Bargaining for rand royalties in the shadow of Patent Remedies Law

Antitrust Law Journal

Volumn 77, Issue 3, 2011, Pages 889-911

  Michel, Suzanne ^a  

^a FEDERAL TRADE COMMISSION   (United States)

Author keywords

[No Author keywords available]

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EID: 84857149472     PISSN: 00036056     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Conference Paper

References (43)

1. See Broadcom Corp. v. Qualcomm, Inc., 501 F.3d 297, 314 (3d Cir. 2007) (denying motion to dismiss allegation that standard-setting organization (SSO) participant had violated antitrust law by deceptively making a commitment to license on fair, reasonable, and nondiscriminatory terms).
2. Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 509-511 (1988) (affirming court of appeals' reinstatement of a jury verdict awarding damages for a Sherman Act violation where producers and sellers of steel conduit had packed a meeting with new members whose sole function was to vote against a proposal to allow the use of equally viable plastic conduit in the building industry).
3. Qualcomm, Inc. v. Broadcom Corp., 548 F.3d 1004, 1022 (Fed. Cir. 2008) (affirming district court determination that failure to disclose patents to an SSO rendered the patents unenforceable under doctrine of waiver).
4. FED. TRADE COMM'N, THE EVOLVING IP MARKETPLACE: ALIGNING PATENT NOTICE AND REMEDIES WITH COMPETITION 137 (2011) [hereinafter 2011 FTC PATENT REPORT], available at http://www.ftc.gov/os/2011/03/110307patentreport.pdf.
5. See, e.g., U . S . DEP'T OF JUSTICE & FED. TRADE COMM'N, ANTITRUST ENFORCEMENT AND INTELLECTUAL PROPERTY RIGHTS: PROMOTING INNOVATION AND COMPETITION 33 (2007) [hereinafter FTC/DOJ IP ANTITRUST REPORT], available at http://www.ftc.gov/reports/innovation/ P040101PromotingInnovationandCompetitionrpt0704.pdf
6. ANTITRUST MODERNIZATION COMM'N, REPORT AND RECOMMENDATIONS 119-20 (2007), available at http://govinfo.library.unt.edu/amc/report-recommendation/amc- finai-report.pdf.
7. CARL SHAPIRO & HAL R. VARIAN, INFORMATION RULES: A STRATEGIC GUIDE TO THE NETWORK ECONOMY 228 (1999) ("Most companies need to cooperate with others to establish standards and create a single network of compatible users.").
8. Joseph Farrell et al., Standard-Setting, Patents and Hold-Up, 74 ANTITRUST L.J. 603, 607 (2007) ("Standards and patents are very important in information technology, but not only there.").
9. See Business Review Letter from Thomas O. Barnett, Assistant Att'y Gen., U.S. Dep't of Justice, to Robert A. Skitol, Drinker Biddle & Reath, LLP (Oct. 30, 2006) (reviewing policy that required ex ante disclosures of maximum royalties and default license terms), available at http://www.usdoj.gov/atr/ public/busreview/219380.pdf.
10. Business Review Letter from Thomas O. Barnett, Assistant Att'y Gen., U.S. Dep't of Justice, to Michael A. Lindsay, Dorsey & Whitney, LLP (Apr. 30, 2007) (reviewing policy that permitted ex ante disclosures of maximum royalties and default license terms), available at http:// www.usdoj.gov/atr/public/ busreview/222978.pdf.
11. See Mark A. Lemley, Intellectual Property Rights and Standard-Setting Organizations, 90 CAUF. L. REV. 1889, 1904-1906 (2002).
12. Joseph S. Miller, Standard-Setting, Patents, and Access Lock-in: RAND Licensing and the Theory of the Firm, 40 IND. L. REV. 351, 357 (2007) ("fTJhere is a common refrain that the RAND promise's meaning is unclear to a troubling degree and that SSOs do too little to explain its meaning.").
13. See Daniel G. Swanson & William J. Baumol, Reasonable and Nondiscriminatory (RAND) Royalties, Standards Selection, and Control of Market Power, 73 ANTITRUST L.J. 1, 10 (2005).
14. See generally Robert H. Mnookin & Lewis Kornhauser, Bargaining in the Shadow of the Law: The Case of Divorce, 88 YALE L.J. 950, 997 (1979) (explaining "[ijndividuals in a wide variety of contexts bargain in the shadow of the law").
15. See Microsoft Corp. v. Motorola, Inc., No. 10-cv-1823-jlr, slip op. at 4 - 5 (W.D. Wash. May 31, 2011).
16. See Robert Cooter et al., Bargaining in the Shadow of the Law: A Testable Model of Strategic Behavior, 11 J. LEG. STUD., 225, 227-228 (1982) (describing bargaining dynamic in which parties divide the gains from cooperation).
17. Kenneth W. Dam, The Economic Underpinnings of Patent Law, 23 J. LEGAL STUD. 247, 248-49 (1994).
18. JOSEPH A. SCHUMPETER, CAPITALISM, SOCIALISM, AND DEMOCRACY 84 (1st Harper Colophon ed. 1975) (1942) (A disruptive technology is one that creates "competition which commands a decisive cost or quality advantage and which strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives.").
19. See ROGER D. BLAIR & THOMAS F. COTTER, INTELLECTUAL PROPERTY: ECONOMIC AND LEGAL DIMENSIONS OF RIGHTS AND REMEDIES 16-17, 19 (2005).
20. Carl Shapiro, Patent Reform: Aligning Reward and Contribution, in 8 INNOVATION POLICY AND THE ECONOMY 111, 113 (Adam B. Jaffe, Josh Lerner & Scott Stern eds., 2007).
