This research shows that free trade is not optimal, except for a few knife-edge cases
Arun Kumar Kaushik, Associate Professor, Jindal School of Liberal Arts & Humanities, O.P. Jindal Global University, Sonipat, Haryana, India.
Apurva Dey, Indira Gandhi Institute of Development Research (IGIDR), Goregaon, Mumbai, Maharashtra.
This paper analyzes interdependences between optimal trade policy and preferred liability doctrine to assess infringement damages, when intellectual property rights are probabilistic, in a model of import competition between a foreign patentee and a domestic infringer.
It shows two reversal results. First, a regime switch from protectionism to free trade reverses stakeholders’ preferences over liability doctrines. Second, the optimal trade policy changes from an import tariff under the lost-profit rule to import subsidization under the unjust-enrichment rule, unless the patent is weak.
It is found that free trade is not optimal, except for a few knife-edge cases.
Published in: Journal of Institutional and Theoretical Economics
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