We identify welfare-optimal patent royalties in a model of costly imitation, entry and imperfect competition. When the social planner may impose a compulsory license, optimal royalties either blockade imitation, facilitating unregulated monopoly, or yield an aggregate-zero-profit "efficient"...

We study the effect of patent royalty damages on social welfare in an entry model of quantity competition. We show that fixed royalties are more effective than per-unit royalties in mitigating the inappropriability problem and promoting social welfare. Intuitively, per-unit royalties help...