"Patent Trolls" And Patent Remedies

"Patent Trolls" And Patent Remedies
85 Tex. L. Rev. 2111
Bluebook cite
John M. Golden, "Patent Trolls" And Patent Remedies, 85 Tex. L. Rev. 2111 (Jun. 2007)

John M. Golden
85 TXLR 2111
Item Type
... If that is the case, then an expectation that either court-awarded damages or injunction-compliance costs will be out of proportion to an invention's more intrinsic economic value - in other words, that the value of at least one of the fractions f or f will be disproportionately high - could cause a potential infringer to agree to pay a licensing fee that is disproportionate to the patented invention's economic worth. ... Lemley and Shapiro's evidence for excessive rewards appears to consist substantially of the following: (1) "one patent owner charges a 0.75% royalty for patents that do not cover industry standards and 3.50% for patents that do cover industry standards"; (2) the manufacturer of the BlackBerry device settled a patent infringement suit for $ 612.5 million after the jury awarded damages of only $ 33.5 million; (3) patent holders in approximately fifty cases spread over more than two decades have won court-assessed damages equivalent to average royalties of 13%, patent holders in a subset of eleven cases involving "component" inventions won damages at royalty rates at levels about two-thirds of those in cases involving "integrated product" inventions, and "the average profit margin across all industries for the past twenty-five years is 8.3%." ... Various factors that drive Lemley and Shapiro's concerns apply regardless of whether the patent holder is nonpracticing or otherwise noncompeting: for example, (1) a patent holder's rational interest in seeking to use the threat of an injunction to obtain as much as it can for its patented invention; (2) difficulties in determining whether patent claims are valid and infringed; and (3) dangers that a commercial actor will be locked into use of a patented technology before the scope and validity of patent claims can be clearly established. ... Hence, if one believes that legal rules should tend to err in favor of procompetitive rather than anticompetitive effects, Lemley and Shapiro's proposal for a discriminatory rule regarding permanent injunctions seems backward: (1) the situations where Lemley and Shapiro most favor permanent injunctions - situations where patent rights are held by competitors or exclusive licensors - may be those in which patent holders are most likely to use patents to suppress competition; and (2) the situations where Lemley and Shapiro disfavor injunctions - situations where the patent holder's only profit comes by authorizing others to use the invention - may be those in which (a) it is most likely that the rational patent holder will want to license rather than to suppress, and (b) the ability to protect inventive ideas through injunctions may be most critical to attract investment.

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