With uncertain scope of patent protection and incomplete enforcement, the effective strength of patent protection is determined by the legal system. We analyze how the legal system effects the incentives of firms to innovate, taking into account possibilities of strategic licensing and...

We compare the bargaining power of the patentee under American and English rules of legal costs allocation. Using the Nash Bargaining Game framework, we show that litigation can be a Pareto efficient outcome. The cooperative game framework allows us to examine how the institutional and market...