Probabilistic Patents, Alternative Damage Rules, and Optimal Tariffs

Apurva Dey, Arun Kumar Kaushik and Rupayan Pal

Journal of Institutional and Theoretical Economics (JITE), 2020, vol. 176, issue 2, 276-311

Abstract: This paper analyzes interdependences between optimal trade policy and preferred liability doctrine to assess infringement damages, when intellectual property rights are probabilistic, in a model of import competition between a foreign patentee and a domestic infringer. It shows two reversal results. First, a regime switch from protectionism to free trade reverses stakeholders' preferences over liability doctrines. Second, the optimal trade policy changes from an import tariff under the lost-profit rule to import subsidization under the unjust-enrichment rule, unless the patent is weak. It is found that free trade is not optimal, except for a few knife-edge cases.

Keywords: probabilistic intellectual property rights; infringement; damage rules; import competition; trade policy (search for similar items in EconPapers)
JEL-codes: F13 K40 L13 O34 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (2)

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DOI: 10.1628/jite-2020-0001

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