THE BROKEN BALANCE: HOW "BUILT-IN APPORTIONMENT" AND THE FAILURE TO APPLY DAUBERT HAVE DISTORTED PATENT INFRINGEMENT DAMAGES

Abstract

The United States patent system is designed to be a balance: in exchange for the inventor disclosing their invention to the public, patentees are granted exclusive rights to that invention for a period of time. This ensures that patentees are adequately compensated for their innovation and society at large benefits from the patent's disclosure. This balance is now broken. Over recent years, patentees-particularly non-practicing entities-have been permitted to seek and recover unreasonable damages that stretch far beyond the value of the technology they invented. This has had serious and negative consequences: excessive patent damages discourage innovation, increase risk and cost of production, and, in turn, increase the cost of products to consumers. Patent law has a solution to this broken balance: apportionment. This principle, which dates back to the nineteenth century, holds that damages must be limited to the value of just the patented invention and cannot capture the value of other features or technology. When applied as intended, apportionment ensures the patent balance-patentees recover the value of what they invented but no more. But therein lies the problem: in recent years, many courts have been backsliding from the principle of apportionment. First, some courts have permitted plaintiffs to rely on "built-in apportionment" to bypass apportionment entirely. Second, some courts have failed to properly apply Daubert and Federal Rule of Evidence 702 to exclude unreliable apportionment theories, particularly where experts purport to use regressions or conjoint survey analysis.

Keywords: Intellectual Property, Patents, apportionment, Infringement, Damages