Principles for Patent Remedies

Article excerpt

Once a joint domain of inertia and arcana, questions about remedies for patent infringement now generate heated public debate. A recent Supreme Court decision has spawned conflicting answers from courts and commentators about when courts should issue injunctions forbidding continued infringement. On Capitol Hill, Orwellian-named entities representing a variety of industry heavyweights have poured millions into lobbying for or against patent reform bills, with a major focus of dispute being legislative language regarding damage awards.

Amidst all the commotion, one fact remains clear. We have little specific sense of what the value of patent remedies either generally is or should be. Such ignorance might inspire despair. I argue that it in fact suggests that policy making should take guidance from three principles of adaptation and two principles of implementation: (1) nonabsolutism in the formulation and application of legal doctrine; (2) antidiscrimination with respect to business models; (3) learning, an interest in fostering the production of useful information; (4) administrability; and (5) devolution of significant decisional responsibility to private or government actors nearest to the facts of an individual case. Although these principles do not uniquely determine any single best system of patent remedies, they provide a framework for assessing the relative merits of policy proposals and for suggesting ways in which proposals can be improved. In particular, the principles have implications for current debates regarding the availability of permanent injunctions, the calculation of reasonable-royalty damages, and the possibility of remedial exemptions for prior users or independent creators.

I. Introduction

The prospect of an injunction-induced blackout of handheld e-mail,1 a jury verdict awarding over a billion dollars in damages2 - these are two of the specters that have haunted current policy discussions regarding U.S. patent law. Once a joint domain of inertia and arcana, questions of patent remedies now generate heated public debate. The 2006 decision of the U.S. Supreme Court in eBay Inc. v. MercExchange, L.L.C? has spawned conflicting answers from lower courts4 and academic commentators5 regarding how to decide when injunctions should issue. Eye-catching nine-figure damage awards6 stoke calls for changes to the law of patent damages. On Capitol Hill, Orwellian-named entities grouped along industry lines, such as the Coalition for Patent Fairness7 and the Coalition for 21st Century Patent Reform,8 have already poured millions9 into lobbying to advance or to thwart proposed legislation in which patent damages has been a major bone of contention.10

In legislative debates, public-choice concerns loom large, as proposed reforms appear commonly to track private, rather than necessarily public, interests." Perhaps most saliently, information-technology incumbents such as Microsoft Corporation and Intel Corporation have pushed strongly for rules to limit the reasonable-royalty damages available to nonincumbent patent holders while leaving untouched the lost-profit remedies available to incumbents.12

Amidst all the resulting commotion, one fact seems clear. We really have little specific sense of what the value of remedies for patent infringement generally is or should be. And it seems unlikely that we will develop a precise idea anytime soon.

Until just a few years ago, decision makers tended to skate around this chasm of ignorance, trusting that the availability of injunctive relief against infringement would foster private arrangements that bridged the gap.13 In accordance with this faith, even a patent skeptic such as Justice Douglas accepted the proposition that a "patent empowers the owner to exact royalties as high as he can negotiate with the leverage ofthat monopoly."14

With a patentee's ability to invoke the leverage of an injunction now in doubt, the hunt for a satisfactory remedial system is likely to be a long one. …