Are Patent Litigation Insurances Fit for the Dynamics
of Innovation?

Patent insurance policies allow firms to externalise the legal cost in case of conflicts. These litigation insurances may incite innovators to sue more often, which would increase the social cost of litigation. By modelling a patent file, we show that these patent litigation insurances incite innovators to claim for wider breadth patent too. Wider breadth patents could lead to an increased number of legal conflicts but could also lead to a slackening in the process of innovation improvement. We come to the conclusion that the effects of these insurance schemes on the welfare are really indeterminate. [JEL Classification: O34, G22]

* christian.benlakhdar@malix.univ-paris1.fr

; An earlier version of this paper was presented to the annual conference of the European Association for Law and Economics in Ljubljana, Slovenia, September 15-17, 2005. The Author is grateful to all the participants for useful comments, especially Professor Luigi A. Franzoni. The Author is also grateful to Prof. Roberto Cellini and Prof. Gustavo Piga for their valuable advice.