Patent Reform 2009: More on Damages

Guest Post by Richard Cauley. Cauley is the author of the recent Oxford Press book titled Winning the Patent Damages Case: A Litigator’s Guide to Economic Models and Other Damage Strategies. I asked him to provide some thoughts on the damages proposals in the Patent Reform Act of 2009. Cauley.jpg

The damages provisions of the Patent Reform Act of 2009 are not new, nor, in an economic sense, are they particularly controversial. Although their introduction in this legislation may create a political firestorm among those who wish to artificially maximize the economic leverage of patentholders both in court and across the bargaining table, the solutions proposed in the latest attempt at patent reform merely reflect – and attempt to measure – the true economic worth of a patent and the reasonable return to which an inventor is entitled.

What these damages provisions (all of which were contained in the various versions of the failed Patent Reform Act of 2007) attempt to accomplish is to force the court to limit the patentholder’s recovery to the real economic worth of an invention – for example, to a company who might want to license that invention to use in another product or to a consumer who might purchase a product because of that very invention.

Thus, the section limiting the application of the entire market value rule to situations in which the actual invention – the advance over the prior art – forms the basis of consumer demand compensates the inventor only to the extent his invention produces something that people actually want to buy.

This section also ensures that patents on relatively minor components are not given a value in excess of their real economic worth. Where the patent does not cover something critically important to the consumer, the provision limits the patentholder’s recovery to the value of that component to the customer – and precludes a recovery based on the entire product, which may include many other patented components.

Likewise, the section requiring the court to determine whether there is already a “market price” for licensing the patent – in the form of pre-existing licenses for similar patent rights – simply measures how much a prospective licensee would be willing to pay on the open market for the right to use the patent. Of course, this is what the reasonable royalty remedy is supposed to measure.

The purpose of these provisions is obvious. First, they will limit the ability of patentholders, primarily patent trolls, to recover damages in patent litigation far in excess of the actual economic value of those patents. More importantly, however, they will reduce the threat of such inflated damages awards – a threat such plaintiffs use as leverage in licensing campaigns and settlement negotiations to secure recoveries far exceeding the worth these patents really have to the prospective licensees.

The problem with these proposed statutes, then is not their objective – to give patents the value they actually deserve – but the implementation. As written, these provisions are a judicial nightmare. They require the court to conduct a kind of “damages Markman” in which the court must decide, before giving the case to the jury, the economic value of the patent’s “specific contribution over the prior art,” the “basis” for the “market demand” for an infringing process, the “relevant market” for a claimed invention and whether that market has “similar noninfringing substitutes” for the claimed invention. Apparently, the court is also supposed to make the economic decision of which Georgia Pacific factors the jury is allowed to consider.   

The delay which will be caused in an ongoing trial will inevitably be substantial and the opportunities for reversible error in this process will be legion. Although the intent of the drafters of these provisions was certainly praiseworthy– to codify limits on jury’s overvaluing patents in awarding damages – the byzantine rules they set up to implement these objective shows that they certainly have never tried a patent case. Indeed, if the courts would simply follow the judicially- established guidelines already in place, this complex set of regulations would not be necessary.

Hopefully, calmer heads will prevail before these rules are actually imposed on the patent litigation bar and on the courts. There are better and more effective ways of reaching these objectives.

Indeed, it is not surprising that, in another section of the bill – limiting venue for patent cases to districts in which the defendant has a facility – there appears to be no appropriate venue for a patent case against an infringing foreign defendant with no facilities in the United States. Thus, a plaintiff might have jurisdiction over an infringer, but nowhere to sue the company – all dressed up and no place to go.

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57 thoughts on “Patent Reform 2009: More on Damages

  1. What I’m trying to say, echoing Judge Michel in his recent address to the FTC, the “true” economic value of a patent extends far beyond the mere mercantile value of the feature in the product. It extends to the wealth creation exemplified by the costs of the production line that was tooled up just to make the product embodying the invention and all the jobs and concomitant wealth associated with bringing the product and in some cases the industry into being. You simply can’t say that retooling costs that would be sunk in the face of an injunction should not be part of the royalty calculus.

  2. “Another fascinating case that highlights the utter incompetence and disgraceful disregard for due process from the thoroughly corrupt stooges at the PTO.”

    I will concede that. Then again, look at the app and look at the arguments, who has time for all that sht? Not examiners.

    “How long do you have to work at the PTO before you figure out where and when to initial? ”

    I don’t think you understand how the process has been altered in your absence. When I sign a case, examiner’s answer for example, then I post it to the SPE, who then would have to pass it on to the coneferee. However, in the event something goes wrong at any stage in this loop the whole thing comes back to me. Maybe conferee didn’t like something, so didn’t sign. Then I post it back to my spe, who then sees all corrections made, and thinks to send it on to the appeal board. Things like this happen all the time.

    “I will follow your case. It’s a “poster child” for all the “record breaking quality” work being done over there at the PTO.”

    Maybe you can do him a favor and vet the new piece of art that is applied to 181 as being dated when wayback says it was dated and also likely being enabled.

