The E ff ects Of Firm Size In Reaching An Out-of-court-settlement in Software Patent Litigation Andreas Panagopoulos ∗ University of Bristol Preliminary and Incomplete January 26, 2005 A b st r act The aim of this paper is to examine if, in patent litigation cases, an out-of-court-settlement is more likely to be reached when there is a notable size difference between the infringing and the plaintiff company. The argument is that size a) endows a rm with lower litigation costs and b) enhances the rms ability to successfully incorporate new ideas into its pool of prior art. The latter effect allows large rms to create better products, increasing the obsolescence rate that small rms are faced with. The model suggests that no cross licensing will take place if the infringer is of small size compared to the plaintiff. This line of approach may shade some light on the expected introduction of patent protection for computer-implemented inventions in the EU, indicating that software patents may result in excess litigation. Keywords: Intellectual property, litigation, size, software patents. JEL No: 032, 034, K0 ∗ Contact email, uctpapa@ucl.ac.uk