Abstract
Once a patent is found to have been infringed the law generally entitles the patentholder to monetary losses suffered as the result of the illegal conduct. It is shown here that there are important differences between the losses awarded under U.S. case law and those that economic models of competition indicate would allow patentholders to just capture the social value of their innovations and, with that, provide private incentives for efficient levels of innovation. The prevailing case law generally overestimates the harm, providing an incentive for the patentholder to opportunistically claim infringement. In the end this increases the reward to innovation and encourages overinvestment. The record of the widely read State Industries vs. Mor-Flo Manufacturing Co. (883 F.2d 1573, Fed. Cir. 1989, cert. denied, 493 U.S. 1022, 1990) provides a case study.
Similar content being viewed by others
References
Arrow, K., “Economic welfare and the allocation of resources for innovation,” in Nelson, R. (ed.), The Rate and Direction of Innovative Activity. Princeton, NJ: Princeton University Press, 1992.
Conley, N., “An economic approach to patent damages,” AIPLA Quarterly Journal, vol. 15, pp. 354–390, 1987.
Culbertson, J. and Weinstein, R., “Product substitutes and the calculation of patent damages,” Journal of Patent Trademark Office Society, vol. 44, pp. 749–764, 1988.
Dam, K., “The economic underpinings of patent law,” Journal of Legal Studies, vol. 23, pp. 107–122, 1994.
Grady, M. and Alexander, J., “Patent law and rent dissipation,” Virginia Law Review, vol. 78, pp. 310–316, 1992.
Kamien, M. and Tauman, Y., “Fee versus royalties and the private value of a patent,” Quarterly Journal of Economics, vol. 99, pp. 471–491, 1986.
Katz, M. and Shapiro, C., “On the licensing of innovations,” Rand Journal of Economics, vol. 16, pp. 504–520, 1985.
Katz, M. and Shapiro, C., “How to license intangible property,” Quarterly Journal of Economics, vol. 101, pp. 567–590, 1986.
Krouse, C., Theory of Industrial Economics. Oxford: Basil Blackwell Publishers, 1991.
Krouse, C., “But-for markets and reasonable royalties: the Rite-Hite vs. Kelley misdirection,” Jurimetrics, vol. 43, pp. 229–242, 2003.
McGee, J., “Patent exploitation: some economic and legal problems,” Journal of Law and Economics, pp. 135–162, 1966.
Rapp, R. and Beutel, P., “Patent damages: rules on the road to economic rationality,” Patent Litigation (Practicing Law Institute), vol. 2, pp. 337–353, 1991.
Waterson, M., “The economics of patents,” American Economic Review, vol. 81, pp. 860–869, 1990.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Krouse, B.R., Krouse, C.G. Patent Infringement: Lessons from Industrial Economics. Journal of Industry, Competition and Trade 4, 191–206 (2004). https://doi.org/10.1023/B:JICT.0000047297.54446.b6
Issue Date:
DOI: https://doi.org/10.1023/B:JICT.0000047297.54446.b6