Michael J. Meurer

The Settlement of Patent Litigation

In this article I develop a model to analyze patent licensing that is induced as part of a settlement agreement to avoid litigation of the issue of patent validity. The patentee possesses private information about patent validity and makes a take-it-or-leave-it settlement offer to a single potential rival. An essentially unique sequential equilibrium exists if out-of-equilibrium beliefs are restricted appropriately. The model analyzes the effect of the probability of settlement and litigation.

Informative advertising and product match

Abstract This paper studies informative advertising in a variety of market structures for which some consumers are informed about two differentiated products while other consumers are uninformed. We characterize a unique symmetric subgame perfect Nash equilibrium in advertising and pricing, and analyze the welfare properties of the equilibrium. Remarkably, total surplus is non-monotonic in advertising. In a duopoly market, the equilibrium level of advertising may be more or less than socially optimal. We also study the effect of a trade association, and compare these results with the first-best solution and a multiproduct monopolist.

The Patent Litigation Explosion

This paper provides the first look at patent litigation hazards for public firms during the 80s and 90s. Consistent with our model, litigation is more likely when prospective defendants spend more on R&D, when prospective plaintiffs acquire more patents and when firms are larger and technologically close. Public firms face dramatically increased hazards of litigation as plaintiffs and even more rapidly increasing hazards as defendants, especially for small public firms. The increase cannot be explained by patenting rates, R&D, firm value or industry composition. Legal changes are the most likely explanation.

The Private and Social Costs of Patent Trolls

In the past, non-practicing entities (NPEs) — firms that license patents without producing goods — have facilitated technology markets and increased rents for small inventors. Is this also true for today’s NPEs? Or are they “patent trolls” who opportunistically litigate over software patents with unpredictable boundaries? Using stock market event studies around patent lawsuit filings, we find that NPE lawsuits are associated with half a trillion dollars of lost wealth to defendants from 1990 through 2010, mostly from technology companies. Moreover, very little of this loss represents a transfer to small inventors. Instead, it implies reduced innovation incentives.

The Private Costs of Patent Litigation

This paper estimates the total cost of patent litigation to alleged infringers. We use a large sample of stock market event studies around the date of lawsuit filings for US public firms from 1984-99. We find that the total costs of litigation are much greater than legal fees and costs are large even for lawsuits that settle. Lawsuits cost alleged infringers about

Do Patents Perform Like Property

28.7 million (

Litigation Settlement and Collusion

92) in the mean and

Copyright Law and Price Discrimination

2.9 million in the median. Moreover, infringement risk rose sharply during the late 1990s to over 14% of R&D spending. Small firms have lower risk relative to R&D.

Price Discrimination, Personal Use and Piracy: Copyright Protection of Digital Works

Do patents provide critical incentives to encourage investment in innovation? Or, instead, do patents impose legal risks and burdens on innovators that discourage innovation, as some critics now claim? This paper reviews empirical economic evidence on how well patents perform as a property system.

Pharmacogenomics, genetic tests, and patent-based incentives.

Private enforcement of regulatory policy is a significant feature of many government-sponsored contests, such as procurements. Although private enforcement is supposed to promote social welfare, we show that competitors can use it to achieve collusive outcomes. In a noncooperative duopoly setting, we show that the threat of litigation, and the possibility of settlement can dramatically affect ex ante competition in the relevant market. Essentially, the settlement process provides a legal mechanism for the exchange of side-payments, while the possibility of a court decision provides the plaintiff with a credible threat against the defendant so as to avert cheating. The result does not require repeated play, ex ante contracts, or other commitment devices. In the federal procurement context, we show that our results are robust to alterations in the court remedy, bargaining power of the litigants, and many other factors.