    It is a poster child for everything wrong with the system, bad claims, bad examination, bad appeal, bad appeal arguments, probably bad traversal of official notice, bad bad bad on forever. But its pro se, so let’s cut him some slack.

    And yes, I agree, this examiner writes badly written actions.

  3. “So, what they are saying is that the value of the injunction is primarily the value of the retooling, and that this is not a reasonable royalty, because it isn’t the royalty that the parties would have agreed to prior to the infringement (and production of the product).”

    I especially like the last part, “it isn’t the royalty that the parties would have agreed to prior to the infringement”

    I think what you really mean is that it isn’t the royalty that the parties would have “agreed” to if there was no threat of injunction.

    If retooling costs to avoid infringement exist, they should be factored in. The higher these costs, the more evidence that a higher royalty rate is necessary. Why? Because if the patented invention is so insignificant, the design around costs should be low. Complete retooling should not be necessary. If it is, it kind of means that the entire operation is 100% vested in the infringing product.

  4. “Indeed, it is not surprising that, in another section of the bill – limiting venue for patent cases to districts in which the defendant has a facility – there appears to be no appropriate venue for a patent case against an infringing foreign defendant with no facilities in the United States. Thus, a plaintiff might have jurisdiction over an infringer, but nowhere to sue the company – all dressed up and no place to go.”

    Go to the United States International Trade Commission under section 337. This is precisely why that forum exists.

  5. value of an injunction, not the value of the invention.”

    Please explain what the difference is? Answer there isn’t a difference.

    I think that this was addressed above. The problem is the retooling costs. A company has products in production, and pulling them back and retooling is typically far, far, more expensive than just removing them in the first place. So, what they are saying is that the value of the injunction is primarily the value of the retooling, and that this is not a reasonable royalty, because it isn’t the royalty that the parties would have agreed to prior to the infringement (and production of the product).

  6. “Take your best shot at 09/832,440.”

    Another fascinating case that highlights the utter incompetence and disgraceful disregard for due process from the thoroughly corrupt stooges at the PTO.

    The first Examiner’s Answer gets bounced because the appeal conferees aren’t initialed. What a disgrace. A simple requirement that the stooges in charge of this case can’t seem to get right. How long do you have to work at the PTO before you figure out where and when to initial? Getting paid GS-14 and GS-15 money and they can’t even perform the most basic ministerial function.

    And after the appeal finally makes it to the Board, they remand. The APJ’s take 9 pages to tell the examiner, and his mid-level-(mis)management stooge overseers, what a total piece of garbage his “answer” is.

    Absolutely disgraceful.

    Pro Se you have my deepest sympathies. I’m sorry that’s all I have to give.

    I will follow your case. It’s a “poster child” for all the “record breaking quality” work being done over there at the PTO.

  7. Just sayin’,

    Thank you for the article about Intel. I would love to hear from the advocates of the term “troll” (those of scholarly persuation and anti-software patent agendas) in relation to the actions depicted and of course realize that silence from those groups is probably their best defense.

  8. “value of an injunction, not the value of the invention.”

    Please explain what the difference is? Answer there isn’t a difference.

    You have proven (perhaps unwittingly) that there is far greater economic value of a patented invention than whether the consumer will pay 10 dollars more for a particular “feature.”

    Congratulations you are now on track to appreciate the far and wide reaching, intangible and true scope of the “value” of one of those dusty patents.

  9. SF says:

    “In such cases, the patentee is unjustly rewarded when an injunction allows the patentee to extract the value of avoiding “re-tooling” as opposed to the value of the patented feature to the infringer or the value of exclusivity to the patentee.”

    Why is this unjust? If I am in a negotiation, and I know that the buyer will pay up to X amount to buy my house, but that for anything over X he will buy my neighbor’s house, is it unjust to demand X from him? The answer is a resounding No. Under your hypothetical, how much below the cost of taking an alternative should a patentee extract from an admitted infringer?

  10. Thank you Richard – as a matter of fact I have been published a couple of times, would like to do it more.

    “BTW, I come by my use of the term “troll” honestly — ”

    But didn’t Detkin famously recant his coinage of the word “troll?” In any case he went to work for Intellectual Ventures.

    Interesting article on Intel and the so-called trolls.

    link to buildingipvalue.com

  11. Sheesh 6, even Michael R is schoolin’ you (and basically calling you a retard) – you better give up, quick.

  12. “Either way, throw it up, I’ll be glad to hand you some invalidating prior art after a quick google and save you the trouble of trying to collect on something unable to be enforced.”

    6: I accept your invitation (challenge?) to provide an actual, real-world example to everyone (or at least to those of us still following this comment string) of your searching prowess (i.e. ideally utilizing one of your oft-stated, “quick google” searches).

    Take your best shot at 09/832,440.

    But please, no so-called “references” from any “databases” which explicitly state in their TOS (or elsewhere) that their data may not be accurate and/or is not to be relied on.

    Anyone else is free to offer their thoughts as well.

    You see, unlike some (many?), I really do only ask for the scope/coverage which this invention is actually entitled to.

    Nothing more. Nothing less.

