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The United States patent system is designed to be a balance: in exchange for the inventor disclosing their invention to the public, patentees are granted exclusive rights to that invention for a period of time. This ensures that patentees are adequately compensated for their innovation and society at large benefits from the patent's disclosure. This balance is now broken. Over recent years, patentees -- particularly non-practicing entities -- have been permitted to seek and recover unreasonable damages that stretch far beyond the value of the technology they invented. This has had serious and negative consequences: excessive patent damages discourage innovation, increase risk and cost of production, and, in turn, increase the cost of products to consumers. Patent law has a solution to this broken balance: apportionment. This principle, which dates back to the nineteenth century, holds that damages must be limited to the value of just the patented invention and cannot capture the value of other features or technology. When applied as intended, apportionment ensures the patent balance -- patentees recover the value of what they invented but no more. But therein lies the problem: in recent years, many courts have been backsliding from the principle of apportionment. First, some courts have permitted plaintiffs to rely on "built-in apportionment" to bypass apportionment entirely. Second, some courts have failed to properly apply Daubert and Federal Rule of Evidence 702 to exclude unreliable apportionment theories, particularly where experts purport to use regressions or conjoint survey analysis. The Federal Circuit and district courts should take action to correct the skewed balance caused by improper application of apportionment law. The Federal Circuit should end the "built-in apportionment" exception to apportionment and district courts should do the hard work at the Daubert stage of ensuring that apportionment is effective and reliable. Inventors, businesses, and the balance upon which the patent system was built depend on it. [ABSTRACT FROM AUTHOR]

The article focuses on teh calculation of reasonable royalty damages in the U.S. Topics discussed include use of market value of the patent by the courts for determining royalties; laws governing patents in the country; and court cases Georgia-Pac. Corp v. U.S. Plywood Corp., and Rite-Hite Corp. v. Kelley Co. addressing the same.

Patent law is implicitly, and sometimes explicitly, based upon a story of patent infringement in which technology users are presumed to be able to discover relevant patents in advance and either design around them or negotiate patent licenses before using the patented technology. That story does not hold true in many fields today, in which the number and widespread ownership of potentially relevant patents renders such preclearance both infeasible as a practical matter and undesirable as a matter of economic policy. But patent damages law continues to apply this outmoded paradigm. As a result, current doctrine perpetuates a vicious cycle of excessive, socially harmful remedies. We propose a number of ways for patent law to adapt to this new reality. First, reasonable royalty remedies should be based on the market value of the patent before infringement and should exclude post-infringement considerations such as lock-in that infect current doctrine and lead to exaggerated damages awards. Second, patent remedy law should distinguish between infringers in the paradigmatic story, who can be regarded as guilty infringers, and innocent infringers for whom preclearance was not practicable; and it should further distinguish between patent holders that were willing to license their patents before infringement and those that had decided to retain exclusive control over their patented invention. In effect, there are four combinations: innocent/willing, innocent/unwilling, guilty/willing, and guilty/unwilling. Remedies should depend on which combination is at issue, and injunctions should be available only for unwilling licensors. In the innocent/unwilling scenario, the patent holder should be able to obtain an injunction only if it agrees to bear the innocent infringer's costs of switching to a noninfringing alternative. [ABSTRACT FROM AUTHOR]