Wednesday, October 19, 2016

Some New Papers on Damages, Part 1

1.  Jason Bartlett and Jorge Contreras have posted on ssrn a draft of the paper they prepare for the University of Texas Patent Damages conference this past June, titled Rationalizing FRAND Royalties:  Can Interpleader Save the Internet of Things?  Here is a link to the paper, and here is the abstract:
Important technical interoperability standards may be covered by hundreds or thousands of patents held by dozens of parties. Patent holders are often required to license these patents to others on terms that are “fair, reasonable and non-discriminatory” (FRAND), and litigation regarding the level of FRAND royalties is expanding. One serious problem that has emerged is the inherent difficulty of determining a “reasonable” royalty rate for a particular standard-essential patent in isolation from the many other patents covering the same standard. Reasonable royalty determinations in litigation are made in a bottom-up manner, patent holder by patent holder, patent by patent, usually in separate proceedings. While individual royalty determinations in these proceedings may seem to adhere to judicial and contractual requirements regarding “reasonableness,” there is no reason to believe that the aggregate royalty rates established through these uncoordinated, serial processes will be reasonable in terms of the overall value that the patented technology contributes to the standard or the product. Unreasonable and inconsistent royalties on important interoperability standards create social costs by impeding value-creating transactions. To address this problem, we propose that the mechanism of statutory interpleader be used to join the holders of all patents covering a particular technology standard into a single proceeding in which an aggregate “reasonable” royalty may be determined and then apportioned among the holders of individual standards-essential patents. This approach will both enhance fairness of royalty determinations and reduce the costs inherent in multiple independent proceedings. Finding such a solution is particularly critical today, as technology convergence continues to impact standardization in key areas such as next-generation wireless communication and the “Internet of Things.”
2.  Sapna Kumar has posted on ssrn a new draft of the paper she presented at the University of Texas Patent Damages Conference, titled Patent Damages Without BordersHere is a link to the paper, and here is the abstract:
The presumption against extraterritoriality is a deceptively straightforward principle: that U.S. law applies only inside the United States. But there is confusion regarding whether the principle applies when a court calculates patent damages. The Federal Circuit has held that patent holders who show infringement under § 271(f) of the Patent Act cannot recover foreign lost profits. The court maintained that allowing recovery of such damages would result in the Patent Act applying extraterritorially, which cannot be done without Congress’s clear intent. This unusual interpretation lacks support from the Supreme Court and severely limits the ability of district courts to make patent infringement victims whole. This article maintains that the Federal Circuit’s reliance on the presumption is misplaced. The presumption was established to prevent U.S. law from applying to extraterritorial conduct; it was not intended to cover situations where harm flows from an act of domestic patent infringement. Moreover, even if the presumption does apply, it has been rebutted under the Supreme Court’s two-step extraterritoriality test. By creating this bright-line rule, the Federal Circuit has unduly restricted the ability of patent holders to recover damages, including in cases where there is no other applicable law. This Article proposes that courts use a more flexible test that balances prescriptive comity concerns with the United State’s interest in making victims of domestic patent infringement whole.

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