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The Misuse of Reasonable Royalty Damages as a Patent Infringement Deterrent

40 Pages Posted: 14 Mar 2009 Last revised: 9 Apr 2011

Brian J. Love

Santa Clara University School of Law

Date Written: March 11, 2009

Abstract

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.

Keywords: patent law, reasonable royalty, willful infringement, patent holdup, independent invention

JEL Classification: 034

Suggested Citation

Love, Brian J., The Misuse of Reasonable Royalty Damages as a Patent Infringement Deterrent (March 11, 2009). Missouri Law Review, Vol. 74, p. 909, 2009. Available at SSRN: https://ssrn.com/abstract=1359049

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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