Wednesday, July 8, 2015

Seaman on Ongoing Royalties

Christopher Seaman has published an article titled Ongoing Royalties in Patent Cases After eBay: An Empirical Assessment and Proposed Framework, 23 Texas Intellectual Property Law Journal 203 (2015).  I'm not finding a copy of the article on the journal's website, but here is a link to what appears to be the final version of the article on ssrn.  Here is the abstract:
The Supreme Court’s landmark decision in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 288 (2006), significantly changed the remedial landscape for patent owners, holding that a permanent injunction would not automatically follow a finding that an asserted patent was infringed and not invalid. As a result, a substantial number of prevailing patentees have been denied the ability to exclude future acts of infringement. eBay’s impact is perhaps most acute for patent assertion entities (“PAEs”) — firms that own, license, and assert patents in litigation, but do not themselves directly practice the patented technology — who rarely can satisfy eBay’s four-factor test.
In eBay’s wake, the Federal Circuit has approved an alternative prospective remedy called an ongoing royalty. But despite lower courts’ increasing use of this remedy, numerous questions about the structure and methodology for determining an ongoing royalty remain unresolved. This Article addresses the issue of ongoing royalty awards from both an empirical and doctrinal perspective. First, it reports the results of an original empirical study regarding ongoing royalty awards by district courts since eBay. Second, it proposes a new framework for computing an ongoing royalty that requires consideration of actual or anticipated changes to the relevant product market, as well as potential future alternatives to the patented technology, in determining the amount of an ongoing royalty award.
Professor Seaman reports, among other things, that from the date of the eBay decision through January 2015 there have been 57 ongoing royalty decisions in all, involving 54 separate awards (10 in 2014); that 40% (23) of these cases were litigated in the Eastern District of Texas; that the leading technologies in these cases (accounting for 81% of them) were software (21), electronics (14), and medical devices (11); and that the mean postjudgment royalty was 1.84 and the median 1.34.   

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