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This paper looks at the decision to settle patent litigation in Germany by focusing on detailed data on within-trial actions and motivations by plaintiff, defendant and the courts. Using a new dataset covering about 80 % of all patent litigation cases in Germany between 2000 and 2008 we estimate the likelihood of within-trial settlement. We find that the within-trial settlement decision is to some degree driven by the proceedings that change the pre-trial setting of the negotiations in terms of information and stakes and make previously refused settlement a new option. Additionally, firm-specific stakes as measured by the relation of the involved parties to the disputed patent as well as firm-specific strategies are found to affect the general willingness to settle after the filing of a court case. The results suggest that pre-trial failure of settlement negotiations can to some extent be offset by within-trial settlement through efforts made by the court, but that the disposition to settle is to a larger degree determined by firm-specific stakes and strategies in the case. [ABSTRACT FROM AUTHOR]

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. [ABSTRACT FROM AUTHOR]