Patent Semi-Comparables

37 Pages Posted: 9 Apr 2018 Last revised: 28 Apr 2018

See all articles by Colleen V. Chien

Colleen V. Chien

Santa Clara University - School of Law; Stanford University - Management Science & Engineering; Columbia University

C. Eric Schulman

Fish & Richardson

Date Written: March 17, 2018

Abstract

Over the last decade, courts have applied increasingly stringent standards to the evidence used to determine patent damages. While this has reduced the risk of awards untethered to the facts, the current focus on strictly comparable licenses covering technology similar to the patent that resemble one-way, royalty-bearing “hypothetical licenses” specified by law has created its own problems, particularly in the valuation of component patents, many of which are incorporated into a single product. The rejection of what we refer to as “semi-comparables”—licenses that deviate in some significant way from the terms of the hypothetical license—has led to distorted incentives, unpredictability, and the exclusion of many of the ex ante transactions that best reflect the incremental value of the invention. We believe that the wholesale exclusion of such licenses is wrong—the problem is not that certain licenses are insufficiently comparable but that courts need better approaches to properly and flexibly interpret evidence of comparables and semi-comparable licenses. Framed in this way, the solution is not to exclude licenses but instead to apply an inclusive but disciplined approach to reasonable royalty determinations that prioritizes objective evidence of a patent’s incremental value even in the form of traditionally excluded “semi-comparable” transactions like technology (as opposed to “patent”) licenses and sales. Though courts have been reluctant to use semi-comparables because of a lack of objective information about their formation, we begin to address this void, drawing upon the collective wisdom of licensing lawyers we interviewed, the nearly two-decade-long career of one of us as a licensing lawyer, and studies of thousands of actual licenses. When a reasonable, evidence-based estimate or upper bound cannot be derived, we consider the expanded use of tailored injunctions, assuming the other eBay elements are met.

Keywords: patents

Suggested Citation

Chien, Colleen V. and Schulman, Charles Eric, Patent Semi-Comparables (March 17, 2018). 25 Texas Intellectual Property Law Journal 215 (2018); Santa Clara Univ. Legal Studies Research Paper No. 2018-02. Available at SSRN: https://ssrn.com/abstract=3157956

Colleen V. Chien (Contact Author)

Santa Clara University - School of Law ( email )

500 El Camino Real
Santa Clara, CA 95053
United States
408-554-4534 (Phone)
408-554-4426 (Fax)

Stanford University - Management Science & Engineering ( email )

473 Via Ortega
Stanford, CA 94305-9025
United States

HOME PAGE: http://https://sites.google.com/view/colleenchien/

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

Charles Eric Schulman

Fish & Richardson ( email )

Redwood City, CA

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