Patent Damages: Working with Limits

By Golden, John M. | The Review of Litigation, January 1, 2017 | Go to article overview

Patent Damages: Working with Limits


Golden, John M., The Review of Litigation


Since the start of the twenty-first century, the United States patent system has been under intense scrutiny.1 Prominent representatives of whole industry sectors, including business leaders in information and communications technology, have clamored that the system is in many ways impeding innovation, rather than promoting it.2 The resulting drumbeat for reform has yielded steady results but also much turbulence. The Supreme Court has repeatedly overturned holdings or policies of the Court of Appeals for the Federal Circuit or the Patent and Trademark Office (PTO).3 Congress has rewritten substantial portions of the Patent Act and has added whole new forms of administrative proceedings.4 The Federal Circuit itself has revisited and rethought various aspects of precedent or accepted practice.5

Debates over patent damages, especially damages according to a reasonable royalty measure, have frequently lain at the center of this storm.6 As indicated by the symposium articles described below, such damages debates broach fundamental questions about the patent system's aims, the proper extent of the system's reach, and the best means for improving system performance. On a practical level, patent damages debates demand attention to sometimes fine points of procedure and call for imaginative ways of improving adjudication.

In many ways, the fierceness and persistence of debates relating to patent damages is predictable. Relevant points of tension reflect the often uncomfortably restrictive limits against which the patent system naturally strains. These limits include (1) limits to theoretical agreement on substantive goals and implementing methodologies; (2) limits to the information available to apply theory correctly even if theoretical agreement is assumed; (3) limits to the abilities of courts and other decision-makers to assess liability or monetary awards properly based on whatever facts and theories apply; and (4) limits on the territorial and subject-matter reach of patent law that can lead to questionable gaps in coverage or discontinuities in results.

To advance conversations about how to proceed in the face of such limits, the University of Texas School of Law hosted a conference on patent damages ("PatDaml") in June of 2016.7 A gift to the School of Law from Intel Corporation supported the conference as well as the offering of honoraria to authors of conference papers. At the same time, control over agenda and speakers for the conference was left wholly within the law school's discretion. The conference featured three separate panels of trial judges, damages experts, and in-house counsel. The conference also featured sessions for the discussion of draft papers to be published as articles in three separate issues of The Review of Litigation and the Texas Intellectual Property Law Journal. The journal issue in which this Foreword appears presents four of those articles.

The twelve articles prepared in association with PatDaml address a variety of issues related to patent damages via a mix of scholarly approaches. Through a series of one-paragraph descriptions, this Foreword highlights aspects of the individual papers. The Foreword concludes with a brief discussion of common threads.

In Patent Damages Heuristics,8 Thomas Cotter argues for addressing the limited fact-finding and decision-making capacities of courts by having them make more conscious and thoughtful use of heuristics-i.e., "shortcuts or 'rules of thumb' for reducing the time and effort needed to reach a solution or decision."9 Cotter starts with the proposition that policymakers should use a "proposed heuristic when the sum of the administrative and error costs associated with its use is lower than the sum of the administrative and error costs resulting from" any competing alternative.10 Cotter then discusses how to weigh error costs versus administrability savings in selecting appropriate heuristics.11 He also develops a taxonomy for different types of heuristics in assessing patent damages, including heuristics for determining patentee eligibility for a particular form of damages, for providing a more readily calculated proxy for the amount of damages to which a patentee is theoretically entitled, and for informing more granular aspects of calculational methodology. …

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