Recurring Themes on Reasonable Royalties in Recent IP United States Damage Cases

Wed Jun 01 16:24:38 EDT 2011
By Dr. Elizabeth M. Bailey and Dr. Alan Cox with former NERA economist Gregory Leonard

A source of considerable concern for companies selling products in the United States is the possibility of being sued for patent infringement in a US court. A finding of infringement of a valid US patent can lead to an award of monetary damages, either lost profits or a reasonable royalty, or a combination of the two. Historically, courts often have been willing to permit expert testimony on damages based on methodologies that had little or no rational, scientific, or business basis. However, four recent cases in the US are indicative of the trend toward higher standards for damage calculation: Lucent Technologies, Inc., v. Gateway, Inc. et al., i4i Limited Partnership v. Microsoft Corporation, Cornell University v. Hewlett-Packard Company, and Uniloc USA, Inc. et al. v. Microsoft Corporation. The Cornell case is a lower court case that was presided over by Chief Judge Rader of the CAFC. All the others were decided by panels of the CAFC judges on appeal from lower courts. This NERA paper describes some of the economic themes that have emerged from these cases. The authors note that litigants in patent cases in the US will need to pay attention to the heightened standards for damage awards when formulating their damage cases. Defendants, in particular, may want to address economically unsound damage claims based on the opinions of the CAFC in these four cases.

This paper is also available in simplified Chinese.