Bargaining over Royalties in the Shadow of Litigation

Fabian Griem and Roman Inderst

No 16902, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We model negotiations over patent royalties in the shadow of litigation through a Nash-in-Nash approach, where outside options, triggered in case of disagreement, are derived from a subsequent game of litigation. The outcome of litigation depends both on "hard determinants", such as relative patent strength, and on "soft determinants", such as parties' efficacy in litigation or their (known) preparedness to disrupt negotiations in favor of litigation. Amongst other things, this has implications for the interpretation of observed royalties in empirical analysis.

Keywords: Royalties; Litigation; Nash-in-nash (search for similar items in EconPapers)
JEL-codes: C71 D45 O34 (search for similar items in EconPapers)
Date: 2022-01
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