Antitrust Limits to Patent Settlements

Carl Shapiro

RAND Journal of Economics, 2003, vol. 34, issue 2, 391-411

Abstract: Patents, patent litigation, and patent settlements increasingly influence competition. Settlements of patent disputes come in many forms, including licensing and cross-licensing agreements, patent pools, mergers, and joint ventures. While frequently procompetitive, such settlements can stifle competition and harm consumers. I propose a specific antitrust rule limiting such settlements: a settlement must leave consumers at least as well off as they would have been from ongoing patent litigation. After establishing that profitable settlements satisfying this constraint generally exist, I show how this antitrust rule can be used to evaluate three types of settlements: mergers, patent pools, and negotiated entry dates. Copyright 2003 by the RAND Corporation.

Date: 2003
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Working Paper: Antitrust Limits to Patent Settlements (2003)
Working Paper: Antitrust Limits to Patent Settlements (2001)
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