Written By: Ashley Kim
Today, it is questionable whether current patent infringement remedies are adequately furthering the goal of patent law – that is, “[promoting] the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.” [1] An exponential progress in the field of science has produced an overwhelming number of fledgling start up tech companies that have contributed to the development of valuable innovation.
However, recent scholars have expressed a concern over excessive damages for patent infringement to inventors at the expense of infringers. [2] It is well admitted that the progress in science has provided “too great a degree of protection to patents” and as a result, such excessive damages would “reduce the overall incentive for firms to develop commercial products.” [3] Therefore, coming up with an efficient assessment for patent infringement damages has always been an issue. [4]
Traditionally, when a patent is infringed, compensation was thought to “[put] the patent holder in the position it would have been in had its patent rights not been infringed.” [5] Generally, lost profits or actual damages and reasonable royalty damages have been the two pillars of remedies for patent infringement. [6] In fact, due to the difficulty in proving lost profits, courts usually refer to the “reasonable royalty” damages, and specifically to the Georgia-Pacific Factors when actual damages cannot be ascertained. [7]
The most problematic issue of using Georgia-Pacific Factors is that they assess “ex post considerations.” [8] Ex post considerations inflate the value of the patent due to the fear of litigation (especially for small companies). [9] In addition, “lock-in” costs pertaining to “the investments made in the allegedly infringing product and the cost to switch to a non-infringing alternative,” ultimately overestimate the value of the patent. [10]
Rather than focusing on the value of the technology, current damages focus on reasonable royalties based on ex post considerations, such as an infringer’s investment. [11] Therefore, the practice perpetuates excessive damages in favor of patent holders that negatively incentivize firms from actualizing the products. It is imperative for courts to carefully consider the impact of implementing ex post considerations when deciding reasonable royalty and thus should balance incentives of patent holders and would-be infringers to further the goal of the Patent Act.
[1] U.S. Const. art. I, § 8, cl. 8.
[2] Hon. Arthur J. Gajarsa, William F. Lee & A. Douglas Melamed, Patent Damages Symposium: Breaking the Georgia-Pacific Habit: A Practical Proposal to Bring Simplicity and Structure to Reasonable Royalty Damages Determinations, 26 Tex. Intell. Prop. L.J. 52, 53 (2018).
[3] Id.
[4] William F. Lee & A. Douglas Melamed, Breaking the Vicious Cycle of Patent Damages, 101 Cornell L. Rev. 385, 391 (2016).
[5] Id. at 394.
[6] Id. at 395.
[7] Id.
[8] Gajarsa, supra note 2 at 54.
[9] Id.
[10] Id.
[11] Lee, supra note 4 at 465.
