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A Cooperative Game Approach to Patent Litigation, Settlement, and Allocation of Legal Costs

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  • Aoki, Reiko
  • Hu, Jin

Abstract

We analyze litigation and settlement behavior in case of patent infringement using the Nash Bargaining Game framework. We show that litigation can be the Pareto efficient outcome. We also show that when there is settlement, the transfer payment from the defendant to the plaintiff is increasing in its own legal cost and decreasing in that of the plaintiff, reflecting the bargaining power on both sides. We also compare the American and English rules of cost allocation when legal costs are endogenously determined.

Suggested Citation

  • Aoki, Reiko & Hu, Jin, 1999. "A Cooperative Game Approach to Patent Litigation, Settlement, and Allocation of Legal Costs," Working Papers 216, Department of Economics, The University of Auckland.
    • Handle: RePEc:auc:wpaper:216
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    File URL: http://hdl.handle.net/2292/216
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    Citations

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    Cited by:

    1. Louise Keely, 2001. "Using Patents In Growth Models," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 10(6), pages 449-492.
    2. Langinier, Corinne & Marcoul, Philippe, 2009. "Contributory infringement rule and patents," Journal of Economic Behavior & Organization, Elsevier, vol. 70(1-2), pages 296-310, May.
    3. Philipp N. Baecker, 2007. "Real Options and Intellectual Property," Lecture Notes in Economics and Mathematical Systems, Springer, number 978-3-540-48264-2, December.
    4. Adriana Breccia & Hector Salgado-Banda, 2005. "Competing or Colluding in a Stochastic Framework," Birkbeck Working Papers in Economics and Finance 0504, Birkbeck, Department of Economics, Mathematics & Statistics.
    5. Salgado Banda Héctor & Breccia Adriana, 2005. "Competing or Colluding in a Stochastic Environment," Working Papers 2005-04, Banco de México.
    6. Adriana Breccia & Hector Salgado-Banda, 2006. "Competing or Colluding in a Stochastic Environment," Computing in Economics and Finance 2006 423, Society for Computational Economics.

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    Keywords

    Economics;

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