Academic journal article Harvard Journal of Law & Technology

Reasonable Certainty in Contract and Patent Damages

Academic journal article Harvard Journal of Law & Technology

Reasonable Certainty in Contract and Patent Damages

Article excerpt

TABLE OF CONTENTS    I. INTRODUCTION                                          257  II. PATENT DAMAGES AND PATENT COMMUNITY DISCONTENT        259      A. The Basic Remedies Framework                       259      B. Recent Developments in Patent Remedies Law         260      C. Continuing Concerns with Damages Valuation         263 III. UNCERTAIN DAMAGES IN CONTRACT LAW                     266      A. The Reasonable Certainty Standard                  267      B. The Equity and Pragmatics of Reasonable Certainty  271  IV. REASONABLE CERTAINTY FOR REASONABLE ROYALTIES         273   V. CONCLUSION                                            277 

I. INTRODUCTION

Assessment of "reasonable royalty" damages for patent infringement has become a leading issue in the substance and procedure of modern patent law. (1) Occasional jury verdicts of several hundred million dollars or more have brought cries for reform. (2) On a more day-today basis, judges, attorneys, and damages experts grapple with questions of what methodologies and evidence are acceptable to support reasonable royalty awards in individual cases. (3)

This Article contends that private law decisions and doctrines can provide inspiration for judges' efforts to regulate reasonable royalty awards in patent cases. In particular, the Article focuses on how contract law's demand for "reasonable certainty" with respect to damages can offer instruction on how courts might flexibly regulate proof of reasonable royalties. The basic contention is that, in both situations, a standard of reasonableness of proof allows courts, in addressing the admissibility or sufficiency of evidence, to take into account context-specific factors not currently highlighted by the standard Georgia-Pacific factors for assessing reasonable royalty damages in patent cases. (4) Such context-specific factors include the size of claimed damages amounts, the relative innocence or blameworthiness of the parties, and the potential availability or non-availability of better methods or evidence for developing a damages calculus. Attention to these context-specific factors can enable courts to tailor their approaches to determining the sufficiency or admissibility of evidence on reasonable royalty awards in ways that support proper ex ante incentives to innovate and to patent, deter opportunistic behavior by infringers and patentees, and encourage use of the best techniques and evidence for assessing damages that are justifiable in light of their cost.

The Article proceeds as follows. Part II provides a primer on patent remedies law and continuing concerns with the calculation of reasonable royalty damages. Part III discusses how contract law has used a "reasonable certainty" requirement as a flexible and context-sensitive mechanism for regulating damages awards that can, in general, be only imprecisely assessed. Part IV describes how patent law might incorporate and implement a similar reasonableness requirement to regulate the availability and amount of reasonable royalty damages.

II. PATENT DAMAGES AND PATENT COMMUNITY DISCONTENT

Reasonable royalty damages are one of the fundamental forms of remedies for patent infringement explicitly made available by the U.S. Patent Act. (5) This Part highlights key aspects of patent remedies doctrine as well as recent doctrinal developments and continuing concerns.

A. The Basic Remedies Framework

Reasonable royalty damages are a sort of residual remedy under the U.S. Patent Act. In a series of statutory sections, the Act provides that, as remedies for patent infringement, patent holders may obtain injunctions to prevent infringement, (6) damages awards, (7) enhanced damages increasing a damages award up to three times the amount otherwise assessed, (8) and "in exceptional cases... reasonable attorney fees." (9) The Act's section on damages explicitly presents reasonable royalty damages as a remedial floor that becomes effective when proof of greater damages fails. …

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