Let the Games Begin: Incentives to Innovation in the New Economy of Intellectual Property Law

Abstract

A number of settlements and jury awards in the past several years have generated widely disparate, and sometimes breathtakingly high, awards in patent infringement cases. At the same time, courts have failed to provide consistent and concrete standards for valuing an infringer's use of an invention. This state of affairs has caused patent litigation to bear a troubling resemblance to a Las Vegas casino. Perhaps unsurprisingly, a secondary market for patents has developed that seeks to turn patents into profit centers. Specifically, entities have been created to acquire patents in order to assert them in the hopes of obtaining a large monetary award or settlement.

In an effort to more accurately align legal standards with the value of the use of a patented invention, Congress has proposed legislation that would require fact-finders to apportion the value of the patent against the infringer's own contribution to the accused infringing product. Although Congress's view is a step in the right direction, the proposed legislation does not address the foundational problem: that the courts have failed to provide a consistent and coherent valuation method for inventions. Congress's proposed amendment should be sensitive to other considerations, including both the practical difficulties of attempting to apportion the value of two separate innovators' contributions, which are combined in a single product, and the need to preserve incentives to create for both initial and subsequent innovators in a manner consistent with the purpose of the patent system.

Keywords: Patent, patent reform, patent damages