Optimal Incentives for Patent Challenges in the Pharmaceutical Industry

Review of Industrial Organization ◽

10.1007/s11151-021-09815-0 ◽

2021 ◽

Author(s):

Enrico Böhme ◽

Jonas Severin Frank ◽

Wolfgang Kerber

Keyword(s):

Pharmaceutical Industry ◽

Market Entry ◽

Consumer Welfare ◽

Antitrust Law ◽

Patent Litigation ◽

Weak Patents ◽

Optimal Incentives

AbstractIn this paper, we show that a provision in antitrust law to allow patent settlements with a later market entry of generics than the date that is expected under patent litigation can increase consumer welfare. We introduce a policy parameter for determining the optimal additional period for collusion that would incentivize the challenging of weak patents and maximize consumer welfare. While in principle, later market entry leads to higher profits and lower consumer welfare, this can be more than compensated for if more patents are challenged as a result.

Download Full-text

Will rivals enter or wait outside when faced with litigation risk? Patent litigation in complex product industries and international market entry

Strategic Organization ◽

10.1177/1476127021998258 ◽

2021 ◽

pp. 147612702199825

Author(s):

Ergun Onoz ◽

Claudio Giachetti

Keyword(s):

Market Entry ◽

International Market ◽

Joint Effect ◽

Litigation Risk ◽

Patent Litigation ◽

Complex Product ◽

Patent Strategy ◽

Negative Effect ◽

Rival Firms ◽

The Relationship

A spiral of patent infringement litigation among rival firms is a phenomenon often observed in complex product industries, where products comprise numerous separately patentable elements. Theoretically grounded in the awareness–motivation–capability framework of competitive dynamics, this article contributes to the literature on patent strategy and international market entry by looking at how, in a complex product industry, the intensity of patent litigation in a country affects a firm’s decision to enter that country. Our results show that the intensity of patent litigation in a country is a deterrent for potential entrants and has a negative effect on a firm’s likelihood of entering that country. We also show that a firm’s previous experience with patent litigation ( awareness component), the share of a firm’s current patent applications in a target country ( motivation component), and the size of a firm’s patent stock ( capability component) moderate the relationship between a country’s patent litigation intensity and a firm’s likelihood of entering that country. We thus shed light on the joint effect of macro- and micro-level patent-related variables on a firm’s market entry decisions. We test our hypotheses with a comprehensive panel of patenting and entry strategies of 84 mobile phone vendors and their patent litigation battles in 45 countries, from 2003 to 2015.

Download Full-text

Is protecting sunk investments an economic rationale for antitrust law?

Journal of Antitrust Enforcement ◽

10.1093/jaenfo/jnaa042 ◽

2020 ◽

Author(s):

Darryl Biggar ◽

Alberto Heimler

Keyword(s):

Alternative Hypothesis ◽

Competition Law ◽

Consumer Welfare ◽

Antitrust Law ◽

Market Participants ◽

Specific Investments ◽

Trade Offs ◽

Trading Partners ◽

Competition Laws ◽

Economic Foundation

Abstract In recent years, the economic foundation of antitrust law is increasingly being called into question. The hypothesis that antitrust law seeks to promote consumer welfare has historically been extremely popular but in recent years has come under attack. In part, this is due to the fact that neither the law, nor the decisions of competition law enforcers, can be fully explained as consistent with a strict consumer welfare standard. Neither do competition laws promote a textbook concept of total economic welfare, neither in their wording, nor in the way they are enforced. Some commentators argue that competition law should protect the competitive process, but this approach lacks a foundation in welfare economics and therefore lacks the ability to make basic trade-offs between desirable goals. This article puts forward an alternative hypothesis, which focuses on the sunk, relationship-specific investments made by market participants. We propose that an important, and overlooked, role of competition law is to protect trading partners from the threat of hold-up, where it is unreasonable for the parties to use conventional mechanisms to protect those sunk investments themselves. This approach can help to explain features of competition law and law enforcement that cannot be explained by the traditional consumer welfare or total welfare frameworks. We suggest that this approach offers promise as providing a consistent, comprehensive, economic foundation for competition law.

Download Full-text

Attack or Defend? The Role of Institutional Context on Patent Litigation Strategies

Journal of Management ◽

10.1177/0149206315605168 ◽

2015 ◽

Vol 44 (3) ◽

pp. 1226-1249 ◽

Cited By ~ 2

Author(s):

Bruce C. Rudy ◽

Stephanie L. Black

Keyword(s):

Pharmaceutical Industry ◽

Competitive Advantage ◽

Semiconductor Industry ◽

Institutional Context ◽

Performance Outcomes ◽

Patent Litigation ◽

Starting Point ◽

Institutional Contexts

Research has suggested that firms engage in a number of different patent strategies to protect and even gain competitive advantage. However, we know less about the strategies firms employ when engaging in patent litigation. Using proprietary and defensive generic patent strategies as a starting point, this paper describes two types of patent litigation strategies, the types of institutional contexts that would be expected to motivate firms to engage in each, and the performance outcomes of firms undertaking such strategies. Analyzing patent litigation activity between 2002 and 2008 in the pharmaceutical and semiconductor industries, we find that firms in the pharmaceutical industry are more likely to follow a proactive proprietary patent litigation strategy, while firms in the semiconductor industry are more likely to engage in a proactive defensive patent litigation strategy. Furthermore, firms in the semiconductor industry that followed a proactive defensive patent litigation strategy enjoyed better performance than firms that did not engage in this strategy.

Download Full-text

International Market Entry Modes

Organizational Innovation and IT Governance in Emerging Economies - Advances in Human Resources Management and Organizational Development ◽

10.4018/978-1-4666-7332-8.ch011 ◽

2015 ◽

pp. 225-253

Author(s):

Jingyuan Zhao

Keyword(s):

Pharmaceutical Industry ◽

Emerging Markets ◽

Market Orientation ◽

Market Entry ◽

International Market ◽

Pharmaceutical Companies ◽

Entry Modes ◽

Resource Base ◽

Industrial Chain ◽

Internationalization Theory

The Chinese pharmaceutical market has become the world's second largest market. The Chinese pharmaceutical industry is becoming a growing player in global pharmaceutical chain. This chapter aims to solve following issues: the market orientation and resource base of Chinese pharmaceutical industry, the role in the global pharmaceutical industrial chain, and the international market entry modes of Chinese pharmaceutical companies. The sample companies are selected and surveyed with a focus on the international market entry modes. Through an empirical research, this chapter summarizes the experience of Chinese pharmaceutical internationalization and finds the effective modes of international market entry are product upgrading along the industrial chain, international certification and cooperation, outsourcing and licensing, and other paths of overseas expansion. The implication for pharmaceutical companies of emerging markets is to choose the suitable entry modes based on advantages, learn from the experience of other emerging markets and domestic leading companies of internationalization, and gradually enter the standard market. This study not only provides international market entry modes for the latecomer of Chinese pharmaceutical companies but also enriches the internationalization theory of emerging markets.

Download Full-text