Injunctions, Hold-Up, and Patent Royalties

Injunctions, Hold-Up, and Patent Royalties

This paper studies royalty negotiations between a patent holder and a downstream firm selling a product which is more valuable if it includes a feature covered by the patent. Royalties are negotiated in the shadow of patent litigation, which will determine whether or not the patent is valid and infringed. If the two firms negotiate after the downstream firm has already designed its product to i...

Anticompetitive Patent Injunctions

Different Rules of Legal-cost Allocation and Patent Hold-up

We study how different rules for allocating litigation costs impact on royalty negotiation when a non-practicing patent holder asserts its patent against a product developer. A theoretical framework is proposed which distinguishes between three legal cost allocation systems: the American system, where each party bears its own costs, the British system, where the loser incurs all costs, and the ...

Does Licensing Resolve Hold Up in the Patent Thicket?

In a patent thicket licensing provides a mechanism to either avoid or resolve hold up. We study the choice between ex ante licensing to avoid hold up and ex post licensing to resolve it. Firms’ choice of licensing contract is studied in the context of a patent portfolio race. We show that high expected blocking leads to ex ante licensing while ex post licensing arises if expected blocking is lo...

Preliminary Injunctions and Damage Rules in Patent Law

This paper shows that preliminary injunctions may be sought in patent cases to obtain market power during the period of the injunction and are likely to be sought only where there is a small probability that the patent will be ultimately found valid. Both patentee and alleged infringer benefit from a preliminary injunction. This is an artifact of the asymmetry of current damage rules. Altering ...