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Damages and Injunctions in Protecting Proprietary Research Tools

Listed author(s):
  • Mark Schankerman

    (London School of Economics)

  • Suzanne Scotchmer

    (University of California, Berkeley)

We investigate how liability rules and property rules affect the incentives to invest in research tools. We argue that it is hard to deter infringement under any of the enforcement regimes available. However, counter-intuitively, a credible threat of infringement can actually be beneficial to the patent holder. We compare the two doctrines of damages under the liability rule, namely, lost profit (lost royalty) and unjust enrichment, and argue that unjust enrichment protects the patent holder better than lost royalty. Both can be superior to a property rule (the right to enjoin infringement), depending on how much delay is permitted before infringement is enjoined. We also show that, for patents on end-user products, the ranking of liability doctrines is reversed: unjust enrichment is inferior to lost profits.

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File URL: http://econwpa.repec.org/eps/le/papers/0012/0012002.pdf
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Paper provided by EconWPA in its series Law and Economics with number 0012002.

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Length: 36 pages
Date of creation: 05 Jan 2001
Handle: RePEc:wpa:wuwple:0012002
Note: 36 pages, Acrobat .pdf
Contact details of provider: Web page: http://econwpa.repec.org

References listed on IDEAS
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  1. Jerry R. Green & Suzanne Scotchmer, 1995. "On the Division of Profit in Sequential Innovation," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 20-33, Spring.
  2. Suzanne Scotchmer, 1996. "Protecting Early Innovators: Should Second-Generation Products Be Patentable?," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 322-331, Summer.
  3. Jean O. Lanjouw & Josh Lerner, 1996. "Preliminary Injunctive Relief: Theory and Evidence from Patent Litigation," NBER Working Papers 5689, National Bureau of Economic Research, Inc.
  4. Suzanne Scotchmer, 1991. "Standing on the Shoulders of Giants: Cumulative Research and the Patent Law," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 29-41, Winter.
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