"Inextricably Commingled": A Restitution Perspective in Patent Remedies
Frye, Amanda, Harvard Journal of Law & Technology
TABLE OF CONTENTS I. INTRODUCTION II. RESTITUTION AND ITS ABANDONMENT A. What is Restitution? B. The Historical Development of Patent Remedies C. The Aro Rule Against Disgorgement and the Subsequent Anti-Restitution Regime D. Problems with a Movement Away from Restitution III. HOW A RESTITUTION PERSPECTIVE WOULD WORK A. Using Equitable Factors to Reform Georgia-Pacific B. Lessons from Apple v. Motorola IV. RESTITUTION IN WILLFUL INFRINGEMENT A. In re Seagate and the Current Approach B. Restitution Would Carefully Calibrate Remedies Based on the Infringer's Fault V. PRIMARY ADVANTAGES OF THE RESTITUTION APPROACH A. Increased Fairness Between the Parties B. Abusive Patent Practices VI. Conclusion
Traditional theories of patent damages can be classified as sounding either in restitution or in torts. A restitution approach provides a remedy for the harm of unjust enrichment: the infringer has received, at the expense of the patentee, a benefit to which she was not entitled. The measure of damages under this approach is determined by considering primarily what the infringer unfairly gained. A torts approach provides a remedy for the injury to the patentee. The primary question is what it would take to make the patentee whole, i.e. "had the [i]nfringer not infringed, what would [the] [p]atent [h]older have made?" (1)
Since 1964, courts have evaluated patent remedies squarely from the torts perspective, embracing compensatory damages over disgorgement. The Federal Circuit has stated that the purpose of patent damages is to compensate patentees, not to punish infringers or to disgorge their profits. (2) However, this approach is not necessarily sound from a historical, economic, legal, or policy perspective. (3) Fundamentally, the restitution approach and the torts approach are different ways to address the same question. Both approaches are based on a hypothetical ex ante negotiation between the parties. Because restitution offers different tools for damage calculation, damage calibration in restitution is often more precise.
Disgorgement as the standard remedy is not a viable proposal. This Note argues instead that courts can and should use the tools of restitution, specifically equitable burden shifting and relaxation of burdens of proof, in calculating patent damages, particularly in cases of willful infringement. These tools could clarify the Georgia-Pacific factors (4) for reasonable royalties and calibrate more carefully willful damages. A restitution approach would lead to more predictable, economically sensible damage awards. Part II of the Note provides a brief introduction to restitution and discusses the historical development of patent damages. Part III of the Note outlines how a restitution perspective would work in the context of a reasonable royalty calculation, using Judge Posner's recent opinion in Apple v. Motorola (5) as an illustration. Part IV of the Note describes a restitution approach to willful damages. Finally, Part V sketches the primary advantages of this approach, including its effect on non-practicing entities.
II. RESTITUTION AND ITS ABANDONMENT
A. What is Restitution?
Restitution (6) follows three general principles in calculating what is owed as the result of an unjust enrichment. (7) First, restitution, a doctrine strongly influenced by equity, is concerned with fairness. (8) The court is encouraged to consider the entire situation surrounding the transaction and the relative faults on both sides. (9) For example, when a house is mistakenly built on land that does not belong to the owner who hired the builder, the court will examine whether the builder knew the land was the wrong plot, whether the real owner was aware the house was being built, what opportunity the builder had to remove the house, what damage the builder's trespass may have caused, and how the real owner has actually benefited from the mistake. …