Tax Solutions to Patent Damages
Citation: 26 Tex. Intell. Prop. L. J. 1 (2018)
Jennifer L. Blouin, Melissa F. Wasserman
Blouin: Professor of Accounting, University of Pennsylvania, The Wharton School
Wasserman: Professor of Law, University of Texas School of Law
The calculation of patent damages lies at the epicenter of patent policy, yet it remains one of the most contentious issues in all of intellectual property law. The dominant legal framework equates a reasonable royalty, the most prevalent patent damage award, to a hypothetical negotiation between the parties at the time infringement began. Commentators and courts generally agree that existing comparable patent licenses, which represent arm’s-length transaction between two unrelated private parties that places a monetary value on the patent, are highly probative in determining a reasonable royalty. The lack of publicly available licensing data, however, limits the ability of courts to identity appropriate comparable licenses. In this paper, we argue that there is a large untapped trove of informationon existing patent licensing agreements, many of which are likely more probative to reasonable royalty calculation than currently existing licensing data offered by patent damage experts. This novel source of data is tax-related “transfer prices.”
The Patent Damages Gap: An Economist’s Review of U.S. Statutory Patent Damages Apportionment Rules
Citation: 26 Tex. Intell. Prop. L. J. 31 (2018)
Author: Anne Layne-Farrar
About: Anne Layne-Farrar is a Vice President at Charles River Associates and an Adjunct Professor at Northwestern University School of Law.
Breaking the Georgia-Pacific Habit: A Practical Proposal to Bring Simplicity and Structure to Reasonable Royalty Damages Determinations
Citation: 26 Tex. Intell. Prop. L. J. 51 (2018)
Appendix: Model Jury Instructions for Reasonable Royalty Patent Damages
Author: Hon. Arthur J. Gajarsa, William F. Lee, and A. Douglas Melamed
The Hon. Arthur Gajarsa is a former United States circuit judge on the United States Court of Appeals for the Federal Circuit, and currently is Senior Counsel in the Boston office of WilmerHale LLP. Lee is a partner in the Boston office of WilmerHale LLP and an Eli Golston Lecturer at Harvard Law School. Melamed is Professor of the Practice of Law at Stanford Law School.
In the mid-1990s, the Federal Circuit endorsed the fifteen Georgia-Pacific factors as an appropriate and helpful framework for determining reasonable royalty damages in patent cases. Courts subsequently have applied the Georgia-Pacific factors as the commonly accepted default framework for reasonable royalty damages, and courts often instruct juries to use the fifteen Georgia-Pacific factors as the test for determining reasonable royalty damages.
The time has come to break the Georgia-Pacific habit. Notwithstanding their widespread use, the Georgia-Pacific factors have become outdated and impractical. Indeed, the Georgia-Pacific factors are not, and were never intended to be, a generally applicable framework for determining reasonable royalty damages. In recent years, the Federal Circuit has cautioned that the Georgia-Pacific factors are not a “talisman” for reasonable royalty determinations and has held that it is reversible error to instruct juries on Georgia-Pacific factors that are irrelevant or inconsistent with the evidence of record. There is evidence that the Georgia-Pacific factors not only complicate the damages analysis but also lead to damages awards that systematically overcompensate patent holders. These problems have led to an increased focus on whether the long list of Georgia-Pacific factors is in fact helpful to juries, as well as new proposals to provide a simpler and more coherent framework.
This article provides a proposal to bring simplicity and structure to reasonable royalty determinations through a new framework for damages jury instructions. Courts should replace their reliance on the Georgia-Pacific factors with a more concise and coherent set of principles that will facilitate damages awards based on the true market value of the patent at the time of the hypothetical negotiation.
Beyond Circularity: Licensing for Innovation
Citation: 26 Tex. Intell. Prop. L. J. 113 (2018)
Author: Oskar Liivak
About: Professor of Law, Cornell Law School.
Cost-Plus Patent Damages
Citation: 26 Tex. Intell. Prop. L. J. 133 (2018)
Author: Michael Abramowicz
About: Professor of Law, George Washington University.
Abstract: This Article assesses recent proposals to use risk-adjusted costs of producing an invention as a basis for either setting patent damages or valuing patents taken by eminent domain. In theory, cost-plus damages can address one of the central challenges of patent law: ensuring that a patentee does not obtain excessive rents for an invention. But cost-plus damages have three principal problems. First, risk may be difficult to estimate, and estimates may be infected by hindsight. Second, if the permitted rate of return is too low, there may be insufficient incentives to invent. Indeed, even a rate of return that seems generous for existing companies may discourage entry into the industry. Third, inventors may spend much more on invention, anticipating that these greater expenses will not only increase the chance of success, but also increase the amount that they can charge. This Article assesses recent literature proposing cost-plus patent damages, and it offers a simulation model to assess the magnitude of these problems. It concludes that while these problems are serious, social welfare still might be increased by considering cost-plus damages as a factor in the patent damages calculus.
Adjusting Patent Damages for Nonpatent Incentives
Citation: 26 Tex. Intell. Prop. L. J. 187 (2018)
Author: Lisa Larrimore Ouellette
About: Associate Professor of Law, Stanford Law School.
Nonpatent innovation policies—including direct spending on grants and procurement, innovation prizes, and R&D tax incentives—are a significant part of innovation policy in practice and are attracting growing attention from legal scholars. When market-based patent incentives undervalue certain inventions, innovation is most efficiently incentivized by using these policies as complements, but in some cases, allowing researchers to claim nonpatent incentives in addition to patent rewards results in significant overcompensation. There are a few potential solutions to this reward-stacking problem, including limiting the patentability of inventions that have received significant alternative rewards, or conditioning nonpatent transfers on some relinquishment of patent rights. When the lost patent rewards are far more valuable than the nonpatent incentives, these solutions might be broader than the problem. This symposium contribution presents and evaluates an additional solution: reducing patent damages to account for the nonpatent rewards (including ex ante risk reduction) an invention has already received. Such an approach could improve not only the incentive side of innovation policy, but also the allocation side, by reducing deadweight loss while maintaining incentives to innovate. The ability of patent damages doctrine to help mediate between different bodies of innovation law is a benefit of recent proposals for patent damages reform that has thus far been overlooked.
Should Courts Award Pain and Suffering Damages in Patent Infringement Cases?
Citation: 26 Tex. Intell. Prop. L. J. 215 (2018)
Author: Ronen Avraham
About: Senior Lecturer, University of Texas School of Law.
Distinguishing Damages Paid from Compensation Received: A Thought Experiment
Citation: 26 Tex. Intell. Prop. L. J. 231 (2018)
Author: Peter Lee
About: Professor of Law, UC Davis School of Law.