Who Really Profits from Patent Infringements? A Comparative International Analysis of Innovation and Imitation Incentives from Patent Indemnification Rules

Markus Reitzig, Joachim Henkel, Christopher Heath

    Research output: Working paperResearch

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    Abstract

    This paper contributes to the fundamental discussion of setting optimal liabilities in restitution law by analyzing the effects that the existing multitude of indemnification rules for patent infringements have on innovative and imitative activity. From a theoretical legal standpoint, the choice of patent law is particularly enlightening due to its hybrid public and private nature. From an economic perspective its relevance lies in regulating the driving forces of welfare in highly industrialized societies. Our analysis of regulations from six different jurisdictions (US, JP, DE, UK, FR, NL) reveals that from a scholarly standpoint none of the regulations sets optimal liabilities in general. Our major finding is that an expectation damage rule based on a renegotiation outcome from an ex-ante perspective (falling in between the generic legal notions of ‘lost profits’ and ‘infringer’s profits’) between licensor and licensee appears optimal in patent infringement cases to avoid dynamic inefficiencies. The result is intuitive, however, was not predicted by the existing literature on indemnification law.
    Original languageEnglish
    Place of PublicationFrederiksberg
    PublisherLEFIC. Center for Law, Economics and Financial Institutions
    Number of pages45
    Publication statusPublished - 2008
    SeriesLEFIC Working Paper
    Number2002-18

    Keywords

    • Patents
    • Litigation
    • Damage awards
    • Innovation
    • Infringement

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