Intellectual Property Infringement by Foreign Firms: Import Protection through the ITC or Court
This paper examines intellectual property litigation as a method of protection from patent-infringing imports. Claims against patent-infringing imports entering the United States may be filed before the International Trade Commission (ITC) or in district court. The ITC applies injunctions (import prohibitions) that would seem to provide more protection from infringing imports than the standard license fee remedy in court. Settlements prior to legal adjudication are common in both venues. Using a model with Nash bargaining and Cournot competition, we show that an ITC filing may restrict imports by less than in court. This result tends to apply if product differentiation is high and the size of the patented cost-reducing innovation is large.
We thank Yoko Sakamoto and Steffan Ziss for very valuable discussant’s comments on the paper. We also thank Vanessa Alviarez, Ed Egan, Taiji Furusawa, and Keith Head. We are grateful for financial support from SSHRC grant 435-2017-0627. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.