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