21. See FED. TRADE COMM'N, TO PROMOTE INNOVATION: THE PROPER BALANCE OF COMPETITION AND PATENT LAW AND POLICY, ch. 2, at 8, 13, 15 (2003) (discussing how competition promotes innovation), available at http://ftc.gov/os/2003/10/ innovationrpt.pdf.
22. See Vincent E. O'Brien, Economics and Key Patent Damages Cases, 9 U. BALT. INTELL. PROP. L.J. 1, 20 (2000).
23. see also Mark A. Lemley, Ten Things to Do About Patent Holdup of Standards (And One Not to), 48 B.C. L. REV. 149, 165-66 (2007) (arguing for reform of patent damages law to mitigate holdup of standards).
24. See Mark A. Lemley & Carl Shapiro, Patent Hold-Up and Royalty Stacking, 85 TEX. L. REV. 1991, 1993 (2007).
25. Douglas Lichtman, Understanding the RAND Commitment, 47 Hous. L. REV. 1023, 1039-43 (2010) (arguing that injunctions should not apply in the RAND context).
26. See SUZANNE SCOTCHMER, INNOVATION AND INCENTIVES 211-212 (2004). This circularity is attenuated in an ex ante licensing negotiation by the licensee's ability to use an alternative technology and its unwillingness to pay more than the incremental value the invention adds to the infringing product, regardless of the size of any potential damage award.
27. See Anne Layne-Farrar et al., Pricing Patents for Licensing in Standard-Setting Organizations: Making Sense of FRAND Commitments, 74 ANTITRUST L.J. 671,705 (2007) (The "fifteen factors in Georgia-Pacific that guide reasonable royalty determinations for patent infringement cases are the most obvious starting point for FRAND, and they appear to be readily applicable to reasonable royalties within SSOs.").
28. See Thomas F. Cotter, Patent Holdup, Patent Remedies, and Antitrust Responses, 34 J. CORP. L. 1151, 1185-86 n.163 (2009).
29. see PRICEWATERHOUSECOOPERS, 2010 PATENT LITIGATION STUDY, THE CONTINUED EVOLUTION OF PATENT DAMAGES LAW: PATENT LITIGATION TRENDS AND THE IMPACT OF RECENT COURT DECISIONS ON DAMAGES 8, at Chart 2c (2010) (listing ten cases in which the initially adjudicated damage award exceeded $200 million since 2007), available at http://www.pwc.com/us/en/forensic-services/publications/ 2010-patent-litigation-study.jhtml.
30. See Kyle Jensen, Counting Defendants in Patent Litigation, PATENTLY-0 BLOG (Oct. 27, 2010), http://www.patentlyo.com/patent/2010/10/guest-post- counting-defendants-in-patent-litigation.html.
31. See Roger D. Blair & Thomas F. Cotter, Rethinking Patent Damages, 10 TEX. INTELL. PROP. L.J. 1, 76 (2001).
32. See, e.g., Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1325 (Fed. Cir. 2009) ('The hypothetical negotiation also assumes that the asserted patent claims are valid and infringed.").
33. H.M. Stickle v. Heublein, Inc., 716 F.2d 1550, 1563 (Fed. Cir. 1983) (quoting Panduit Corp., 575 F.2d at 1158).
34. See generally Brian J. Love, The Misuse of Reasonable Royalty Damages as a Patent Infringement Deterrent, 74 Mo. L. REV. 909 (2009).
35. Lance E. Gunderson et al., The "Analytic Approach" as a Technique to Determine a Reasonable Royalty, in ECONOMIC DAMAGES IN INTELLECTUAL PROPERTY: A HANDS-ON GUIDE TO LITIGATION 171, 182 (Daniel Slottje ed., 2006) ("Generally, the maximum royalty amount that licensee would be willing to pay is the excess profit licensee would expect to earn from the infringing products over the return from its [next best alternative].").
36. RICHARD B. TROXEL & WILLIAM O. KERR, CALCULATING INTELLECTUAL PROPERTY DAMAGES § 5:21, at 280 (2011) (determining the value of the patented technology requires a "comparison of the gains that the infringer expects to receive from using the infringing technology with the gains that would have been available had the infringer gone forward with the next-best noninfringing technology").
37. See Peter B. Frank et al., Patent Infringement Damages, in LITIGATION SERVICES HANDBOOK: THE ROLE OF THE FINANCIAL EXPERT ch. 22, at 16 (Roman L. Weil et al. eds., 2007).
38. Gregory K. Leonard & Lauren J. Stiroh, A Practical Guide to Damages, in ECONOMIC APPROACHES TO INTELLECTUAL PROPERTY POLICY, LITIGATION AND MANAGEMENT 63-64 (Gregory K. Leonard & Lauren J. Stiroh eds., 2005).
39. See Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N. Y. 1970), modified and a j f d , 446 F.2d 295 (2d Cir. 1971).
40. Zygo Corp. v. Wyko Corp., 79 F.3d 1563, 1571-72 (Fed. Cir. 1996).
41. See also Christopher B. Seaman, Reconsidering the Georgia-Pacific Standard for Reasonable Royalty Patent Damages, 2010 B.Y.U. L. REV. 1661, 1722 ("Recently, in Mars, Inc. v. Coin Acceptors, Inc., the Federal Circuit suggested that reasonable royalty damages should not be capped at the cost of a noninfringing alternative.").
42. See, e.g., Verizon Servs. Corp. v. Vonage Holdings Corp., 503 F.3d 1295, 1310-11 (Fed. Cir. 2007).
43. Amgen Inc. v. F. Hoffmann-LaRoche Ltd., 581 F. Supp. 2d 160, 212-26 (D. Mass. 2008) (evaluating whether injunction could increase drug prices for government health programs), affd in part, 580 F.3d 1340 (Fed. Cir. 2009).