TILEC Seminar: Jorge Lemus Encalada (U Illinois)
10:45-11:45, M 1003
Pay-for-delay with Follow-on Products
Jorge Lemus is an Assistant Professor at the Department of Economics at the University of Illinois, Urbana-Champaign (UIUC). His research interests are Economics of Innovation, Industrial Organization, and Applied Microeconomic Theory. Before joining UIUC, Jorge received his PhD in Economics from Northwestern University.
research interests: Industrial Organization, Economics of Innovation, and Applied Theory.
Pay-for-delay with Follow-on Products
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’s payoffs relative to the case of no follow-on products. 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 relative to the entry date negotiated in the absence of follow-on products, and litigation may arise in equilibrium.