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Patent Protection and Threat of Litigation in Oligopoly

Author

Listed:
  • Carlo Capuano

    () (Università di Napoli Federico II)

  • Iacopo Grassi

    () (Università di Napoli Federico II)

  • Riccardo Martina

    () (Università di Napoli Federico II and CSEF)

Abstract

In a context of imperfect patent protection, this paper analyses the strategic use of patents from a novel perspective; patents are seen as a means available to the incumbent firm to control entry and, more importantly, to influence the post-entry market interaction process effectively, by creating the conditions that favour collusion. The level of patent protection chosen by the incumbent affects the likelihood that a potential entrant will be found guilty of patent infringement. This mechanism can operate as a punishment device that eases the conditions for collusion sustainability. Therefore, in a sense, patent protection can be regarded as an instrument allowing replication of the monopoly outcome in the context of a contestable market.

Suggested Citation

  • Carlo Capuano & Iacopo Grassi & Riccardo Martina, 2019. "Patent Protection and Threat of Litigation in Oligopoly," CSEF Working Papers 537, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  • Handle: RePEc:sef:csefwp:537
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    Keywords

    patents; patent portfolio; litigation; collusion; foreclosing; entry game;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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