Working Paper: CEPR ID: DP2554
Authors: Mark Schankerman; Suzanne Scotchmer
Abstract: We investigate how liability rules and property rules affect 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 beneficial to the patentholder. We compare the two doctrines of damages under the liability rule, namely, lost profit (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 profits.
Keywords: damages; injunctions; intellectual property; research tools
JEL Codes: K00
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| liability rules (K13) | patent holder's ability to deter infringement (K11) |
| property rules (K11) | patent holder's ability to deter infringement (K11) |
| credible threat of infringement (K11) | patent holder's negotiation position (D45) |
| unjust enrichment doctrine (D63) | patent holder's protection compared to lost royalty measures (O34) |
| timing of injunctions (K41) | patent holder's bargaining power (D45) |
| if infringement is effectively deterred (K42) | advantages of unjust enrichment doctrine diminish (K41) |