Damages for Unlicensed Use

Abstract

This article investigates the distinction between breach of license and infringement of property rights, and how damages ought to be measured for each. It identifies two remedial puzzles. First, under current law the line between breach of a license contract and infringement of a property right is murky, and thus minor differences between violations could lead to major differences in damage measures. Second, damages for infringement are augmented in a subtle but distortive way, by giving owners an option to choose between the greater of two computation measures, each based on different information. The article argues that these existing remedial patterns are not justified. If provides an alternative framework for determining whether a violation is breach or infringement. In a nutshell, violations involving activities that an owner would want to license in a separate transaction, or not to license at all, should be regarded as infringements and sanctioned more severely.