Alternative damage rules and probabilistic intellectual property rights: Unjust enrichment, lost profits, and reasonable royalty remedies

Research output: Contribution to journalArticle

15 Citations (Scopus)

Abstract

This paper investigates how alternative damage rules in patent infringement cases shape competition when intellectual property rights are probabilistic. More specifically, I develop a simple model of oligopolistic competition to compare two main liability doctrines that have been used in the U.S. to assess infringement damages - the unjust enrichment rule and the lost profit rule. I show that the lost profit rule provides more protection to the patent holder than the unjust enrichment rule if the patent holder and infringer are equally efficient. When the lost profits from the infringement cannot be proved, the court accepts a "reasonable royalty rate" that would have been negotiated in a hypothetical bargaining situation as an alternative measure of damage. However, I point out that the concept of "reasonable" royalty rates lacks logical consistency when intellectual property rights are probabilistic.

Original languageEnglish
Pages (from-to)145-157
Number of pages13
JournalInformation Economics and Policy
Volume21
Issue number2
DOIs
Publication statusPublished - 2009 Jun 1

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics
  • Management, Monitoring, Policy and Law

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