The Demise Of Junk Science And The 25% Rule

Wed Jul 28 20:24:38 UTC 2010
By Dr. Alan Cox et al.

Much of the current interest in patent reform appears to arise out of a widely held belief that many awards based on supposedly reasonable royalties have been excessive. This column from Law360 notes that some of these awards have resulted from the use of methods -- including the so-called 25 Percent Rule -- that have no rational, scientific, or business basis but are merely rules-of-thumb applied using ad hoc techniques. Such awards are also wildly unpredictable, unnecessarily increasing business uncertainty and making it difficult for attorneys to advise their clients on litigation and settlement strategies. However, several recent decisions by judges of the US Court of Appeals for the Federal Circuit (such as Cornell v. Hewlett-Packard and Lucent v. Gateway) indicate that courts will increasingly reject these methods, and instead require the use of logical and rigorous business and economic methods in the calculation of royalty rates. To meet the higher standard, the authors advise that courts reject unscientific methods in pretrial rulings on Daubert motions, in verdicts or in post-trial judgments as a matter of law.