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Monday, February 4, 2013

Revisiting Antitrust Limits to Probabilistic Patent Disputes: Strategic Entry and Asymmetric Information

Posted by D. Daniel Sokol

Jing-Yuan Chiou, Department of Economics, IMT Lucca and Richard Schmidtke, University of Munich are Revisiting Antitrust Limits to Probabilistic Patent Disputes: Strategic Entry and Asymmetric Information.

ABSTRACT: We consider separately strategic entry and asymmetric information in the design of the settlement policy governing patent disputes, with a focus on Shapiro's (2003) consumer protection rule. We show that, when a potential entrant strategically incurs an entry cost before engaging in a patent dispute, a more stringent settlement policy of deterring costly entry benefits the patent-holder and may raise static efficiency. Concerning asymmetric information, when the disputants, but not the court, learn the patent validity, we derive an ‘expectation test,’ which requires that a laxer settlement policy be coupled with higher expected patent validity under settlement.

http://lawprofessors.typepad.com/antitrustprof_blog/2013/02/revisiting-antitrust-limits-to-probabilistic-patent-disputes-strategic-entry-and-asymmetric-informat.html

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