The Economics of the Entire Market Value Rule: As Applied to Complex Products
24 Pages Posted: 18 Nov 2011
Date Written: November 17, 2011
This paper focuses on the implications for royalty determination of the latest expression of the Entire Market Value Rule (EMVR) and its usefulness in guiding damage estimation in the context of complex products whose components are protected by intellectual property rights. We provide a model of royalty estimation that reveals a conceptual disconnect between the objectives of the contemporary EMVR (e.g. as expressed in Uniloc v. Microsoft) and the patents that have been and likely will be subjected to the Rule. It is our view that the guidance of the latest court opinions, in identifying the appropriate royalty base, is misdirected. By not taking sufficient account of economic relationships between components of complex products, these opinions make adherence to the Court’s guidance in estimating reasonable royalties problematic and risk discouraging innovation.
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