%A Jing-Yuan Chiou
%A Richard Schmidtke
%K Probabilistic Patents, Antitrust Limits, Patent Settlements
%T Revisiting Antitrust Limits to Probabilistic Patent
Disputes: Strategic Entry and Asymmetric
Information
%D 2010
%L eprints97
%X We consider separately strategic entry and asymmetric information in the design
of the settlement policy governing patent disputes, with a focus on Shapiro (2003)?s
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 is preferable to the patent-holder and may lead to higher
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.
%O JEL codes: O3, L1, L4, K4