In 1977, noted economist F.M. Scherer wrote a monograph entitled “The Economic Effects of Compulsory Patent Licensing.” At that time, there was pending legislation on compulsory licensing of nuclear technology. In some ways, Scherer’s analysis thirty years ago can serve as the starting-point for determining whether to issue an injunction in our post-eBay environment. Specifically, Scherer argues that compulsory licensing should not be favored when any of the following are true:
- The patent holder’s share of the product market averaged less than 20% over the preceding five years; or
- The patent holder’s total sales of related products during the past five years as well as the reasonably anticipated sales over the next five years are less than ten-times the patentee’s R&D budget; or
- The patent holder exercised extraordinary creative initiative or extraordinary technical and financial risks in its innovative effort.
Scherer was concerned that injunctive relief was most important for small and especially micro-sized firms whose barriers to entry and lack of non-patent competitive advantages increased their relative valuation of patent importance.