25 Percent, 50 Percent...What's In A Number?

21 June 2011
By Dr. Christine Siegwarth Meyer and Dr. David Blackburn

The United States Court of Appeals for the Federal Circuit's (CAFC) recent ruling in Uniloc USA, Inc. v. Microsoft Corp. ("Uniloc") marked an important change in patent infringement litigation. The CAFC ruling unequivocally rejected use of the long-standing 25-percent rule in determining reasonable royalty patent damages, calling it "a fundamentally flawed tool" in patent damages calculations, a view long advocated by NERA economists. However, one  question that the Uniloc case has raised in the context of patent damages is whether another oft-used percentage -- namely the midpoint in the bargaining range of a hypothetical negotiation -- is subject to the same critique as was successfully leveled at the 25-percent rule. In this article from Law360, NERA Senior Vice President Dr. Christine Siegwarth Meyer and Vice President Dr. David Blackburn argue that the answer to that question is a resounding "no." While care must be used in its application, the consideration of the midpoint of a bargaining range is a useful paradigm, rooted in rigorous, well-established economic theory and -- in marked contrast to the 25-percent rule -- directly tied to the facts of the case.