This paper studies the effect of litigation as a way to enforce patents when firms hold private information. A structure to the legal system is provided, allowing a better understanding of the settlement and litigation decisions taken by entrepreneurs. The model is broadly consistent with recent...

This paper presents a model of cumulative innovation where firms are heterogeneous in their research ability. We study the optimal reward policy when the quality of the ideas and their subsequent development effort are private information. The optimal assignment of property rights must...