Friday, September 16, 2011
Posted by D. Daniel Sokol
Congrats to Carl Shapiro (Berkeley). Shaprio has won the 2011 Distinguished Article Prize of the American Law and Economics Review for his article Injunctions, Hold-Up, and Patent Royalties.
The abstract from the article is below.
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.