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.

Journal of Economic Surveys, 2006

This Article provocatively asserts that lawmakers should weaken patents significantly—by between 25% and 50%. The primary impetus for this conclusion is the underappreciated effects of new and emerging technologies, including three-dimensional printing, synthetic biology, and cloud computing. These and other technologies are rapidly decreasing the costs of each stage of the innovation cycle: from basic research, through inventing and prototyping, to marketing and distribution. The primary economic theories supporting patent law hold that inventors and innovators need patents to recoup the costs associated with research, inventing, and commercializing. Because new technologies have begun—and will continue—to dramatically decrease these costs, the case for weakening patents is ripe for analysis.

2003

2014

ABSTRACT. – Patents are probabilistic rights. We set up a multi-stage model in which choosing between patent and trade secrecy is affected by three parameters: the patent strength defined as the probability that the right is upheld by the court, the cost of imitating a patented innovation relative to the cost of imitating a secret innovation, and the innovation size defined as the magnitude of the cost reduction. The choice of the protection regime is the result of two effects: the damage effect evaluated under the unjust enrichment doctrine and the effect of market competition that occurs under the shadow of infringement. We find that large innovations are likely to be kept secret whereas small innovations are always patented. Furthermore, medium innovations are patented only when patent strength is sufficiently high. Finally, we investigate a class of patent licensing agreements used to settle patent disputes between patent holders and their competitors. Choix de la protection int...

2002

We study the determinants of patent suits and their outcomes over the period 1978-1999 by linking detailed information from the U.S. patent office, the federal court system, and industry sources. The probability of being involved in a suit is very heterogeneous, being much higher for valuable patents and for patents owned by individuals and smaller firms. Thus the patent system

2013

This paper uses latest advances in economic research for examining recent changes in patent regimes aimed at strengthening patent protection, and beyond that, for rethinking the rationale of the patent system. Considering that economic theory does not regard patents as a natural right that should be systematically granted to inventors, but as a policy instrument aimed at fostering innovation and diffusion, three major implications can be drawn from economic theory regarding current policy debates. First, patents may not be the most effective means of protection for inventors to recover R&D investments when imitation is costly and first mover advantages are important. Moreover, they may do more bad than good to innovation if innovation is cumulative and first generation inventions are essential to develop further inventions, especially when patent protection is strong. Patents should not be seen as the solution by default, notably as regards new areas of patentability such as software, business methods and genetic inventions. Second, patentability requirements, such as novelty or non-obviousness, should be sufficiently stringent to avoid the grant of patents for inventions with low social value that increase the social cost of the patent system. Third, rather than the statutory patent life, what matters is the effective life of patents: the broader is a patent the longer is its effective life. Policy instruments affecting patent breadth (e.g. extra fee for independent claims above a certain threshold) and length (e.g. renewal fees) could be used to provide long effective lives to inventions with high social value. Beyond these currently debated issues, economic theory pleads for an in-depth reshuffling of the patent system. If the system were to be radically changed, an optimal patent policy could be based on a multidimensional menu of different degrees of patent protection associated to different patent fees, where stronger protection would correspond to higher fees. Patents could be transformed into self-selection mechanisms whereby patentees reveal the economic characteristics of their inventions, compensate society for the protection they are granted and obtain sufficient incentives to innovate.

2005

Patents are probabilistic rights. We set up a multi-stage model in which choosing between patent and trade secrecy is a¤ected by three parameters: the patent strength de ned as the probability that the right is upheld by the court, the cost of imitating a patented innovation relative to the cost of imitating a secret innovation, and the innovation size de ned as the extent of the cost reduction. The choice of the protection regime is the result of two e¤ects: the damage e¤ect evaluated under the unjust enrichment doctrine and the e¤ect of market competition that occurs under the shadow of infringement. We nd that large innovations are likely to be kept secret whereas small innovations are always patented. Furthermore, medium innovations are patented only when patent strength is su ¢ ciently high. Finally, we investigate a class of patent licensing agreements used to settle patent disputes between patent holders and their competitors.

2006

This paper investigates how different damage rules in patent infringement cases shape competition when intellectual property rights are probabilistic. I develop a simple model of oligopolistic competition to compare two main liability doctrines that have been used in the US to assess infringement damages – the unjust enrichment rule and the lost profit rule. It also points out the logical inconsistency in the concept of the “reasonable royalty rates” when intellectual property rights are not ironclad.

2010

research and development. 2 Pursuant to this theory, absent exclusive legal rights to use an invention, there would be no incentive to invent, as free riders may imitate the invention and drive down its market price to a level that would not allow the inventor to recoup her research and development costs and make a reasonable profit. 3 By providing legal exclusivity, patents overcome this market failure and provide the missing incentive to engage in inventive activity, thus benefiting society. The "incentive to invent" theory has been complemented by other theories, including the "incentive to disclose" theory 4 and the "prospect" theory, 5 all of which set out to justify the need for a patent system from an economic point of view. 6 The economic justifications for the patent system have not gone unchallenged. Over the years, the various purported economic benefits of the patent system have been called into question. A central argument criticizing the "incentive to invent" theory has been that government intervention is not necessary to secure incentives to invent. As the argument goes, inventions are developed, with or without patents, when 2.