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Damage rules and the patent hold-up problem : An analysis of Article L. 615-7

  • Bertrand Chopard
  • Thomas Cortade
  • Eric Langlais

This paper provides an analysis of two damage rules (Lost Pro fit versus Unjust Enrichment) introduced in the French Code de la Propriété Intellectuelle in 2007 (Loi du 27 Octobre 2007, Art. L. 615-7). We use a simple sequential game where both the decisions to infringe and to enforce the patent, as well as the decisions to accomodate, settle or litigate the case, and the outputs decisions (Cournot competition) are endogenous. We characterize the equilibria associated with each rule, and compare their properties. We show that: 1/ the Unjust Enrichment rule provides Patentees with higher damages compensation than the Lost Pro fit one; however, 2/ Lost Profi t induces more deterrence of infringement, and is associated with less trials than Unjust Enrichment; 3/ Unjust Enrichment may deter the Patentee to enforce his right; 4/ when there is a positive probability that the case settles, Patentee'’s expected utility is higher under Lost Profi t than under Unjust Enrichment.

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File URL: http://economix.fr/pdf/dt/2013/WP_EcoX_2013-37.pdf
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Paper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2013-37.

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Length: 16 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:drm:wpaper:2013-37
Contact details of provider: Postal: 200 Avenue de la République, Bât. G - 92001 Nanterre Cedex
Web page: http://economix.fr
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  1. Michael J. Meurer, 1989. "The Settlement of Patent Litigation," RAND Journal of Economics, The RAND Corporation, vol. 20(1), pages 77-91, Spring.
  2. 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.
  3. Carl Shapiro, 2010. "Injunctions, Hold-Up, and Patent Royalties-super-1," American Law and Economics Review, Oxford University Press, vol. 12(2), pages 509-557.
  4. 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.
  5. Farrell, Joseph & Shapiro, Carl, 2007. "How Strong Are Weak Patents?," Competition Policy Center, Working Paper Series qt8vg425vj, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  6. Osborne, Evan, 1999. "Who should be worried about asymmetric information in litigation?," International Review of Law and Economics, Elsevier, vol. 19(3), pages 399-409, September.
  7. Bertrand Chopard & Thomas Cortade & Eric Langlais, 2008. "Trial and settlement negotiations between asymmetrically skilled parties," EconomiX Working Papers 2008-32, University of Paris West - Nanterre la Défense, EconomiX.
  8. 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.
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