IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/16714.html

A Theory of Socially-Inefficient Patent Holdout

Author

Listed:
  • Llobet, Gerard
  • Padilla, Jorge

Abstract

This paper proposes a framework to analyze holdout in patent licensing negotiations. We show that when the validity of a patent is probabilistic, a potential downstream user has incentives to shun to pay the price offered by a patent holder to license the technology and risk being brought to court. These incentives are exacerbated when jurisdictions are local and the downstream producer can approach courts sequentially. The informational spillovers across trials imply that this firm often finds optimal to go to court aiming to invalidate the patent in a jurisdiction due to the knock-on effect on future jurisdictions. This process results in excessive litigation compared to when the jurisdiction is global. The distortions from sequential litigation are likely to be aggravated when final competition is accounted for or when patent injunctions are not allowed.

Suggested Citation

  • Llobet, Gerard & Padilla, Jorge, 2021. "A Theory of Socially-Inefficient Patent Holdout," CEPR Discussion Papers 16714, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16714
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP16714
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    Citations

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


    Cited by:

    1. is not listed on IDEAS
    2. Florian Schuett & Chayanin Wipusanawan, 2025. "Essentiality Checks for Standard Essential Patents," Management Science, INFORMS, vol. 71(12), pages 10671-10691, December.
    3. Love, Brian J. & Helmers, Christian, 2023. "Patent hold-out and licensing frictions: Evidence from litigation of standard essential patents," International Journal of Industrial Organization, Elsevier, vol. 89(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

    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:cpr:ceprdp:16714. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.cepr.org .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.