    …and let me say in advance that for obvious reasons (i.e. estoppel) I’m not likely to discuss/debate with you what you “find” or your comments regarding such here on a public board (though others far more knowledgeable and experienced than I may do so), I actually would like to hear what you have to say.

    Batter up.

  13. “As a prospective attorney I can’t have the whole system go to pot before I get there can I now?”

    BWAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAH!!!!!

    Please keep us laughing.

  14. Good point, Curious. Here in Europe we have The Principle of Subsidiarity, which is that all decisions should be pushed down to the lowest level that is still competent to handle them. In the context of this thread, Congress shouldn’t be doing what the courts are (or should be) competent to do. Then there’s the maxim “Hard Cases Make Bad Law”, from which the English Common Law world suffers, but not the world’s default legal system, Roman civil law. It might take ” a few years” in your system, mate, but not in the civil law part of the world, where a corrective touch on the tiller can be instantaneous (because there is no hindering Doctrine of Binding Precedent). POTUS has a cabinet of intellectual stars from all over the world. They could usefully ponder the matter (in the continuing absence of a Secretary for Commerce). It’s important enough, after all, because the US patent system is vital to the continuing competitiveness, even survival(?), of the USA. They might come around to the idea that it would be useful to import one or two good ideas for reform of the Statute from outside the homeland. Or they might better decide to make the involved patent litigation courts more competent, so they can make wiser and more perceptive decisions. After all, with Binding Precedent, each such decision, at CAFC and above, is of more significance to the economy than tinkering with the Statute. You expect more of your judges than their decisions in KSR and Bilski, right? But maybe I shouldn’t blame the judges. Saddled with an inadequate, obsolete, incompetent Statute, that’s about the best any human judge can do.

  15. With inventors filing fewer applications due to the recession and with fewer examiners leaving the PTO due to the recession, the PTO should start catching up on its backlog. And with applications being prepared and prosecuted in view of KSR now fewer broad (“over claiming”) patents should be issuing. And with the increasing use of reexams by third parties fewer litigations should be filed. And Bilski should cut down on the number of broad applications being filed and broad patents issuing.

    I think that we should wait a few years to see how everything washes out before tinkering with the patent statutes.

  16. sounds like the determination of damages is going to make litigation horrible expensive and time consuming.

  17. You can, in fact, sue the Federal government for patent infringement — in the Court of Federal Claims. You cannot get an injunction, as the Federal government has an automatic license to all US patents, but, under the “takings” clause, the patentholder is entitled to a reasonable royalty, which is calculated the same as in a case against a private party. In fact, I was surprised that so many of the cases I cited in the book came from litigation against the Federal government, as it seems to be quite common. Hope this answers your question.

  18. “I’ve got an app/invention at the Board right now that’s being unquestionably infringed by a govt agency that’s chosen to provide it to everyone for free (well; if we call stuff paid for by our tax dollars as “free”)…even though its commercial value (i.e what a normal for-profit company would charge) is in the $100-$200 range per use.

    So I’d be entitled to what–nothing?–since the gov’s decided to give it away?

    Gee. I don’t think that’s quite what our founding fathers had in mind.”

    If it is at the board then it doesn’t seem like there can be any infringement going on since it hasn’t issued, unless you’re in a reexam now. Either way, throw it up, I’ll be glad to hand you some invalidating prior art after a quick google and save you the trouble of trying to collect on something unable to be enforced.

    As to your topic of discussion though … can you sue the federal gov for infringement? Don’t they have some kind of shield like the states, except probably better?

    Thanks for letting me know I’m wrong Michael. Always good to hear from ya.

  19. The government above everyone else should pay as they are suposed to be the most ethical.As soon as the value of an invention reaches zero then the incentive to create it also reaches zero then economic stagnation occurs and human advancement reach zero also.

  20. “Suppose the infringer makes the component and gives it away for free. Is the value zero?”

    Excellent point, Mr. Kremen; and one that far from being merely academic.

    I’ve got an app/invention at the Board right now that’s being unquestionably infringed by a govt agency that’s chosen to provide it to everyone for free (well; if we call stuff paid for by our tax dollars as “free”)…even though its commercial value (i.e what a normal for-profit company would charge) is in the $100-$200 range per use.

    So I’d be entitled to what–nothing?–since the gov’s decided to give it away?

    Gee. I don’t think that’s quite what our founding fathers had in mind.

  21. What should rule in the decision to include or not include an improvement or new feature of an invention is the consumer and if he is willing to pay for it and what percentage of profits of the cost of the new invention the company presently producing it will pay. This is where my 15% minimum of profits after all expenses concept shines.For the consumer benifit it should be made available for comparison test marketing then a consumer willing to pay figure can be determined to base the value on. this should become law as a method of settling the disputes.

  22. Leopold makes a good point. The cost to design-around (given a system is already implemented) is often much, much higher than the cost that an infringer would have paid prior to implementing a system with the feature (e.g., in the hyptohetical negotiation).

    In such cases, the patentee is unjustly rewarded when an injunction allows the patentee to extract the value of avoiding “re-tooling” as opposed to the value of the patented feature to the infringer or the value of exclusivity to the patentee.

