Broad cross-license agreements and persuasive patent litigation: theory and evidence from the semiconductor industry

Galasso, Alberto (2007) Broad cross-license agreements and persuasive patent litigation: theory and evidence from the semiconductor industry. EI (45). Suntory and Toyota International Centres for Economics and Related Disciplines, London, UK.

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Abstract

In many industries broad cross-license agreements are considered a useful method to obtain freedom to operate and to avoid patent litigation. In this paper I study the previously neglected dynamic trade-off between litigating and cross-licensing that firms face to protect their intellectual property. I present a model of bargaining with learning in which firms’ decisions to litigate or crosslicense depend on their investments in technology specific assets. In particular the model predicts that where firms’ sunk costs are higher, their incentive to litigate and delay a cross-license agreement is lower. In addition, the bargaining game shows how firms with intermediate values of asset specificity tend to engage in inefficient "persuasive litigation". Using a novel dataset on the US semiconductor industry I obtain empirical results consistent with those suggested by the model. Combining model intuition with some empirical figures, I evaluate possible effects of the currently debated patent litigation reform.

Item Type:	Monograph (Discussion Paper)
Official URL:	http://sticerd.lse.ac.uk
Additional Information:	© 2007 Alberto Galasso
Divisions:	STICERD
Subjects:	T Technology > T Technology (General) H Social Sciences > HB Economic Theory K Law > K Law (General)
JEL classification:	L - Industrial Organization > L6 - Industry Studies: Manufacturing > L63 - Microelectronics; Computers; Communications Equipment O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O31 - Innovation and Invention: Processes and Incentives O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O32 - Management of Technological Innovation and R&D C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C78 - Bargaining Theory; Matching Theory
Date Deposited:	08 Jul 2008 14:36
Last Modified:	15 Sep 2023 23:11
URI:	http://eprints.lse.ac.uk/id/eprint/6718

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