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Patentee Overcompensation and the Entire Market Value Rule

Brian J. Love

Santa Clara University School of Law

August 16, 2010

Stanford Law Review, Vol. 60, No. 1, p. 263, 2007

This article studies the "entire market value rule," a U.S. patent law doctrine that, when applied, allows the owner of a component invention to capture the entire value of a larger infringing product that unlawfully incorporates its invention. I argue that the entire market value rule systematically results in the overcompensation of patent owners relative to their inventive contributions to society. First, I examine the current state of entire market value rule case law. I track the doctrine's evolution over time and explain that, from its modest origins, the doctrine has been expanded far beyond the rationales that led to its creation. Second, I present the case for modifying the entire market value rule. I introduce an economic model that demonstrates the doctrine's overcompensating effect and also address the negative consequences that result when patent rights are overvalued. Third, using a hypothetical infringing personal computer system as a case study, I explore how the entire market value rule will likely be applied in future patent litigation involving complex electronic devices. Finally, I suggest patent reform measures to counteract the doctrine's overapplication and the problems caused by the overvaluation of patented inventions.

Number of Pages in PDF File: 33

Keywords: patent law, entire market value rule, patent damages, reasonable royalty

JEL Classification: 034

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Date posted: June 6, 2007 ; Last revised: March 12, 2013

Suggested Citation

Love, Brian J., Patentee Overcompensation and the Entire Market Value Rule (August 16, 2010). Stanford Law Review, Vol. 60, No. 1, p. 263, 2007. Available at SSRN: http://ssrn.com/abstract=991429

Contact Information

Brian J. Love (Contact Author)
Santa Clara University School of Law ( email )
500 El Camino Real
Santa Clara, CA 95053
United States
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