Settlement during patent litigation trials. An empirical analysis for Germany

Settlement in patent litigation suits is a frequently observed phenomenon. Even though parties have the opportunity of achieving an agreement at the first negotiation round they often reach one during trial. Game theoretic models suggest that additional or differently evaluated information may trigger settlement after a first bargaining round. This paper investigates settlement decisions in patent infringement suits for Germany. Based on a data set of 824 patents involved in infringement suits in Germany during 1993 and 1995 I find legal differences between the District Courts to have a significant impact on the settlement rates during trial. The results also reveal it is only in later stages of the trial that invalidity suits as a means of defense have a positive impact on the probability of settlement. Prior opposition to the litigated patent, however, always has a negative impact on settlement probability. Contrary to results for the US the adoption of the prevailing or not at the first instance has no effect on the settlement decision at the second instance.