Post on 03-Jan-2016
CONCERNING THE "UTILITY" OF UTILITY PATENTS: RECENT TRENDS IN DAMAGES AWARDS AND LICENSE ROYALTIES IN THE
UNITED STATES
Gary R. Edwards
Crowell & MoringWashington, DC
_____________________________
Nikkei Intellectual Property Forum
Tokyo, 08 September 2003____________________________
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Infringement Damages and License Royalties in the United States
“The only thing that is keeping us alive is our brilliance. The only way to protect
our brilliance is patents.”
Edwin LandApril 27, 1976
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Infringement Damages and License Royalties in the United States
United States Constitution, Article I, Section 8, Clause 8:
“The Congress shall have the power ...To promote the progress of science and useful arts, by securing for limited times to...inventors the exclusive right to their respective...discoveries.”
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Infringement Damages and License Royalties in the United States
Doyle v. Microsoft (2003)
$520.6 million
City of Hope Nat. Med. Center v. Genentech (2002)
$500,000,000
IGEN International v. Roche Diagnostics (2002)
$505,000,000
Haworth v. Steelcase (1996)
$211,000,000
Polaroid v. Kodak (1991)
$873,000,000
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Infringement Damages and License Royalties in the United States
Intellectual Property Portfolio Management Philosophies
Purely Defensive• Patents held for Cross Licensing
• Entree to technology developed by others
• Patents not a profit center
Aggressive Portfolio Acquisition and Licensing
• Competitive Tool
• Profit Center
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Infringement Damages and License Royalties in the United States
U.S. Growth in Patent License Revenues in 1990’s
$15 Billion --------> $115 Billion
Estimated Current Volume$150 Billion
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Infringement Damages and License Royalties in the United States
IBM Patent Portfolio Management
• Ranked first in U.S. Patent Acquisition for the past ten years
• Estimated Annual Income from Patent Licensing: $1.5 Billion
• Estimated Ten Year Income from Patent Licensing: $10.0 Billion
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Infringement Damages and License Royalties in the United States
Texas Instruments Settlements
Hyundai Electronics (1999) $1,000,000,000
Samsung Electronics (1996) $1,000,000,000
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Infringement Damages and License Royalties in the United States
Industry Royalty Rates
8.0%
7.5%
6.8%
5.1% 5.0% 5.0%4.8% 4.7%
4.5%
4.0% 4.0% 4.0%3.6%
3.2%2.8%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
Med
ian
Ro
yalt
y R
ate
(%
of
Sale
s)
RoyaltySource Database
Source: Analysis Group|Economics(reproduced by permission)
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Infringement Damages and License Royalties in the United States
• In general, in the United States, a patent owner is entitled to be compensated for all economic losses that are reasonably attributable to an infringement.
• No fixed limit on the type of economic injury that can be compensated.
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Infringement Damages and License Royalties in the United States
35 U.S.C. §284:
“Upon finding for the claimaint the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty....”
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Infringement Damages and License Royalties in the United States
Seymour v. McCormick:“[Because] of the immense variety of patents
issued every day,...there cannot in the nature of things, be any rule of damages which will apply equally in all cases. The mode of ascertaining actual damages must necessarily depend on the peculiar nature of the monopoly granted.”
U.S. Supreme Court, 1853.
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Infringement Damages and License Royalties in the United States
• Rite-Hite Corp. v. Kelley Co.:
“The language of [§284] is expansive rather than limiting. It [provides] only a lower limit and no other limitation.
U.S. Court of Appeals
for the Federal Circuit (1995)
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Infringement Damages and License Royalties in the United States
Damages Considerations to be Discussed:
• Lost Profit
• Reasonable Royalty
• Entire Market Value Rule
• Triple Damages
• Attorney Fees, Prejudgment Interest
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Infringement Damages and License Royalties in the United States
Lost Profit Examples:
• Lost sales
• Price erosion
• Lost opportunity to raise prices
• diminution of sales growth
Lost profit need be proven only “to a reasonable probability”.
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Infringement Damages and License Royalties in the United States
Reasonable Royalty
• Hypothetical “arm’s length” negotiation
• Not an accounting exercise
• No need to show lost sales
• Fifteen Factors -- Georgia Pacific case
• Highly Subjective
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Infringement Damages and License Royalties in the United States
Entire Market Value Rule
• Patented feature is the “basis for customer demand” for the entire article.
• Damages calculated based on value of the entire article, and not just patented feature.
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Infringement Damages and License Royalties in the United States
Triple Damages -- wanton disregard, willful infringement
Attorney Fees -- “exceptional cases” (usually, willful infringement, bad faith litigation, etc.)
Prejudgment Interest -- ordinarily awarded where necessary “to afford the plaintiff full compensation for infringement”.
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Infringement Damages and License Royalties in the United States
Hallmarks of U.S. Damages law:
• Full Compensation for all economic losses
• Flexible -- no rigid rules regarding types of loss that are compensable
• Very Subjective
• Courts generally receptive