We present a model where an incumbent firm has a proprietary product whose technology consists of at least two components, one of which is patented while the other is kept secret. At the patent expiration date, an entrant firm will enter the market on the same footing as the incumbent if it is...

By using a simple model of patent settlement, in this paper we show that even if side payments (negative fixed fees) are banned, a licensing agreement to settle a patent dispute may harm consumers in comparison with the expected outcome of the lawsuit. This may occur when the challenger's...

This paper shows that when a product innovation is protected by both patents and trade secrets, under U.S. law the innovator can be induced to license a rival even if patent protection is very broad and there are no partially competitive older products. This opportunity may benefit society....

We study how different rules for allocating litigation costs impact on royalty negotiation in an environment such as the information technology sector where patent hold-up is possible. We first consider the American system, where each party bears its own costs, and the British system, where the...

We present a simple model where patents are inferior to secrecy, meaning that when private returns from innovation under the two regimes are the same, society is better off if innovator chooses not to patent. In our model trade secret licensing is envisaged and inferiority of patents depends on...