JOHN W. SCHLICHER

PATENTS, PATENT LITIGATION, PATENT DISPUTE RESOLUTION AND

SETTLEMENT, LICENSING, ANTITRUST, LAW AND ECONOMICS

 

 

Nine Things to Think about before Litigating Reasonable Royalty Damages or Licensing under the Threat of Litigation

Companies have asked Congress to fix the law on reasonable royalty damages for inventions that add something to earlier products.  One bill introduced in the Congress would not have solved the perceived problems.  See S.1145 (January 28, 2008).  See John W. Schlicher, Patent Damages, the Patent Reform Act, and Better Alternatives for the Courts and Congress (July 7, 2008).  Congress rejected that proposal.  Those companies should consider an alternative to legislation.

1. The Supreme Court said reasonable royalty damages should be based on the nature of the invention, its utility and advantages, and the extent of the use.  Why not follow the Supreme Court instead of the District Court in Georgia-Pacific?

 

2. The utility and advantages of any invention is the difference between the net profits an infringer earned from sales of the infringing product and net profits it could have earned selling the next best non-infringing substitute available to it during the period of infringement.  Why shouldn’t reasonable royalty damages be the amount of this difference?

 

3. Georgia-Pacific factor 9 restates the Supreme Court’s basic standard.  (“The utility and advantages of the patent property over the old modes or devices, if any, that had been used for working out similar results.”).  For courts wedded to Georgia-Pacific, why shouldn’t factor 9 determine reasonable royalty damages?

 

4. The “old modes or devices” of factor 9 are not prior art processes and products, as some believe.  Reasonable royalty damages depend on any alternatives available during the period of infringement.  Why measure the value of some invention against prior art substitutes if the world moved on and others were available?

 

5. Grain Processing illustrates this approach to reasonable royalty damages.  Why not follow a clear, sensible decision affirmed by the Court of Appeals?

 

6. Lawyers often look to Georgia-Pacific factor 13 for guidance on damages for inventions that add something to earlier products.  (“The portion of the realizable profit that should be credited to the invention as distinguished from non-patented elements …”.)  Factor 13 does not say how to identify the portion of profit to be credited to the invention.  Why apply factor 13 when it doesn’t say what to do?

 

7. Lawyers sometimes argue that the form of a patent’s claims is significant to damages.  The law has been clear since the inception that the form of a claim has nothing to do with damages.  Why not follow the law?

 

8. The Court of Appeals’ “basis for consumer demand” version of the entire market value rule does not make sense.  Even if consumers wanted a product with the patented feature or the infringer used that feature in marketing, the value of the invention is not the infringer’s entire profits, if the infringer could have sold and marketed a non-infringing product.  Why not challenge this test?

 

9.   Inventions that provide entirely new products are rare.  Almost all inventions are improvements.  Yet the courts find that modifications to old products (home water heaters and automobile radiators) provide their entire value.  Challenge this also?