Innovation, Imitation & Preliminary Injunctions in Patents

We analyze the effect of preliminary injunctions in patent cases, using a simple probabilistic model of a legal challenge to a patent’s validity. We show that using current U. S. damages rules, preliminary injunctions are likely to lead to inefficient innovations, non-novel patents, and extensive litigation, since both the patent holder and the allegedly infringing firm can benefit from a preliminary injunction. We also show that a secondbest patent rule is non-monotonic in the probability that the innovator successfully defends his patent, and that the probability that a preliminary injunction is granted should be quite low. * Email: [email protected] and [email protected]. We thank Tim Gilbert, who started us thinking about preliminary injunctions in the first place. We also thank Jean-Claude Rioux and seminar participants at the University of Calgary for helpful comments and discussion. INNOVATION, IMITATION & PRELIMINARY INJUNCTIONS IN PATENTS We analyze the effect of preliminary injunctions in patent cases, using a simple probabilistic model of a legal challenge to a patent’s validity. We show that using current U. S. damages rules, preliminary injunctions are likely to lead to inefficient innovations, non-novel patents, and extensive litigation, since both the innovator and the imitator benefit from a preliminary injunction. We also show that a second-best patent rule is non-monotonic in the probability that the innovator successfully defends his patent, and that the probability that a preliminary injunction is granted should be quite low.