Enhanced Ongoing Royalties: The (Sometimes) Inequitable Equitable Remedy

Abstract

Since the Supreme Court’s 2006 decision in eBay v. MercExchange, courts in patent infringement cases have haphazardly assessed ongoing royalties after denying injunctive relief. Some courts have concluded that ongoing royalties should be set at compensatory levels, and others have set ongoing royalties at supracompensatory levels. In large part, this inconsistency stems from courts’ failures to evaluate traditional remedial principles, resulting in a disagreement about whether ongoing royalties should account for the defendant’s switching costs or the willfulness of the defendant’s future infringement.

This article attempts to answer these questions. In doing so, it first examines the reasons that courts typically deny injunctive relief, looking to cases both in patent law and in other property contexts. It suggests that, in many cases, concerns for patentee opportunism underlie the denial of injunctive relief. The article then evaluates courts’ reasons for preferring ongoing royalties over other solutions, such as lump-sum damages or leaving the patentee to file another lawsuit after the defendant’s future infringement. Using insights gleaned from these rationales, this article argues that switching cost considerations and willfulness enhancements are usually improper components of an ongoing royalty, especially where opportunism concerns prompt the denial of the injunction.

Keywords: Ongoing royalty, royalties, patent, ebay, injunction, intellectual property