Friday Miscellany: Reasonable royalites, NPEs, FRAND, and other topics

1.  Christopher S. Marchese, Michael E. Florey, and Juanita R. Brooks have published Retooling Patent Damages Law for NPE Cases, 14 Sedona Conference Journal 47 (2013).  The authors propose abolishing use of the Georgia-Pacific factors in cases in which NPEs are plaintiffs, and instead allowing NPEs to recover either (1) an established royalty, if there is one, or (2) "a fully-paid up lump sum award of reasonable royalty damages," which would be "based on the value of the patented invention over the next best noninfringing alternative (NBNA) at the time the defendant adopted the patented invention," split as the parties themselves would have split it.  The authors would also permit enhanced damages in cases in which the lump-sum award is insufficient.  There's much to agree with here, though like Durie & Lemley I think that a proper application of Georgia-Pacific requires that the factors be used only as relevant to the overarching question of what the willing licensor and willing licensee would have agreed to ex ante.  I also don't disapprove altogether of the use of ex post evidence (the book of wisdom) or royalties paid in settlement, as these authors do, though I think courts should be very careful in using such evidence to shed light on what the ex ante royalty would have been.

2. Bernard Chao & Jonathan R. Gray have published a short paper, A $1 Billion Parable, 90 Denver U. L. Rev. 185 (2013), arguing that a $1 billion judgment awarded to Monsanto in a 2012 trial was excessive, even though consistent with the law it comprised a lump-sum royalty based on expected sales (which never occurred; the defendant DuPont made, but wound up never selling, any infringing seed).  The authors argue that "No company . . . would pay one billion dollars to license an untested product under development."

3. Greg Sivinski of Microsoft has published Patently Obvious:  Why Seeking Injunctions on Standard-Essential Patents Subject to a FRAND Commitment Can Violate Section 2 of the Sherman Act, CPI Antitrust Chronicle 2013(1).  I disagree with the author's conclusion that U.S. antitrust law has a major role to play in this space, for reasons expressed here, but I'm sure that some readers will disagree with me on this.

4.  I recently met Martha Gooding of Jones Day at the Fifth Annual Patent Law & Policy Conference at Georgetown.  She has published four very interesting articles in Bloomberg BNA's Patent, Trademark, and Copyright Journal (PTCJ):  Early Patent infringement Damages Evaluation:  Case Management Techniques (with William C. Rooklidge), 86 PCTJ 310 (June 7, 2013), which discusses, among other things, "reverse bifurcation" of the sort Judge Holderman employed in the Innovatio case (see my thoughts on this, here and here); Analyzing the "Analytic Method" of Calculating Reasonable Royalty Patent Damages, 84 PCTJ 78 (May 11, 2012); Patent Damages Mulligans?  What Happens When the Patentee Fails to Sustain Its Burden of Proving a Reasonable Royalty?, 83 PCTJ 875 (Mar. 9, 2012); and Reasonable Royalty Patent Damages and the "Smallest Salable Patent-Practicing Unit" Dicta, 86 PCTJ 771 (Aug. 9, 2013).  I have some disagreement with the last of these, which argues that "the smallest salable infringing unit may be an appropriate starting point for the royalty base analysis," but that if it "contains unpatented components or features, the patentee still must apportion the damages claimed between the patented and unpatented technology".  In my view, if we must use a royalty base and a royalty rate to calculate a reasonable royalty, the base and rate ideally should be the ones the parties themselves likely would have chosen.  On this view, the base could be the entire end product, if that's what the parties would have chosen (say, for convenience), as long as it's multiplied by an appropriately small royalty rate.  The problem is that in the U.S. juries usually make these determinations, and the fear is that if a jury hears evidence about an enormous royalty base, it will award an inflated royalty because it's hard to process the idea of using a minute rate (e.g., 0.00001%).  So the "smallest salable patent practicing unit" is a way to keep such evidence away from the jury, except in cases in which the patented feature drives the demand for the product (in which case you get to use the "entire market value" as the base).  On this view, "smallest salable patent practicing unit" is simply a way to control juries; we should focus on its function rather than on formalities.  As long as the base is small enough to avoid the risk that juries will unduly swayed to over-reward, that should suffice, in my view; the judge should then exercise discretion to keep expert testimony focused on an appropriate royalty rate.  But we'll see how the law develops.

5.  On Sufficient Description, Professor Siebrasse has an interesting post on the disparity, in Canada, between attorneys' fees awarded in litigation and actual attorneys' fees incurred.

5.  PatLit has an interesting post from October 31 titled "Patent Litigation Statistics:  A Task for Do-It-Yourself Enthusiasts?.  Bottom line is that the U.K. IPO does not keep statistics on median patent damages awards and the like.

6.   IPKat has an interesting two-part discussion of a recent conference in London on Standards, FRAND, NPEs, and Injunctions, see here, here, and here. The Kat also links to a recent article by Professor Phillip Johnson titled 'Damages' in Euyropean Law and the Traditional Accounts of Profits, Queen Mary J. Intell. Prop. 296 (2013), which I will read and perhaps blog about sometime soon.

7.  Update.  Florian Mueller has a couple of patent damages-related posts up on Foss Patents today:  German Court Stays Google-Apple FRAND Rate-Setting Case, Invites EU Commission to Participate, available here, and Judge Conditionally Bars Samsung from Pointing Next Week's Jury to the Apple-HTC Settlement Deal, available here.

8.  Further Update.  IPKat has a post today on a recent debate on whether the U.K. should adopt criminal penalties for design infringement, available here.