Question: Question: 02 Mikrosoft keeps finding itself in costly IP litigation battles because it is allegedly infringing on some other firm's patented operating system. The CEO

Question: 02

Mikrosoft keeps finding itself in costly IP litigation battles because it is allegedly infringing on some other firm's patented operating system. The CEO of Mikrosoft is confident that he will win the case on a rejigged First Amendment argument about C code as protected speech, but the firm is spending $11 million per year on this litigation and it will go on for 3 years. The interest rate is

Assume that Mikrosoft's has a top-shelf legal department that is equally productive to an outside firm and that the market for outside legal help is perfectly competitive. Finally, assume that the payment for legal services will be made at the beginning of each year.

a. Suppose Mikrosoft wants to stop dealing with the distraction, how much would it have to pay an external firm to take full responsibility of the case? (Hint: You need to calculate a net present value.)

b. If there were barriers to entry in the market for legal services, would it be more or less costly for Mikrosoft to rid itself of this liability? Explain your reasoning. Question: 02 Mikrosoft keeps finding itself in

Question: 02 Mikrosoft keeps finding itself in costly IP litigation battles because it is allegedly infringing on some other firm's patented operating system. The CEO of Mikrosoft is confident that he will win the case on a rejigged First Amendment argument about C code as protected speech, but the firm is spending $11 million per year on this litigation and it will go on for 3 years. The interest rate is Assume that Mikrosoft's has a top-shelf legal department that is equally productive to an outside firm and that the market for outside legal help is perfectly competitive. Finally, assume that the payment for legal services will be made at the beginning of each year. a. Suppose Mikrosoft wants to stop dealing with the distraction, how much would it have to pay an external firm to take full responsibility of the case? (Hint: You need to calculate a net present value.) b. If there were barriers to entry in the market for legal services, would it be more or less costly for Mikrosoft to rid itself of this liability? Explain your reasoning

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