On the 'Smallest Saleable Patent Practicing Unit' Doctrine: An Economic and Public Policy Analysis

33 Pages Posted: 21 Apr 2016

See all articles by Edward Sherry

Edward Sherry

Independent

David Teece

Institute for Business Innovation

Date Written: January 20, 2016

Abstract

We discuss the recently developed court-originated legal doctrine that patent infringement damages should use as the damages base the selling price of the “smallest saleable patent practicing unit” (SSPPU). The doctrine appears to have been motivated by concerns that using a broader damages base risks overcompensating patent holders by basing damages on product features the patent holder did not invent. We note that very few real-world licenses use the SSPPU as the royalty base. We discuss a number of conceptual and pragmatic problems with the SSPPU doctrine, including concerns about the fact that the SSPPU may be a component that accounts for only a small fraction of the value of the overall infringing product. In a recent controversial change to its IP policy, the IEEE-SA recently endorsed basing royalties for standards-essential patents on the “smallest saleable compliant Implementation” of the relevant IEEE-SA standard. The most recent appellate court decision on the subject has rejected a categorical rule requiring the use of the SSPPU.

Keywords: patents, licensing, damages, SSPPU

JEL Classification: D23, K11

Suggested Citation

Sherry, Edward and Teece, David J., On the 'Smallest Saleable Patent Practicing Unit' Doctrine: An Economic and Public Policy Analysis (January 20, 2016). Available at SSRN: https://ssrn.com/abstract=2764614 or http://dx.doi.org/10.2139/ssrn.2764614

Edward Sherry (Contact Author)

Independent ( email )

No Address Available

David J. Teece

Institute for Business Innovation ( email )

F402 Haas School of Business, #1930
Berkeley, CA 94720-1930
United States
(510) 642-4041 (Phone)

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