  23. “At that point, the INFRINGER [not some academic theorist] can determine what the “value” of the the onvention(s) is to HIM. If the value is ‘minor’, then he can simply eliminate it from his product. RIM paid something like $600+ million to settle.”

    Even an English major ought to be able to see that the cost of re-tooling an extensive network infrastructure to remove a selected technology is likely to be largely unrelated to the ex ante value of the invention, and could be huge, even for a “minor” invention. So you’re really talking about the value of an injunction, not the value of the invention. The latter is more properly assessed in relation to the cost of alternatives, etc.

  24. All that this proposed damages provision will do is encourage infringement. Why should anyone negotiate a license for something that is only a small component of a much more expensive device. The true value of the component is not determined how much the infringer is selling the device for (or the ratio of the component to product price), but rather by what the market will bear if the patentee decided to sell the product himself generally. The specific use should not be a determining factor for damages. Suppose the infringer makes the component and gives it away for free. Is the value zero?

  25. To 6 Who I am sorry but your wrong.I dont know what your talking about with the wires and atoms thing.Not defending an accusation of ignorance or that my proposals are moving backwards would be ignorant on my part. The reality your comments are ignorant and backwards. The uniquely retartive thing about your comments is little or nothing moves forward significantly unless I invent it.

  26. The entire problem with damages usually stems from an inventorship dispure. This points out the urgent need to make quick accurate determinations of conception. Beginning with the compiling of a master list of all concieved inventions and products in production or not. applications are checked for intellectual materials when recieved an an immediate determination is made. A waiting period of ninety days then begins to see if there are other persons involved either actual inventors or thefters. Then the invention is published to see if any opposition is encountered including hearings. The conception decision issues at 6 months. No manufacturing is allowed in this period no discussion is allowed and the files are kept by pto secretly. Other factors are considered like previous conception clusters.

  27. As most recently exemplified by RIM, grant the injunction. At that point, the INFRINGER [not some academic theorist] can determine what the “value” of the the onvention(s) is to HIM. If the value is “minor”, then he can simply eliminate it from his product.

    RIM paid something like $600+ million to settle.

    So, let’s stop with the English-major BS “theories” of determining “true” value and whether an in vention is “minor”, etc.

    The market sets the value. Of course, if the infringer elects not to settle before thE jury decises what it thinks the invention is worth, then the infringer gets what he deserves.

  28. “What Dennis is really saying is that wealthy corporate infringers should have all the leverage in a negotiation and that the bigger they are, the less they should have to pay attention to someone with a legitimate claim of right to a portion of the product.”

    I don’t think that’s what D said, I think he addressed the complexity of the device, or at least the number of inventions (parts, methods) used to create it, not really the size of the corp.

  29. “All I can think about is your efforts to support your assertion that atoms fall out of wires.”

    If you look back it wasn’t originally my assertion. I merely confirmed that it did indeed occur. And then I showed proof. I can google a video for you if you can’t believe written works. I would say I was wrong, I have often said as much, but in this case there simply is no need since it is factual. You’ll have to QQ a lot moar before I say I was wrong about something blatantly before your face with legions of evidence of it occuring. Iirc Just’s alter ego Eye who originally made that assertion. BTW richard, he doesn’t post under his real name because he likes to take time out of his day to post ridiculousness about other posters quite regularly, which only makes you look bad irl. You should never do your main trolling/flaming on your main. The best troll/flamers know this. That is why Eye is likely JD’s alter ego.

    You know what though guys? Perhaps I was wrong about damages being fine as is. You folks who espouse the view that they are fine are so vitriolic towards anyone with any different view, no matter how slightly different, that is becoming more and more clear that it is likely only mere self interest that has blinded me along with you. As a prospective attorney I can’t have the whole system go to pot before I get there can I now? Meh, maybe it really is for the best. One thing I can say for sure is that I wish I hadn’t gotten PTT exposed. That guy was a barrel o laughs.

  30. Just sayin’:

    Thanks for your well written, thoughtful comments. I don’t know why you comment anonymously — you should publish your views out in the patent press as, in my opinion, the more voices out there that have actually thought through these issues, the better — even if they don’t always agree. BTW, I come by my use of the term “troll” honestly — I used to practice with Peter Detkin back in the day.

  31. Every time I hear someone use the word “troll” in an article that is supposed to be “serious” I cringe first, then I lose respect for the author.

    That being said, here are a couple of choice tidbits in an article that is full of them.

    “Thus, the section limiting the application of the entire market value rule to situations in which the actual invention – the advance over the prior art – forms the basis of consumer demand compensates the inventor only to the extent his invention produces something that people actually want to buy.”

    It this supposed to be some kind of a revelation? Why would the inventor have any desire to sue someone who makes a product using the patented invention that no one wants to buy? And I fail to see the connection between limiting the application of the entire market value rule when people actually want to buy the invention. The paragraph is beyond gobbledygook.

    “This section also ensures that patents on relatively minor components are not given a value in excess of their real economic worth. Where the patent does not cover something critically important to the consumer, the provision limits the patent holder’s recovery to the value of that component to the customer – and precludes a recovery based on the entire product, which may include many other patented components.”

