Pay-for-Delay with Follow-On Products

Jorge Lemus, Emil Temnyalov

Research output: Contribution to journalArticlepeer-review

Abstract

We study pay-for-delay settlements between a patent-holder and a challenger when the patent-holder can introduce follow-on products. We show that ignoring follow-on products biases the inferred competitive harm of pay-for-delay settlements (the “Actavis inference”).The reason is that patent invalidation triggers an earlier introduction of follow-on products, which changes pay-for-delay negotiation payoffs. When follow-on products are ignored, we show that an inference based on a reverse payment over-estimates patent strength. If parties cannot use payments (as in pure-delay settlements), follow-on products may push the parties to settle on an earlier entry date, and litigation may arise in equilibrium.

Original languageEnglish (US)
Pages (from-to)697-714
Number of pages18
JournalReview of Industrial Organization
Volume56
Issue number4
DOIs
StatePublished - Jun 1 2020

Keywords

  • Antitrust
  • Evergreening
  • Litigation
  • Pay-for-delay
  • Product hopping

ASJC Scopus subject areas

  • Economics and Econometrics
  • Strategy and Management
  • Organizational Behavior and Human Resource Management
  • Management of Technology and Innovation

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