Pay-for-Delay with Follow-On Products

Jorge Lemus and Emil Temnyalov

Review of Industrial Organization, 2020, vol. 56, issue 4, No 8, 697-714

Abstract: Abstract We study pay-for-delay settlements between a patent-holder and a challenger when the patent-holder can introduce follow-on products. We show that ignoring follow-on products biases the inferred competitive harm of pay-for-delay settlements (the “Actavis inference”). The reason is that patent invalidation triggers an earlier introduction of follow-on products, which changes pay-for-delay negotiation payoffs. When follow-on products are ignored, we show that an inference based on a reverse payment over-estimates patent strength. If parties cannot use payments (as in pure-delay settlements), follow-on products may push the parties to settle on an earlier entry date, and litigation may arise in equilibrium.

Keywords: Antitrust; Evergreening; Litigation; Pay-for-delay; Product hopping (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (5)

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Working Paper: Pay-for-delay with Follow-on Products (2019)
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DOI: 10.1007/s11151-020-09750-6

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