Groundhog Day: Recurring Themes on Reasonable Royalties in Recent IP Damage Cases

Mon Dec 07 15:24:38 EST 2009
By Dr. Elizabeth M. Bailey and Dr. Alan Cox with former NERA economist Dr. Gregory K. Leonard

Judges of the Court of Appeals for the Federal Circuit are giving increased scrutiny and guidance on the standards used for calculating reasonable royalty damage awards in patent matters. This appears to be in response to the widely-held perception that district courts, in awarding damages, have tolerated the use of methodologies that are not based upon sound economic and business principles and are unscientific. Three cases are indicative of the trend toward higher standards for damage calculation: Lucent Technologies, Inc. v. Gateway, Inc., i4i Limited Partnership v. Microsoft Corp., and Cornell University v. Hewlett-Packard Co. The latter case is a district court case that was presided over by Judge Randall Rader and is currently up on appeal. This note describes some of the economic themes that emerge from these cases. Litigants in patent cases will need to consider the heightened standards for damage awards when formulating their damage cases.