NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Damages and Injunctions in the Protection of Proprietary Research Tools

Mark Schankerman, Suzanne Scotchmer

NBER Working Paper No. 7086
Issued in April 1999
NBER Program(s):   PR   LE

Profit on proprietary research tools is determined partly by the remedies for infringement, such as damages and injunctions. We investigate how damages under a liability rule and the opportunity for injunctions under a property rule can affect the incentives to develop research tools. We show that the prevailing legal doctrine of damages under liability rule, called lost profit or reasonable royalty, suffers from a logical circularity which leads to an indeterminacy in permissible damages. This can create insufficient incentives to develop research tools. Incentives can be improved either by a property rule with injunctions or by a liability rule under the doctrine of unjust enrichment.

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Document Object Identifier (DOI): 10.3386/w7086

Published: Schankerman, Mark & Scotchmer, Suzanne, 2001. "Damages and Injunctions in Protecting Intellectual Property," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 199-220, Spring.

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