    How in the world can the consumer determine whether, say, the patented magic of a compression chip is important to them? If the end-product is important, which it presumably is – or else why would anyone sue, and if the patented technology is enabling of the product, which it presumably is, it is nearly impossible to say that one patented component in a given product is more valuable than another, with a few possible exceptions.

    In an automobile, are you going to say that consumers value the patented technology in the fuel injectors more or less than the patented technology in the air bag system? In a cell phone are you going to tell me that consumers value the patented technology in the thin film display module more or less than the patented battery life extension technology? If there are exceptions, such as the patented stitching on the floor mats, I would guess they are rare anomalies and should not be difficult to address.

    The ideal scenario is where the injunction right is strong and CAN be used as leverage in a negotiation. If a patentee does not want to practice but wants to license, then there is no benefit or incentive, even among groups of patentees to run the product into the ground. The result that it seems that we don’t want is for a bald non-practicing entity with no intention to practice to be able to threaten an injunction in exchange for an unreasonable and potentially business destroying payout.

    However, each request for injunction should be evaluated on a case-by-case basis. If a large corporation knowingly and willfully appropriated patented technology and was on notice before accumulating profits, perhaps those profits and an ongoing royalty SHOULD be extracted even by a non-practicing patentee. On the other hand, a non-practicing patentee who goes after a manufacturer who unwittingly infringes and learns about it only after racking up profits should be treated differently.

    But not because of narrowly tailored statutory remedies, but rather based on sound application of existing precedent including laches, and the like. In other words, since the evidentiary burden on a non-practicing injunction seeker is naturally high it is hard to believe that corporations feel so victimized by so-called “trolls.” And the contracting behavior between private parties who are in the best position to evaluate the “true value” of the patented technology should not be interfered with and should be assisted somehow. Also the negotiating skill of the counsel in seeing that deals get done and products get made should not be underestimated.

    Any damages reform legislation should be tailored to assist parties in negotiating private settlements (the Democrat-sponsored proposed generic settlement limitation legislation is an abomination against the sanctity of the private contract)

    It reminds me of stories like Cisco, who, after miserably failing to establish a vigorous policy for vetting infringement claims and sloughing off non-meritorious ones, resorted to name-calling and other notorious subterfuge against claimants.

    Instead of trying to adopt a one-size fits all policy toward claims of infringement, corporate patent counsel, even those with supposed pedigrees and notorious and, now, discredited blogs, need to evaluate every individual claim on its relative merits – and that takes real work, something that few these days seem to be able or prepared to do even though more tools are available now than ever to easily defeat spurious claims.

  32. Georgia Pacific factors 1 and 2, relating to licenses for the asserted patents and related technology, usually dominate the reasonable royalty analysis. Factors such as 13 are relegated to afterthoughts unless there are absolutely no license benchmarks. The proposed legislation may move the analysis away from licenses, though I expect that would be folded in somehow.

    Richard’s point that the proposed legislation would cause much judicial headache is a very good one. Indeed, Lemley’s written testimony counseled against amending patent damaged law now, despite the need for reform, at least until after the Federal Circuit has decided Lucent. That point is lost in the press reports of Lemley’s testimony.

  33. Lucent v Gateway [now at the CAFC] will hopefully clarify infringement damages law, but just merely adopting the “Georgia Pacific factors” will not end the questions and confusion.
    An important issue in both that case and the damages legislation debates is whether judges or juries are really comprehending or paying correct attention to and applying the “Georgia Pacific factors” that are allegedly the current law and [per many lobbyists] are perfectly clear already. [Even though they are self-evidently overlapping or alternative tests.] So this is a good point for everyone to seriously consider the one and only actual Georgia Pacific factor that ] directly relates to the embattled “damages apportionment” issue:

    Factor 13 is: “13. The portion of the realizable profit that should be credited to the invention as distinguished from non-patented elements, the manufacturing process, business risks, or significant features or improvements added by the infringer.”
    BUT, what does this Factor 13 “credited to the invention….” really mean?
    How can that be squared with “as distinguished from non-patented elements” in modern patents having now-legal “aggregation claims” encompassing numerous prior art element that should logically not be “credited to the invention” but are in fact claimed? To put it another way, how can an aggregation claim literally encompassing an entire car, not just its novel cup-holder, have any “non-patented elements”? Aggregation claims can recite all of the old parts of an entire product, not just the inventive features?
    Note also that Factor 13 does not even mention the word claims.
    Factor 13 probably arose before aggregation claims became legal and common?
    Is Factor 13 built on a confusion between “the invention” and “non-patented elements” that is just as inapplicable as some of the proposed legislation for true combination inventions?

  34. Discussions about damages are meaningless without discussing the strength of injunctions. As much as Dennis/Mooney hates to see anyone making money and actually having leverage in a patent negotiation against a corporation, without the threat of an injunction, why bother having negotiations at all? What Dennis is really saying is that wealthy corporate infringers should have all the leverage in a negotiation and that the bigger they are, the less they should have to pay attention to someone with a legitimate claim of right to a portion of the product.

