Injunctions, Hold-Up, and Patent Royalties

Carl Shapiro (2010) “Injunctions, Hold-Up, and Patent Royalties."American Law and Economics Review, Volume 12, Issue 2,  Pp. 509-557. doi: 10.1093/aler/ahq014 ; link to ALER.

==original Abstract==

A simple model is developed to study royalty negotiations between a patent holder and a downstream firm whose product is more valuable if it includes a feature covered by the patent. The downstream firm must make specific investments to develop, design, and sell its product before patent validity and infringement will be determined. The hold-up component of the negotiated royalties is greatest for weak patents covering a minor feature of a product with a high margin between price and marginal cost. For weak patents, the hold-up component of negotiated royalties remains unchanged even if negotiations take place before the downstream firm designs its product. The analysis has implications for the use of injunctions in patent infringement cases.


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2 comments on “Injunctions, Hold-Up, and Patent Royalties

  1. 引用通告: Do Patent Holdup and Royalty Stacking Lead to Systematically Excessive Royalties? | 行為 & 經濟實驗文獻注 (備忘) by 楊奕農

  2. 引用通告: Patent related literature in economics | 行為 & 經濟實驗文獻注 (備忘) by 楊奕農


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