Monday, January 9, 2017

Some New Papers on Remedies

1.  Jorge Contreras and Michael Eixenberger have posted a paper on ssrn titled Model Jury Instructions for Reasonable Royalty Patent Damages, 57 Jurimetrics J. __ (forthcoming 2017).  Here is a link to the paper, and here is the abstract:
Consistent, accurate and understandable jury instructions are critical to the determination of damages in patent cases. In January 2016 the Federal Circuit Bar Association (“FCBA”) amended its popular model jury instructions. Among other things, the 2016 amendments substantially reframed the instructions regarding the calculation of reasonable royalty damages in patent cases, replacing the fifteen “Georgia-Pacific” factors with a streamlined set of three factors emphasizing the value contribution of the patented technology to the overall product and comparable license agreements. This Essay discusses the history and implications of the FCBA instruction change for reasonable royalty damages. It assesses the adherence of the reformulated damages analysis to the Federal Circuit’s rulings regarding damages calculations in Ericsson v. D-Link and other recent case law, and compares the FCBA instruction with corresponding instructions developed by the American Intellectual Property Law Association (“AIPLA”) and the Northern District of California. We also present new empirical data regarding the use and adoption of model jury instructions in cases in which reasonable royalty damages are adjudicated. We find that a wide variety of instructions are used, partially defeating the goals of consistency and efficiency that model instructions seek to achieve. We conclude by recommending that the Federal Circuit endorse a single set of model jury instructions for patent cases, and that it consider the new FCBA instructions for this purpose. We also urge the FCBA and other organizations developing model jury instructions to continue to emphasize the traditional incremental value approach to patent valuation, and to develop additional jury instructions addressing issues raised by standards-essential patents.
This is a very interesting paper, and it makes what appear to me to be some sensible recommendations. 

2.  Timothy Holbrook has posted a paper on ssrn titled Boundaries, Extraterritoriality, and Patent Infringement Damages, 92 Notre Dame Law Review __ (forthcoming 2017).  Here is a link to the paper, and here is the abstract: 
Patents are generally considered to be the most territorial of all the various forms of intellectual property. Even patent law, however, has confronted issues of applying a U.S. patent to extraterritorial activity. The approach by the US Court of Appeals for the Federal Circuit has been, at best, inconsistent. At times the court has afforded extraterritorial protection, even in the face of strong territorial language in the patent statute itself. At other times, however, it has approached the issue of extraterritoriality more restrictively, even when the statute itself expressly contemplates the regulation of activities outside of the United States. This dynamic has been addressed by myself and other scholars.
More recently, however, the Federal Circuit has addressed the issue of patent damages for extraterritorial activities. These scenarios have arisen because there necessarily has been an act of domestic patent infringement. The damages theory advocated by the patent holder, however, has attempted to ensnare overseas sales, either under a lost profits or reasonable royalty theory. Additionally, the Federal Circuit has begun to address the appropriate scope of damages for infringement under § 271(f) of the Patent Act, a provision that defines infringement as the exportation of all of the components of an invention, or a single component with no substantial non-infringing use, where it is to be assembled abroad. Necessarily, this provision contemplates the regulation of foreign markets through the domestic hook of acts of exportation. The Federal Circuit, nevertheless, rejected the patentee’s requested remedy in this case.
This Article turns to the issue of the extraterritorial reach of patent damages. It suggests that the Federal Circuit’s approach is lacks nuance to account for the particular economic and legal circumstances that differentiates the different infringement provisions at stake. It draws on earlier work where I advocated for a conflicts-based approach to extraterritorial application of U.S. patents and extends that work to these scenarios, offering a more balanced approach to assessing whether damages are appropriate in these circumstances.
Finally, the article explores whether the various damages theories involved in these cases, regardless of the territorial limits, suggests it is time to revisit the foreseeability/proximate cause aspect of Rite-Hite. The theories of damages seem quite far removed from the actual acts of infringement, even if they occurred within the United States. Some scholars have begun work on this enterprise, and these cases suggest such consideration is ripe. 
3.  Bert Huang has published a paper titled The Equipoise Effect, 116 Columbia Law Review 1595 (2016).  Here is a link to the paper, and here is the abstract:
This Essay explores an overlooked way to use the remedy of disgorgement in torts, contracts, and regulation. It begins with a reminder that disgorging net gains does not force the liable actor to take a loss; by definition, it allows him to break even. As a matter of incentives, it places him in a sort of equipoise. This equipoise effect has a logical upshot that might seem counterintuitive: Substituting disgorgement for any other remedy, part of the time, can emulate the incentive effect of using that other remedy all of the time.
In theory, then, courts or regulators can sometimes substitute disgorgement for compensatory or expectation damages without undoing the benefits of harm internalization. This flexibility may prove especially useful in contexts where harm can be hard to measure. The accuracy of such emulation will depend on certain ideal conditions, however, and circumstances such as information costs will affect whether the approach is feasible and attractive.
The paper makes some interesting theoretical points, and some of the author's examples are based on patent and copyright cases.  On the deterrence point, though, if (as is widely believed) most patent infringement these days is inadvertent, I'd be concerned that the disgorgement remedy risks significant overdeterrence.  On the other hand, if we limit the disgorgement option to cases of intentional or advertent infringement (assuming we can define what that means, and in a way that can be readily administered) it might make sense to consider disgorgement in some cases--though if it were to be as an alternative to compensatory damages (reasonable royalties) in cases where the latter are hard to estimate, I wonder if patentees would have an incentive to overestimate the difficulty of calculating royalties . . . 

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