  35. 6, at the risk of precipitating another post from you (I beg you not to respond), defending your own ignorance is a sure sign that you will never grow out of it. And if you’re not growing out of it you’re moving backwards because time is always marching on (this means that if you’re not moving forward, you are, at best, standing still, which, as it turns out, is actually moving backward).

    All I can think about is your efforts to support your assertion that atoms fall out of wires. Why not try on some of the most powerful words in the world “I’m sorry, I was wrong.”

  36. The biggest problem is that collecting infringement damages has to be done in court.So inventors dont even have the money to go there to collect. Rules must be drafted to shut down product production or require court supervised accounts required contributations by infringers.Fines can be leavied as deemed nessary by judges or administrators.

  37. “I think the most amusing part of this comment is that 6 somehow thinks that working at the PTO is “in the real world.””

    Actually I’m imagining myself at my house being called to court. Though, imagining myself at work being called to court is pretty much the same. I should have said above: “Out here in the real world I’m pretty sure we consider having to deal with a summary judgement having to go to a trial, even if it is simplified”

    “If we ever find anything you do know, you may comment at will.”

    Maybe you’ll find that I know that ignorance can never “grow”, except through perhaps forgetting. However, that did not occur here. Contrary to what you find incredible I have to say that what is in fact incredible is your ability to ignore anything that goes against the position you no doubt espouse and simply ignore the issues that do actually exist. At least Michel attempts to pay lip service to them.

    Bottom line to all this damages mess is that if the courts had done a decent job with damages (which is a pretty fin important part of trials I’d say) in more cases then we wouldn’t even be having this discussion.

  38. “Out here in the real world I’m pretty sure we consider having to go to a summary judgement having to go to a trial.”

    I think the most amusing part of this comment is that 6 somehow thinks that working at the PTO is “in the real world.” I’m not sure I can imagine a more unreal world.

  39. “Out here in the real world I’m pretty sure we consider having to go to a summary judgement having to go to a trial.”

    Your ignorance grows each day. Simply incredible that you are actually getting dummer. Some university should hook some electrodes up to whatever you’re using as a brain and study you. Maybe a little vivisection would be in order.

    “I think I’m entitled to comment on what I do know though, don’t you?”

    If we ever find anything you do know, you may comment at will.

  40. Want to hear a funny story?

    I just got a Final action back from a spe who is helping my spe out this week. He says that instead of responding to the applicant at all I should just use the “arguments are moot in view of the new grounds of rejection” FP instead lol. That is why you see it so often.

  41. “Re the venue provision, I was talking about a foreign company that has infringed in the US (by selling), but has no subsidiary or facility in the US. ”

    How do they sell in the US without a facility or subsidiary? Just curious.

  42. “A second myth was that companies faced a recent explosion of infringement litigation. Again, claims were made in vague, general terms, devoid of statistics. Actually, the overall percentage of litigated patents has remained constant for decades at 1% of in-force patents.”

    Wouldn’t that be an explosion though? I like Michel, but he has some weird ways of looking at some things that much is sure. I think he just tried to spin those numbers to work in his favor when they really show exactly what his opposition wants to portray: an explosion of litigation.

    “In the present decade, the number of infringement suits filed
    per year has remained nearly constant at less than 3,000. All but 300 settle. Of the 300
    remaining, 200 are resolved without expensive trials by summary judgment, nearly
    always of non-infringement. Fewer than 100 per year are actually tried.”

    That may be true, but what were the numbers in the 90′s compared to today? Oh, that’s right, they portray an explosion when we look at what happened throughout this decade iirc lol. Just because the explosion has been sustained doesn’t defeat what they had to say.

    “A third myth is that Federal Circuit reversals regularly require “wasteful” second
    trials. Actually, two-thirds of our appeals had no first trial, being resolved on summary
    judgment. So even when we do reverse them, about 30%, it just means one trial. Of the
    100 cases that went to trial, we affirm a large majority. Perhaps 20 trial results are
    vacated per year. On remand, most settle. If five or 10 must be tried a second time to
    assure lawfulness and fairness, that is not a crisis, but a real world necessity because
    no system is perfect. All have error rates and always will.”

    Out here in the real world I’m pretty sure we consider having to go to a summary judgement having to go to a trial. It just happens to be a trial where we didn’t have to go through everything. Congress will see having to go to court from the view of the everyman/everycompany I’m afraid.

    “All claimed that likely litigation results forced them to settle for plainly exorbitant amounts. But the University of Houston Law
    School’s examination of all actual jury verdicts in calendar years 05-08 fails to show any
    award against most of those companies, much less exorbitant awards.”

    Um, they were talking about settlements, not awards by juries iirc from your previous sentence.

    Michel was jk lol. He’s a regular comedian that guy.

    Then he gets to some meat:

    “But what about the grievances felt by the 24 companies? Are they real? Yes, but
    I think they have been overstated. To a large extent, the pressure felt to pay undue if
    not exorbitant license or settlement fees comes from the high cost of defending an
    infringement suit, even where the defense later proves meritorious. Broad discovery is a
    major problem.”

    Where he admits the courts culpability in the problems.

