1. William F. Lee and Mark A. Lemley have published The Broken Balance: How Built-In Apportionment and the Failure to Apply Daubert Have Distorted Patent Infringement Damages, 37 Harv. J.L. & Tech. 255 (2024). Here is a link, and here is the abstract:
The United States patent system is designed to be a balance: in exchange for the inventor disclosing their invention to the public, patentees are granted exclusive rights to that invention for a period of time. This ensures that patentees are adequately compensated for their innovation and society at large benefits from the patent’s disclosure. This balance is now broken. Over recent years, patentees — particularly non-practicing entities — have been permitted to seek and recover unreasonable damages that stretch far beyond the value of the technology they invented. This has had serious and negative consequences: excessive patent damages discourage innovation, increase risk and cost of production, and, in turn, increase the cost of products to consumers.
Patent law has a solution to this broken balance: apportionment. This principle, which dates back to the nineteenth century, holds that damages must be limited to the value of just the patented invention and cannot capture the value of other features or technology. When applied as intended, apportionment ensures the patent balance — patentees recover the value of what they invented but no more. But therein lies the problem: in recent years, many courts have been backsliding from the principle of apportionment. First, some courts have permitted plaintiffs to rely on “built-in apportionment” to bypass apportionment entirely. Second, some courts have failed to properly apply Daubert and Federal Rule of Evidence 702 to exclude unreliable apportionment theories, particularly where experts purport to use regressions or conjoint survey analysis.
The Federal Circuit and district courts should take action to correct the skewed balance caused by improper application of apportionment law. The Federal Circuit should end the “built-in apportionment” exception to apportionment and district courts should do the hard work at the Daubert stage of ensuring that apportionment is effective and reliable. Inventors, businesses, and the balance upon which the patent system was built depend on it.
I previously read the paper in draft, and noted it on this blog here.
2. Maria Teresa Bartalena has published an article titled Reasonable Royalty Damages Across Different Countries and Through a Law and Economics Lens, 2 J. Law, Market & Innovation 59 (2023). Here is a link to the paper, and here is the abstract:
In most legal systems, a reasonable royalty represents the minimum compensation for patent infringement litigation, and it is undoubtedly the most used among the remedies at the courts’ disposal. Therefore, its calculation is crucial in the intellectual property field and, more specifically, within the function of liability in this context to incentivise investments in R&D and promote innovation.
Nonetheless, some differences can be found between the methods used to calculate reasonable royalty awards in two largely developed countries, ie in the U.S., where judges are deemed to consider only the parties’ ex ante information and in Germany, where ex post considerations are involved in calculation. This article intends to analyse how these different approaches can affect investments in the field of technology and innovation. In this process, German and U.S. case law will be primarily investigated, but some references will also be taken from Chinese experience, a legal system for some aspects similar to civil law ones and in which patent infringement disputes are solved by specialised judges, such as in Germany, whose set of remedies, nonetheless, has been recently modified to include a measure that resembles much the treble or punitive damages of the U.S. Code.
3. John Turner has posted a paper on ssrn titled Welfare-Optimal Rewards and Royalties for a Full Stack of Standard-Essential Patents. Here is a link, and here is the abstract:
This paper studies the problem of determining the optimal size and structure of royalties for a full stack of standard-essential patents (SEPs). Conditioning on a full stack sidesteps many complicated and contested issues that typically arise when determining fair, reasonable and non-discriminatory (FRAND) royalties for SEPs. This focuses attention on an important question-what should be the total cost of licensing SEPs for a particular standard to incentivize both standard development and adoption? To study this problem, I adapt a workhorse general equilibrium model to capture the behavior of firms that invent and implement new technology standards, and derive the welfare-optimizing level and structure of royalty-based rewards for the full stack. This model shows that a new standard can emerge and yield higher welfare as long as the reward satisfies two "guardrail" conditions. As a fraction of income spent on standard-compliant goods, the reward: (1) must exceed the unrecovered invention cost margin; and (2) must be less than the welfare contribution margin of the standardized technology. If the first condition does not hold, invention of standardized technology is unprofitable; if the second does not hold, product variety and/or output per variety is so low that welfare would not improve. Multiple reward structures can optimize economic welfare. With an optimal reward structure, a one-percentage-point increase in reward size decreases product variety by one percentage point.
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