the U.S. to assess infringement damages - the unjust enrichment rule and the lost profit rule. I show that the lost profit rule provides more protection to the patent holder than the unjust enrichment rule if the patent holder and infringer are equally efficient. When the lost profits from the infringement cannot be proved, the court accepts a "reasonable royalty rate" that would have been negotiated in a hypothetical bargaining situation as an alternative measure of damage. However, I point out that the concept of "reasonable" royalty rates lacks logical consistency when intellectual property rights are probabilistic.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Choi, Jay Pil, 1998.
"Patent Litigation as an Information-Transmission Mechanism,"
American Economic Review,
American Economic Association, vol. 88(5), pages 1249-63, December.
- Choi, J.P., 1997. "Patent Litigation as an Information Transmission Mechanism," Discussion Paper 1997-17, Tilburg University, Center for Economic Research.
- Claude Crampes & Corinne Langinier, 2002.
"Litigation and Settlement in Patent Infringement Cases,"
RAND Journal of Economics,
The RAND Corporation, vol. 33(2), pages 258-274, Summer.
- Crampes, Claude & Langinier, Corinne, 2002. "Litigation and Settlement in Patent Infringement Cases," Staff General Research Papers Archive 5231, Iowa State University, Department of Economics.
- Mark A. Lemley & Carl Shapiro, 2005.
Journal of Economic Perspectives,
American Economic Association, vol. 19(2), pages 75-98, Spring.
- James Bessen & Michael J. Meurer, 2005. "The Patent Litigation Explosion," Working Papers 0501, Research on Innovation.
- Reinganum, Jennifer F., 1989. "The timing of innovation: Research, development, and diffusion," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 14, pages 849-908 Elsevier.
- Joseph Farrell & Carl Shapiro, 2008.
"How Strong Are Weak Patents?,"
American Economic Review,
American Economic Association, vol. 98(4), pages 1347-69, September.
- Reitman, David, 1994. "Partial Ownership Arrangements and the Potential for Collusion," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 313-22, September.
- Kwoka, John E, Jr, 1992. "The Output and Profit Effects of Horizontal Joint Ventures," Journal of Industrial Economics, Wiley Blackwell, vol. 40(3), pages 325-38, September.
- James J. Anton & Dennis A. Yao, 2007. "Finding "Lost" Profits: An Equilibrium Analysis of Patent Infringement Damages," Journal of Law, Economics and Organization, Oxford University Press, vol. 23(1), pages 186-207, April.
- Joseph Farrell & Carl Shapiro, 1990. "Asset Ownership and Market Structure in Oligopoly," RAND Journal of Economics, The RAND Corporation, vol. 21(2), pages 275-292, Summer.
- Joseph P. Cook, 2007. "On Understanding the Increase in U.S. Patent Litigation," American Law and Economics Review, Oxford University Press, vol. 9(1), pages 48-71.
- Reynolds, Robert J. & Snapp, Bruce R., 1986. "The competitive effects of partial equity interests and joint ventures," International Journal of Industrial Organization, Elsevier, vol. 4(2), pages 141-153, June.
- Reiko Aoki & Jin-Li Hu, 1999. "Licensing vs. Litigation: The Effect of the Legal System on Incentives to Innovate," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 8(1), pages 133-160, 03.
- Schankerman, Mark & Scotchmer, Suzanne, 2005.
"Still Looking for Lost Profits: The Case of Horizontal Competition,"
Competition Policy Center, Working Paper Series
qt5746p162, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
- Schankerman, Mark & Scotchmer, Suzanne, 2005. "Still Looking for Lost Profits: The Case of Horizontal Competition," Department of Economics, Working Paper Series qt45r7776m, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- James J. Anton & Dennis A. Yao, 2003. "Patents, Invalidity, and the Strategic Transmission of Enabling Information," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(2), pages 151-178, 06.
- 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.
When requesting a correction, please mention this item's handle: RePEc:eee:iepoli:v:21:y:2009:i:2:p:145-157. 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: (Shamier, Wendy)
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.