Damages and Injunctions in Protecting Proprietary Research Tools

We investigate how liability rules and property rules a ect the incentives to invest in research tools. We argue that it is hard to deter infringement under any of the enforcement regimes available. However, counterintuitively, a credible threat of infringement can actually be bene cial to the patentholder. We compare the two doctrines of damages under the liability rule, namely, lost pro t (lost royalty) and unjust enrichment, and argue that unjust enrichment protects the patentholder 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 pro ts.