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

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Abstract:This paper contributes to the fundamental discussion of setting optimalliabilities in restitution law by analyzing the effects that the existingmultitude of indemnification rules for patent infringements have oninnovative and imitative activity. From a theoretical legal standpoint, thechoice of patent law is particularly enlightening due to its hybrid public andprivate nature. From an economic perspective its relevance lies in regulatingthe driving forces of welfare in highly industrialized societies. Our analysisof regulations from six different jurisdictions (US, JP, DE, UK, FR, NL)reveals that from a scholarly standpoint none of the regulations sets optimalliabilities in general. Our major finding is that an expectation damage rulebased on a renegotiation outcome from an ex-ante perspective (falling inbetween the generic legal notions of ‘lost profits’ and ‘infringer’s profits’)between licensor and licensee appears optimal in patent infringement casesto avoid dynamic inefficiencies. The result is intuitive, however, was notpredicted by the existing literature on indemnification law.Keywords: Patents, litigation, damage awards, innovation,infringementJEL-Classifications: K41,L00, L20

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Markus Reitzig, Joachim Henkel, Christopher Heath

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eng

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application/pdf

Resource resource URL

http://hdl.handle.net/10398/6827

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