The Evolving IP Marketplace: Aligning Patent Notice and Remedies ...

Recommendation. Courts should eliminate the entire market value rule and thequestion of whether the patented feature was the “basis for customer demand”from the determination of the appropriate base in a reasonable royalty damagescalculation. It is irrelevant and it risks injecting significant confusion thatthreatens to produce inaccurate awards.Identifying the base. Multiple considerations apart from the entire market value ruleinfluence parties’ choice of a royalty base in actual licensing negotiations, including convenienceof the parties and the practice in the industry. Where the patented invention is only onecomponent of a larger product, the product may be the only item that is priced and can bemonitored. However, the practical difficulty of identifying a royalty rate that accurately reflectsthe invention’s contribution to a much larger, complex product counsels toward choosing thesmallest priceable component that incorporates the invention. Because the choice of a base in anactual licensing negotiation is not driven by whether the patented feature is the “basis forcustomer demand,” that question should not drive the choice of base in a hypotheticalnegotiation. (The rule’s concern with the extent to which a patented invention drives customerdemand is relevant for identifying an appropriate royalty rate.)Recommendation. Courts should identify as the appropriate base that which theparties would have chosen in the hypothetical negotiation as best suited foraccurately valuing the invention. This may often be the smallest priceablecomponent containing the invention.CHAPTER 8PERMANENT INJUNCTIONS IN PATENT CASESIn addition to awarding damages for past patent infringement, courts may also grantpermanent injunctions prohibiting future infringement. In 2006, in eBay v. MercExchange, aunanimous Supreme Court held that the grant of permanent injunctive relief in a patent case isgoverned by “traditional equitable principles.” The Court listed four factors that a patentee mustsatisfy to obtain an injunction:(1) that it has suffered an irreparable injury; (2) that remedies available atlaw, such as monetary damages, are inadequate to compensate for thatinjury; (3) that, considering the balance of hardships between the plaintiffand defendant, a remedy in equity is warranted; and (4) that the public20interest would not be disserved by a permanent injunction.20eBay, Inc. v. MercExchange, LLC, 547 U.S. 388, 391 (2006).25