[Pharm-policy] Michael Pegues on setting royalties in patent litigation

[Susan Finston]

Jamie:  the actual standard for compensation for patent infringement is =
actually set forth in the first para of the article, which I have copied =
here (one would almost think that you have an agenda to which you seek to =
fit the facts):=20

Title 35, section 284 provides in part that, "upon a finding for the =
claimant the court shall award the  claimant damages adequate to compensate=
 for infringement...." The purpose of compensatory  damages is not to =
punish the infringer, but to render the patent owner whole. See Aro Mfg. =
Co. v.
 Convertible Top Replacement Co., 377 U.S. 476, 507, 84 S. Ct. 1526 (1964) =
("the question to be  asked in determining damages is: 'Had the infringer =
not infringed, what would the patent holder . . .  have made?'"); General =
Motors Corp. v. Devex Corp., 461 U.S. 648, 654, 103 S. Ct. 2058
 (1983)("damages adequate to compensate" means "full compensation for 'any =
damages' [the patent  owner] suffered as a result of the infringement.") =
The amount of damages is a question of fact on  which the plaintiff bears =
the burden of proof by a preponderance of the evidence. SmithKline
 Diagnostics, Inc. v. Helena Labs. Corp., 926 F.2d 1161, 1164 (Fed. Cir. =
1991). While there are  no statutory limitations on the elements of a =
damage award that will constitute "full compensation" in  a particular =
case, two general measures are often considered: (1) a reasonable royalty =
between a
 willing licensee and a willing licensor in a hypothetical market as it =
would have developed absent the  infringement; or (2) lost profits =
measured in such a hypothetical market. See King Instruments Corp.  v. =
Perego, 65 F.3d 941, 947 (Fed. Cir. 1995), cert. denied, 517 U.S. 1188 =
(1996)("Section 284
 imposes no limitation on the types of harm resulting from infringement =
that the statute will redress.")


>>> James Love <love@cptech.org> 09/27/00 02:21AM >>>
http://www.hayboo.com/briefing/6_29_00Pegues.htm=20
 Protecting Patents, Trademarks, Copyrights:
 Remedies for Infringement=20
 For Presentation
 Houston, Texas: June 29-30, 2000 and September 14-15, 2000
 Dallas, Texas: July 6-7, 2000 and September 21-22, 2000=20
 The University of Houston Law Foundation: Corporate, Partnership and
Business
 Law Seminar and Representing New Businesses and Startups Seminar
 Michael Pegues - Intellectual Property Litigation

 This is an interesting page with a lot of discussion of court set
royalties in patent disputes.  Here is an excerpt from one case
mentioned.

[snip]

In the course of a bench trial, GPC sought damages for lost profits
based on lost sales of GPC's food additive, price erosion, and
accelerated market entry by AMP after the patent expired. GPC further
claimed that for any of AMP's sales not covered by an award of lost
profits, GPC was entitled to a 28% royalty on AMP's infringing sales.
The district court held that a 3% reasonable royalty was adequate to
compensate GPC, and denied recovery of lost profits entirely. (The
district court held that the fourth process constituted an "available"
non-infringing substitute sufficient to bar the recovery of lost
profits, and this issue is discussed further below.) Id. at 1347.=20

The Federal Circuit held that the district court had supported its
royalty analysis with sound economic data and with actual, observed
behavior in the market, and also commented:

"The [district] court candidly stated that the 3% rate is its "best
estimate," an honest observation that would apply to most reasonable
royalty analyses, given the difficulty of determining a hypothetical
agreement between parties which did not actually agree on anything at
all."

  [snip]

James Love, Consumer Project on Technology
v. 1.202.387.8030, fax 1.202.234.5176
love@cptech.org, http://www.cptech.org=20


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