Formalism and Pragmatism in the Analysis of Damages for Indirect Patent Infringement

Abstract:     
In many patent infringement cases, the only practical way that the plaintiff can obtain relief is on a theory of secondary liability, which is generally referred to as indirect infringement. The remedy in patent cases frequently includes damages for past infringement. Because jury verdicts in patent cases can amount to hundreds of millions of dollars, patent damages have become a hotly litigated issue. Nevertheless, much to the frustration of the litigants in these high-stakes lawsuits, the courts still struggle to clarify how patent damages should be determined in indirect infringement cases.

The Court of Appeals of the Federal Circuit (Federal Circuit), which has exclusive appellate jurisdiction over patent cases, has deepened the confusion over calculating damages. Two recent opinions from the Federal Circuit have made contradictory pronouncements on the issue of accounting for proven acts of primary (i.e., direct) infringement in determining damages for indirect infringement. Lucent Technologies v. Gateway held that the extent of directly infringing use of the patent should be viewed as one of many pieces of evidence for measuring the extent of damages (“the evidentiary approach”). In contrast, Cardiac Pacemakers v. St. Jude Medical endorsed a rule that enables trial judges to limit damages as a matter of law to proven, enumerated acts of direct infringement of the asserted patents (“the atomistic approach”).

The conflict between the two approaches raises fundamental, unanswered questions concerning the relationship between patent infringement and general tort law. This Article fills a gap in the literature by identifying, and working toward unraveling, one of the puzzles of indirect infringement. Specifically, it examines what the legal fiction of formally imputing an act of one entity to another — an important tenet of secondary liability in tort — means for patent damages. The answer is surprising: the atomistic approach is consistent with the principles of tort law, but is utterly at odds with well-established, general rules for determining patent damages. Conversely, the evidentiary approach seems to ignore tort law’s imputation principle and embodies the pragmatic, patent-specific damages rules that the atomistic approach eschews. The Article resolves the tension in favor of the evidentiary approach and explains that considerations of policy, logic, and precedent support a damages analysis that reflects key differences between patent law and tort law.

Number of Pages in PDF File: 59

Keywords: damages, indirect infringement, reasonable royalty

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