Patent License Agreement

According to data provided in PWC’s 2012 Patent Litigation Study, there was a decline in median damage award amounts of more than 50% in patent infringement disputes from the period between 2001 to 2005 and the period between 2006 to 2011—from $8.7 million to $4 million, respectively. What is most intriguing about this data is that there has been neither a decline in patent litigation, nor a decline in patent applicants. In fact, both have increased at a substantially similar rate.

In considering this drastic reduction in median damage award amounts, one might also inquire as to if there has been a reduction in the success rate of patent holders. According to PWC data, the answer to this question is no. Except for a minor percentage change for nonpracticing entities between the 2001-2005 period and 2006-2011, the overall success rate for patent holders continues to increase. In fact, in comparing the data provided by PWC from the period between 1995 to 2000 and 2006 to 2011, the overall success rate of patent holders increased from 13.4% to 24.3% for nonpracticing entities, and 27.9% to 37.9% for practicing entities.

What can be gained from this data is that patent holders are not losing in infringement claims, they are simply gaining less in terms of damage award amounts. The decline in damage award amounts in the absence of triers of fact arriving at arbitrary award amounts, therefore, can be attributed to only a handful of valid explanations. From the claimant’s perspective, either there is a failure to present sufficient, proper, or admissible evidence on the issue of damage calculation. From the defendant’s perspective, either improper calculation methods have been successfully challenged by opponents, thereby resulting in the exclusion of evidence, or the evidence provided in opposition of a claimant’s damage amount, rate, or calculation method was more readily accepted by the trier of fact.

The commonality shared amongst each explanation is a party opponent’s ability to properly support, or successfully challenge an issue in dispute. While the language provided in patent infringement statutes fails to offer definitive guidelines in a legislative sense, what is expressly included is language granting authority to the trier of fact, whether judge or jury, in decision making in such disputes. For example, while 35 U.S.C. 284 fails to provide a precise method for calculation of royalty damages, the concluding sentence of this statute does provide:

“[t]he court may receive expert testimony as an aid to the determination of damages or of what royalty would be reasonable under the circumstances.”

Clearly this inclusion of discretionary authority was a purposeful legislative intent. Taking this simple notion and evaluating it in conjunction with recent trends, as provided by statistical data, suggests the significant role that supporting and negating evidence, typically in the form of expert testimony, has had on damage award amounts recovered by patent holders. When assessed at the most basic level, it seems clearly apparent that one side is doing something right, while the other side is doing something wrong. With such high financial stakes involved in many patent disputes, and in consideration of the cost of appeals, making use of expert support services in a careful and calculated manner, and as early on in the dispute process as possible, can greatly impact an outcome, whether in increasing an award amount for a claimant, or decreasing a judgment against a defendant.

By: Alicia McKnight, J.D.