Posts Tagged: "Patent Royalties"

The Federal Circuit has agreed to expeditiously hear an appeal from Dodocase VR, Inc. v. Merchsource, LLC No. 17cv7088 (N.D. Cal.) (“Dodocase”) in which the district court determined that a forum selection clause could not be overridden to allow a patent validity challenge at the PTO without breaching the contract containing the clause.  The court issued a preliminary injunction ordering the withdrawal of the petitions MerchSource had filed with the Patent Trial and Appeal Board (PTAB).  Dodocase at 24.  In its arguments, MerchSource strongly relied on the public’s interest in permitting the PTO to correct its mistakes.  This interest, however, was not found to outweigh the policy favoring enforcing parties’ agreed upon selection of a forum.  Id. at 17.

The patent boom China has been experiencing is easy to explain. China as a country has been unwavering in its support for domestic patent production in recent years. Indeed, the Chinese government has been actively encouraging not only increased innovation that makes it more likely there will be patentable innovations, but that government has been aggressively incentivizing increased patent filings. Incentives include subsidizing patent filing fees, providing rewards for patent filings, and tax credits that are tied to patent output. In many ways, China’s innovation economy is a near photo-negative of the current iteration of the U.S. patent system.

Patent damages law is one of the most complex areas in patent law and it is constantly evolving. Attorneys and courts often confuse the principles and get the law wrong. Further, even without the backdrop of constantly evolving and complex damages law, proving damages at trial is one of the hardest aspects of patent litigation. And properly apportioning damages can be one of the most difficult aspects of damages law to get right. The Federal Circuit’s two recent decisions in Exmark Man. Co. v. Briggs & Stratton Power Prods. Grp., No. 2016-2197, __ F.3d __ (Fed. Cir. Jan. 12, 2018) and Finjan, Inc. v. Blue Coat Sys., Inc., No. 2016-2520, __ F.3d __ (Fed. Cir. Jan. 10, 2018) shed light on calculating damages for multi-component products. Together, these cases show that the royalty rate must be apportioned based on the incremental value the novel elements add to conventional elements of a claim, while the royalty base must be apportioned based on the incremental value the patented features add to the accused product.

Though much of today’s proposed patent legislation is controversial, removal of the Brulotte rule remains largely uncontested by analysts and has historically garnered support on both sides of the political divide. Replacing the Brulotte rule with the rule of reason from antitrust law would improve market efficiency and spur innovation by increasing the dissemination of intellectual property in the marketplace. To unlock those benefits, Congress must modernize how Federal Courts evaluate post-expiration patent royalty cases.