    “As to legal fees, the Patent Act already
    provides for fee-shifting in exceptional cases. Perhaps greater use of this deterrent to
    abusive lawsuits or litigation tactics is in order.”

    Mhmmm. Or perhaps it should be loser pays except in exceptional cases.

    “In the final analysis, however, fixing problems perceived as unduly hindering
    defense of suits by 24 companies cannot rationally wag the dog of the system on which
    all 100,000 companies, including the Fortune 500, depend. Let’s find solutions to the
    real problems that will ameliorate them without hurting the legitimate interests of
    innumerable other companies and industries.”

    And what would he say when 500, 5000, or 50000 companies join those 24?

    “Nice to know that it doesn’t prevent you from commenting anyway.”

    I think I’m entitled to comment on what I do know though, don’t you?

  43. “Of course, I haven’t looked into the matter in depth.”

    Nice to know that it doesn’t prevent you from commenting anyway.

  44. Me:

    Re the venue provision, I was talking about a foreign company that has infringed in the US (by selling), but has no subsidiary or facility in the US. Under the present venue provision, there would be jurisdiction (because the infringing goods were sold in the US), but no venue — which doesn’t make much sense.

  45. “Could determination of incremental $$ value be part of the examination? Egopsychotic, power-happy examiners like IQ=6 would love something like that.”

    Are you kidding? That would be a freakin nightmare. I don’t even think a court with nearly unlimited resources would have an easy time with that very often.

    “The only problem with this claim is that it is largely untrue.”

    From Michel’s speech. The only problem with this, Michel, is that the claim is partially true, and that is what has law makers spooked. If the courts had been doing their jobs in the first place then we wouldn’t have this problem, would we?

    Overall, I’m not too much for the damages provision here lately, it seems like a great idea and all, but I think the courts just need to start doing their job better. There appears to be too many potential unintended side effects to these provisions to make them worthwhile atm. Of course, I haven’t looked into the matter in depth.

    “The myth pretends, however, that where total sale price is used, the onecomponent-
    in-a-thousand factor falls completely out of the computation. But it is actually
    included, just within the percentage multiplied against value, i.e., as a percentage of a
    percentage.”

    I do think there is a small problem there though because the percentages, if memory serves, are often way higher than what one part in a thousand reasonably demands. Even 1% seems likely to be high in a case like that. And I doubt if you see many damages calculated with .00001% etc. included in the calculation.

  46. To the venue point at the end of the article – so you want to sue someone who has never infringed in the U.S. and has no facilities and no presence? What would you sue for? Just curious…

  47. WRONG!!!!!!!!

    The Georgia-Pacific factors are a great way to measure patent damages, why does this guy want to codify one of them with language further limiting its application.

    Not controversial? What planet is this guy on. Clearly he has never been an inventor…

    Everyone needs to sign on to Feinstein’s letter currently circulating that would codify the Georgia-Pacific factors as the damages law, with some gatekeeper language.

  48. As I’ve said before (and is now being proposed by Feingold) why not simply codify the 15 Georgia-Pacific “damage” factors and be done with it. Georgia-Pacific recognizes that each damage case is different and unique, and may require application of different sets of these factors. Also, you won’t have as much difficulty hitting equilibrium in the case law as these factors already have quite bit of case law to provide guidance on these factors, and how to use them

    By contrast, the proposed damages provision, being completely new, will require much longer to reach that equilibrium. I see no point in “reinventing” the standard where there’s a good one already in place in the case law; codifying that standard will simply confirm that. If Lahey and his cohorts, in their usual infinite unwisdom, want to do something about damages, stick with Georgia-Pacific 15 factors test which has been accepted by all courts (including the Federal Circuit) as setting forth the best test (or at least best set of factors) for determining damages. And if Lahey and his cohorts want to ignore the Georgia-Pacific factors, and put in this new nonsensical (and frankly nebulous) provision on damages, then by all means let this oxymoronic “patent law reform” legislation sink with no survivors.

  49. Judge Michel of the Federal Circuit spoke about last year’s version of damage reform at a meeting of the Association of Corporate Patent Counsel. It’s a good time to be reminded about the “misinformation and sloppy scholarship” and the “blatant, outcome-driven politics of both the commentators and the Congressional proponents of ‘reform’” (not his words). The summary is on the Patent Docs blog at
    link to patentdocs.org

  50. I have to agree with Mr. Cauley that this legislation will cause more trouble than it is worth. If we are talking about a patent troll, then the measure of damages is most likely a “reasonable royalty” since a troll can’t claim the lost profits measure.

