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Side payments, litigation risk and settlement outcomes

Author

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  • Ottoz, Elisabetta
  • Cugno, Franco
Abstract
We offer a simple model of patent settlement for examining how litigation prospects, patent strength and expected damage awards affect consumer benefits stemming from settlement agreements providing for per-unit royalties and non-negative fixed fees. The result shows that consumers may be harmed if expected damage payments forgone by settlement lead to agreements with high royalty payments that benefit both the patent holder and licensee at the expense of the consumer.

Suggested Citation

  • Ottoz, Elisabetta & Cugno, Franco, 2016. "Side payments, litigation risk and settlement outcomes," Information Economics and Policy, Elsevier, vol. 35(C), pages 76-81.
    • Handle: RePEc:eee:iepoli:v:35:y:2016:i:c:p:76-81
    DOI: 10.1016/j.infoecopol.2016.02.001
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    References listed on IDEAS

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    1. Shapiro, Carl, 2003. "Antitrust Limits to Patent Settlements," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 391-411, Summer.
    2. Choi, Jay Pil, 2009. "Alternative damage rules and probabilistic intellectual property rights: Unjust enrichment, lost profits, and reasonable royalty remedies," Information Economics and Policy, Elsevier, vol. 21(2), pages 145-157, June.
    3. Schmalensee, Richard, 1988. "Industrial Economics: An Overview," Economic Journal, Royal Economic Society, vol. 98(392), pages 643-681, September.
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    5. Schankerman, Mark & Lanjouw, Jean, 2001. "Enforcing Intellectual Property Rights," CEPR Discussion Papers 3093, C.E.P.R. Discussion Papers.
    6. Dixon, Huw D. & Somma, Ernesto, 2003. "The evolution of consistent conjectures," Journal of Economic Behavior & Organization, Elsevier, vol. 51(4), pages 523-536, August.
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    8. Michael J. Meurer, 1989. "The Settlement of Patent Litigation," RAND Journal of Economics, The RAND Corporation, vol. 20(1), pages 77-91, Spring.
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    Cited by:

    1. Kyung Seo & Yeonbae Kim & Kyunam Kim, 2022. "Strategic and economic behavior of a sued company in patent litigation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 4124-4138, December.

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    More about this item

    Keywords

    Consumers' welfare; Infringement damages; Licensing; Patent settlements;
    All these keywords.

    JEL classification:

    • K2 - Law and Economics - - Regulation and Business Law
    • 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

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