This paper deals with strategic behaviour of firms in a duopoly, subsequent to the
claim by one firm that it has reduced the unit cost of production. A variety of possible
strategic equilibria are discussed in the context of a duopoly game between a multinational
and a local firm. In the context of an extended uniform period of patenting, as finally
agreed in the Uruguay round (1994), firms have increased incentive to take patents.
In the presence of cost differences, the act of taking process-patents has implications for
the equilibrium output strategies of the duopoly firms and sometimes may have a negative
overall welfare effect for the local producer and consumers
