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Antitrust Limits on Patent Settlements: A New Approach *
Author(s) -
Hovenkamp Erik,
Lemus Jorge
Publication year - 2022
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/joie.12288
Subject(s) - counterfactual thinking , human settlement , settlement (finance) , competition (biology) , verifiable secret sharing , law and economics , argument (complex analysis) , economics , patent troll , business , class action , industrial organization , intellectual property , law , political science , patent law , finance , engineering , computer science , philosophy , ecology , chemistry , biology , biochemistry , epistemology , set (abstract data type) , state (computer science) , algorithm , waste management , payment , programming language
Patent settlements between rivals restrain competition in many different ways. Antitrust requires that their anticompetitive effects are reasonably commensurate with the firms' expectations about (counterfactual) patent litigation. Because these expectations are private and non‐verifiable, this standard is hard to administer; to date, it has been successfully applied only within a very narrow class of agreements. We show that it can be applied universally by policing the economic structure of the firms' contract. This approach determines whether settlement outcomes will be antitrust‐compliant for any private beliefs the firms might have, thus avoiding the need to speculate about such beliefs.