Monday, March 30, 2015

Lee and Melamed on Patent Damages; Elhauge on RAND Commitments

1.  William F. Lee and A. Douglas Melamed have posted a paper on ssrn titled Breaking the Vicious Cycle of Patent DamagesHere is a link to the paper, and here is the abstract:
Patent law is implicitly, and sometimes explicitly, based upon a story of patent infringement in which technology users are presumed to be able to discover relevant patents in advance and either design around them or negotiate patent licenses before using the patented technology. That story does not hold true in many fields today, in which the scope and diffusion of potentially relevant patents renders such preclearance both infeasible as a practical matter and undesirable as a matter of economic policy. But patent damages law continues to apply this outmoded paradigm. As a result, current doctrine perpetuates a vicious cycle of excessive, socially harmful remedies.
We propose a number of ways for patent law to adapt to this new reality. First, reasonable royalty rates should be based on the market value of the patent before infringement and should exclude post-infringement considerations such as lock-in that infect current doctrine and lead to exaggerated damages awards. Second, patent remedy law should distinguish between infringers in the paradigmatic story, who can be regarded as guilty infringers, and innocent infringers for whom preclearance was not practicable; and it should further distinguish between patent holders that were willing to license their patents before infringement and those that had resolved to maintain their patent monopoly. In effect there are four combinations — innocent/willing, innocent/unwilling, guilty/willing, and guilty/unwilling. Remedies should depend on which combination is at issue, and injunctions should be available only for unwilling licensors. In the innocent/unwilling scenario, the patent holder should be able to obtain an injunction only if it agrees to bear the innocent infringer’s costs of switching to a non-infringing alternative.
I probably will have some comments on the paper after I have finished reading and digesting it.  Mr. Lee of WilmerHale is counsel to Apple in the Apple v. Samsung litigation.  Mr. Melamed, the coauthor of one of the most famous law review articles of all time, formerly was a partner at WilmerHale and general counsel at Intel, and is now a visiting professor of law at Stanford.

2. A year or so ago I mentioned (here) that Professor Einer Elhauge had posted a draft paper on ssrn titled Treating RAND Commitments Neutrally.  The final version of the paper is now out, in the Journal of Competition Law & Economics (available here).  Here is the abstract:
This article argues that the same legal standards should apply to RAND commitments whether they are made to standard-setting organizations or not. The arguments for concluding that RAND commitments should limit injunctive patent relief or trigger antitrust liability turn on whether the commitment reasonably induces lock-in that generates hold-up effects or market power when that commitment is breached. But RAND commitments can induce such lock-in effects when they are made outside of standard-setting organizations and do not always induce them when they are made to standard-setting organizations. Thus, any special legal rules for RAND commitments should turn on whether the commitments induced such lock-in, rather than on the institutional context. The arguments against using special legal rules for RAND commitments turn on the extent to which lock-in might fail to generate holdup problems, denying patent injunctions might generate reverse-holdup problems, and contract or promissory estoppel remedies might obviate the need for antirust liability. But those arguments likewise apply equally inside and outside of standard-setting organizations. Thus, however one resolves the arguments for and against applying special legal rules to RAND commitments, the resulting legal standards should be the same whether or not the commitment is made to a standard-setting organization. 

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