    As Cauley mentions, the way it works now is that the jury considers the Georgia Pacific Factors:
    1. The royalties received by the patentee for the licensing of the patent in suit, proving or tending to prove an established royalty.
    2. The rates paid by the licensee for the use of other patents comparable to the patent in suit.
    3. The nature and scope of the license, as exclusive or non-xclusive; or as restricted or non-restricted in terms of territory or with respect to whom the manufactured product may be sold.
    4. The licensor’s established policy and marketing program to maintain his patent monopoly by not licensing others to use the invention or by granting licenses under special conditions designed to preserve that monopoly.
    5. The commercial relationship between the licensor and licensee, such as, whether they are competitors in the same territory in the same line of business; or whether they are inventor and promotor.
    6. The effect of selling the patented specialty in promoting sales of other products of the licensee; the existing value of the invention to the licensor as a generator of sales of his non-patented items; and the extent of such derivative or convoyed sales.
    7. The duration of the patent and the term of the license.
    8. The established profitability of the product made under the patent; its commercial success; and its current popularity.
    9. The utility and advantages of the patent property over the old modes or devices, if any, that had been used for working out similar results.
    10. The nature of the patented invention; the character of the commercial embodiment of it as owned and produced by the licensor; and the benefits to those who have used the invention.
    11. The extent to which the infringer has made use of the invention; and any evidence probative of the value of that use.
    12. The portion of the profit or of the selling price that may be customary in the particular business or in comparable businesses to allow for the use of the invention or analogous inventions.
    13. The portion of the realizable profit that should be credited to the invention as distinguished from non-patented elements, the manufacturing process, business risks, or significant features or improvements added by the infringer.
    14. The opinion testimony of qualified experts.
    15. The amount that a licensor (such as the patentee) and a licensee (such as the infringer) would have agreed upon (at the time the infringement began) if both had been reasonably and voluntarily trying to reach an agreement; that is, the amount which a prudent licensee — who desired, as a business proposition, to obtain a license to manufacture and sell a particular article embodying the patented invention — would have been willing to pay as a royalty and yet be able to make a reasonable profit and which amount would have been acceptable by a prudent patentee who was willing to grant a license.

    Factor number 13 is not distinguishable from what Cauley says is the laudable intent of the legislation. So the proponents of this legislation merely want to take it out of the hands of the jury and let the judge worry over it and get reversed on appeal.

  51. Some pejorative terms used, that should be addressed…

    “true value” and “minor component”- The true value of the patent even a supposed minor component has the power to suppress all uses of the minor component… i.e. if an injunction was issued, the complete product would be suppressed, not just the “minor component” – that would be equivalent, if my math is correct and it always is, to the WHOLE MARKET.

    “judicial nightmare” – What is more likely a judicial nightmare is patent law as a whole (“gobbledygook” – Scalia) and less the proposed or existing damages statute. If you want get rid of the judicial nightmare, please start attacking the entire field of patent law, not just the damages statute.

    “patent troll” – derogatory on its face – not surprisingly Prof. Crouch, and Mr. Professor from GW on the previous post are both professors with links to big law and big corp – both use this term constantly.

    This is a pretty controversial topic unlike what Mr. Crouch claims…

  52. What a fatuous comment: that being found by a district court judge (assisted by a jury) to be inside the scope of a claim that’s found not to be invalid is the same as the criminal act of theft. Who are you Sir? Can you really not see the difference between theft and full integrity, healthy but fierce competition between rival manufacturers in the same field. Just in case, I’ll tell you. The former hurts the public, the latter benefits it.

  53. I think the penalty for theft is excessive. We should reform our sentencing statutes so that if you’re convicted of larceny, the maximum penalty is that you must return what you took.

  54. Richard said:

    “there appears to be no appropriate venue for a patent case against an infringing foreign defendant with no facilities in the United States”

    I don’t think that is entirely correct.

    Of course, if the infringement is not in the US or its territories, there is no jurisdiction, period.

    Section 8(c)(1) of the reform bill says that for a foreign corp with a US subsidiary, venue is the subsidiary’s place of business, etc.

    I don’t know whether or how often foreign corps operate in the US without a US subsidiary. I’ve never set up or dealt with a foreign corp, so I don’t know if it’s even possible for one to operate in a US state without a domestic entity.

    I certainly hope not.

    Richard’s comments on damages make a lot of sense. I think this approach could eventually obviate the whole 103 obviousness conundrum.

    But, I’m having trouble seeing a practical, efficient way of implementing the objectives. Richard says there are better and more effective ways. Would love some more insight on that thought.

    Could determination of incremental $$ value be part of the examination? Egopsychotic, power-happy examiners like IQ=6 would love something like that.

  55. “a “small” patentee shouldn’t get a “big” damages award from a “big” infringer.”

    Sounds like a great idea to me…

  56. Last time Dennis said something “wasn’t controversial” e.g. first to file, it generated close to 250 posts within a couple of days.

    The fact is, the *true* value of a patented invention cannot always be easily known unless damages are calculated at the end of the patents life based on actual data looking backward.

    Also a canard like “value to the consumer” is specious, because it may be that certain enabling technology may not be that glamorous or may not map clearly to user recognizable feature but for the enabling technology the product would not be possible.

    “The purpose of these provisions is obvious. First, they will limit the ability of patentholders, primarily patent trolls, to recover damages in patent litigation far in excess of the actual economic value of those patents.”

    Spoken like a true Mooney. Oh wait. I guess this means that a “small” patentee shouldn’t get a “big” damages award from a “big” infringer.

    Basically Dennis likes the idea that if you’re big, its OK to infringe because you won’t have to pay out a big award to a “small” patentee.

    This is stilted “Lottery” thinking…

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