Brief Amici Curiae of Fifteen Professors of Intellectual Property Law in Carnegie Mellon Univ. v. Marvell Tech. Grp., Ltd., No. 14-1492 (Fed. Cir.)
31 Pages Posted: 13 Aug 2014
Date Written: August 11, 2014
The vast majority of the damages awarded in this case — at least three-quarters of the roughly $1.17 billion pre-enhancement total — is a reasonable royalty for the use of chips that were neither manufactured in nor imported into the U.S. Under long-standing precedent, extraterritorial actions fall outside the scope of conduct that constitutes patent infringement under U.S. law. Nonetheless, the district court permitted Carnegie Mellon University to recover damages incorporating the value of chips in hard drives that were manufactured, bought, and used outside the U.S. because Marvell’s chip design and marketing activities took place in the U.S.
Affirming the damages award on that theory will effectively eliminate the long-standing prohibition on recovering damages under the U.S. Patent Act for extraterritorial patent infringement. Virtually all technology companies designing a new product produce a small number of prototypes, demonstrate those prototypes to potential customers, and tweak their designs based on customer feedback — often over the course of months or years in a lengthy iterative process indistinguishable from Marvell’s so-called “sales cycle.” A holding from this Court that such conduct is sufficient to draw worldwide sales into the ambit of U.S. patent litigation will effectively render the extraterritoriality rule a dead letter.
Moreover, limiting damages in this case to only those chips made, used, or sold in the U.S. will not create a disincentive to invention. A patentholder in CMU’s shoes could have sought and enforced foreign patent rights to protect its invention from foreign actions like Marvell’s without the need for a new, disruptive theory of U.S. patent damages. To the contrary, affirming the district court’s view of the scope of infringement damages will often over-reward inventors and thereby reduce overall incentives to innovate. By transforming every U.S. patent into a de facto worldwide patent right, the damages principles approved below undermine the territorial sovereignty of patent law and will routinely lead to overcompensation. Those principles permit U.S. patentees to evade more restrictive patent regimes enacted in foreign nations: inventors who never obtained foreign patent rights could nonetheless seek damages in U.S. courts for products made, used, and sold abroad. In addition, if left in place, the damages ruling below may allow inventors who do obtain both U.S. and foreign patent rights to recover damages twice for the very same conduct: once by asserting U.S. patent rights against domestic uses to recover a royalty reflecting the value of all uses worldwide, and again by asserting foreign patent rights in foreign nations where the patented technology was principally used. Drastically increasing the amounts at stake in U.S. patent suits — which at present levels are already the source of considerable criticism — threatens to upset the patent system’s delicate balance of adequately rewarding innovators of the past without handcuffing the innovators of today.
Keywords: patent infringement damages, extraterritorial, international, overcompensation, double-recovery
JEL Classification: O34, K41
Suggested Citation: Suggested Citation