The Misuse of Reasonable Royalty Damages as a Patent Infringement Deterrent
Brian J. Love
Santa Clara University School of Law
March 11, 2009
Missouri Law Review, Vol. 74, p. 909, 2009
This Article studies the Federal Circuit's use of excessive reasonable royalty awards as a patent infringement deterrent. I argue against this practice, explaining that properly viewed in context of the patent system as a whole, distorting the reasonable royalty measure of damages is an unnecessary and ineffective means of ensuring an optimal level of reward for inventors and deterrence for infringers. First, I introduce cases in which the Federal Circuit and other courts following its lead have awarded punitive reasonable royalty awards and explain the Federal Circuit's professed rationale for doing so. Next, I demonstrate that this practice makes little sense, given the number of other powerful deterrents already present in the patent system. I also explain that any additional deterrence-related benefits attributable to excess damages are not realized when courts impose those damages against innocent infringers-a group that likely makes up the lion share of patent infringers. I further explain that there is good reason to believe that the patent system already over-deters infringement without the added burden of inflated royalties, because accused infringers participating in a competitive market face strong incentives not to challenge patents asserted against them. Finally, I propose several patent reforms for efficiently deterring deliberate copyists, while sparing innocent infringers from that threat.
Number of Pages in PDF File: 40
Keywords: patent law, reasonable royalty, willful infringement, patent holdup, independent invention
JEL Classification: 034Accepted Paper Series
Date posted: March 14, 2009 ; Last revised: April 9, 2011
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