Litigate or Let It Go? Multi-Market Contact and IP Infringement-Litigation Dynamics

Abstract

We explore how multi-market contact (MMC) explains the kind of intellectual property (IP) infringement-litigation dynamics that arise within a particular pair of competitors. We build a contingency model in which the role played by each firms in shared markets determines which of the two possible dynamics will arise: mutual forbearance (low probability of IP infringement and high probability of litigation) vs mimetic behavior (high probability of IP infringement and low probability of litigation). Specifically, we examine whether firms are seen by rivals as innovators or imitators in the markets they share and propose that: (1) mutual forbearance dynamics arise when firms see their competitors as innovators whereas (2) mimetic behavior dynamics arise when firms see their competitors as imitators. We find support for our predictions in a sample of 813 patent infringement cases in the biopharmaceutical industry.