Academic journal article The Review of Litigation

Discretion in Patent Damages

Academic journal article The Review of Litigation

Discretion in Patent Damages

Article excerpt

ABSTRACT...................287

INTRODUCTION...................289

I. THE BASIC FRAMEWORK FOR PATENT DAMAGES..............293

II. DISCRETION IN SYSTEM DESIGN...................294

A. Defining the Nature of Relevant Discretion.............294

1. Authoritative Discretion................294

2. Designing Authoritative Discretion.................297

B. Costs and Benefits of Discretion in System Design...........300

C. Analyzing Schema for Discretion.............303

D. Evolving Limits on Judicial Discretion..............306

III. Optimizing Discretion for Patent Damages.............307

A. Recent Pushes to Limit or Liberate Discretion............307

1. Congressional Proposals to Limit Discretion..............308

2. Federal Circuit Moves to Limit District Court Discretion.................310

3. Supreme Court Countermoves....................313

B. Designing and Guiding Discretion in Patent Damages............. 315

1. Understood Purposes of Monetary Awards in Patent Law...................... 315

2. Congressional Delegation of Discretion to the Judiciary .................. 317

3. Trial-Court Discretion in Awarding Patent Damages ................. 319

4. The Question of Federal Circuit Discretion.............. 323

Conclusion............... 324

INTRODUCTION

In human institutions and organizations, delegation of decision-making discretion has long been a strategy for responding to concerns about information costs and contingency. Such concerns tend to be particularly high in the context of intellectual property, which focuses on a goal of promoting innovation that naturally entails problems of uncertainty and incommensurability. In the United States, recent and ongoing disputes over patent damages provide a striking example of these issues. Courts struggle to assess how much compensation is appropriate for violating a patentee's "right to exclude," particularly when the patent in question covers only a facially small portion of an overall product or process. In addressing key questions relating to such assessments, including the admissibility and sufficiency of evidence and the propriety of enhanced damages, trial judges wield great discretion. More generally, by providing only relatively bare statutory instructions on monetary remedies, Congress has effectively given the judiciary as a whole great discretion in administering these awards.

The role of discretion in patent damages has been salient both in legislative reform efforts and in interchanges between the United States Supreme Court and the United States Court of Appeals for the Federal Circuit, the circuit court that hears nearly all appeals in patent cases.1 Awards of enhanced damages and of attorney fees are both considered forms of patent "damages" for purposes of this Article, and, for both, the Supreme Court has recently obliterated legal rules developed by the Federal Circuit that significantly limited trial court discretion.2 Here, as elsewhere in patent law, the Supreme Court has pushed significant amounts of discretion back to trial judges, a move predictably leading to questions about whether any resulting increases in legal uncertainty or inconsistency are justified by gains that such discretion promises.3 Meanwhile, the Federal Circuit has made recent and as-yet unrebuffed moves to limit trial court discretion in awarding reasonable royalty damages: the Federal Circuit has overturned some awards as excessive, provided new instruction or limits on approaches to establishing monetary remedies, and generally placed more pressure on district judges to act as vigilant gatekeepers for expert testimony.4 Congress itself has considered adopting statutory provisions designed to limit judicial discretion with respect to reasonable royalty damages, although congressional action on this front has repeatedly stalled.5

This Article examines recent developments with respect to discretion in the awarding of patent damages and connects questions about discretion in patent damages to a more general body of literature. …

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