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How Reasonable is the ‘Reasonable’ Royalty Rate? Damage Rules and Probabilistic Intellectual Property Rights

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  • Jay Pil Choi

Abstract

This paper investigates how different damage rules in patent infringement cases shape competition when intellectual property rights are probabilistic. I develop a simple model of oligopolistic competition to compare two main liability doctrines that have been used in the US to assess infringement damages – the unjust enrichment rule and the lost profit rule. It also points out the logical inconsistency in the concept of the “reasonable royalty rates” when intellectual property rights are not ironclad.

Suggested Citation

  • Jay Pil Choi, 2006. "How Reasonable is the ‘Reasonable’ Royalty Rate? Damage Rules and Probabilistic Intellectual Property Rights," CESifo Working Paper Series 1778, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_1778
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp1778.pdf
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    References listed on IDEAS

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    1. Mark A. Lemley & Carl Shapiro, 2005. "Probabilistic Patents," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 75-98, Spring.
    2. Reitman, David, 1994. "Partial Ownership Arrangements and the Potential for Collusion," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 313-322, September.
    3. Kwoka, John E, Jr, 1992. "The Output and Profit Effects of Horizontal Joint Ventures," Journal of Industrial Economics, Wiley Blackwell, vol. 40(3), pages 325-338, September.
    4. Joseph Farrell & Carl Shapiro, 2008. "How Strong Are Weak Patents?," American Economic Review, American Economic Association, vol. 98(4), pages 1347-1369, September.
    5. 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.
    6. F. M. Scherer, 2005. "Patents," Books, Edward Elgar Publishing, number 3903, June.
    7. 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.
    8. 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.
    9. 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.
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    Cited by:

    1. Vargas Barrenechea, Martin, 2008. "Licensing probabilistic Patents: The duopoly case," MPRA Paper 9925, University Library of Munich, Germany.

    More about this item

    Keywords

    probabilistic intellectual property rights; damage rules; reasonable royalty rates;

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