Patent Damages- How much is too much?
First Publication Date: 6th January 2011
When the US sneezes, the world catches cold!
In post trial motion the District Court granted Microsoft’s motion of new trial for damages as the 25% rule is unjust and unfair in this case. Perturbed by this Uniloc filed an appeal in CAFC , their primary point of contention being that the 25% rule is the right way of calculating damages and that the CAFC has passively tolerated the use of this rule in earlier cases. The CAFC for the first time gave the following observation with respect to the calculation of damages using the 25% rule-
“This court now holds as a matter of Federal Circuit law that the 25 percent rule of thumb is a fundamentally flawed tool for determining a baseline royalty rate in a hypothetical negotiation.”
Having said the aforementioned the court observed that evidence relying on the 25 percent rule of thumb is inadmissible under Federal rules of evidence, because it fails to tie a reasonable royalty base to the facts of the case at issue. CAFC upheld the District Court’s judgment that Microsoft is entitled to a new trial on damages.
This judgment has brought alive the debate on patent damages the world over. Due to lack of enough jurisprudence and precedents on the subject we expect that this case will be used by a lot of litigants around the world in patent suits. Also the result of the new trial on damages will be interesting to note as it may shape atleast the way US looks at patent infringement damages.
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