Thursday, January 15, 2009

Study: Apportioned Damages Would Decrease Patent Value Between $35-85B

Yesterday a group of U.S. manufacturers released research entitled “The Likely Adverse Effects of an Apportionment-Centric System of Patent Damages.” The research was conducted by Scott Shane, Ph.D., Professor of Economics at Case Western Reserve University in Cleveland.

The study sought to answer the threshold question of whether and how much average damage awards would be reduced by apportionment legislation. The following effects of apportionment legislation were estimated:

1. Reduction in U.S. patent value of between $34.4 billion and $85.3 billion.

2. Reduction in value of U.S. public companies of between $38.4 billion and $225.4 billion.

3. Reduction in R&D of between $33.9 billion and $66 billion per year.

4. Between 51,000 and 298,000 U.S. manufacturing jobs put at risk.

5. Industries employing fewer people favored over those employing more people.

The paper is provided by the Manufacturing Alliance on Patent Policy (link), and a PDF copy of the study may be downloaded here.

2 Comentários:

Anonymous said...

Seems a little charitable to call this "research." For example, the author explicitly assumes that: “Because injunctive relief is increasingly difficult to obtain following . . . eBay vs. MercExchange (2006), the value of a patent is best determined as a function of the amount of damages one can collect if one wins an infringement lawsuit.” But various studies report that there's still about a 75% grant rate overall for injunctions.

Assuming away injunctions because they "only" have a 75% probability of being granted when requested makes the valuation estimate silly (at best). For example, one could argue that since both injunctions and damages awards are dependent on which party prevails, we should apply the 75% rule to litigation outcome instead of just injunctions. Because plaintiffs win less than 75% of the time, we can disregard both the damages and value of injunctions for purposes of patent valuation. So, since our "analysis" concludes that patent value is based only on the value of the remaining remedies (or, alternatively, on the damages awards in cases where the defendant prevails completely). But the value when the defendant prevails is zero, so because the value of patents depends entirely on the value of these remedies we've just "proved" that no patents have any value at all.

Beyond the assumption on injunctions, the "analysis" also seems to assume that lost profits awards are unavailable to all plaintiffs. (It looks like he calculates the reduction in aggregate patent value by discounting estimated total value of all U.S. patents by the percentage decrease in reasonable royalty awards, so implicitly both the possibility of an injunction and potential lost profits damages have a combined value of zero).

Then again, I could be wrong about all this. I was an English major, so I'm definitely not a competent statistician and I'm definitely not a patent attorney ...

Anonymous said...

Seems a little charitable to call this "research." For example, the author explicitly assumes that: “Because injunctive relief is increasingly difficult to obtain following . . . eBay vs. MercExchange (2006), the value of a patent is best determined as a function of the amount of damages one can collect if one wins an infringement lawsuit.” But various studies report that there's still about a 75% grant rate overall for injunctions.

Assuming away injunctions because they "only" have a 75% probability of being granted when requested makes the valuation estimate silly (at best). For example, one could argue that since both injunctions and damages awards are dependent on which party prevails, we should apply the 75% rule to litigation outcome instead of just injunctions. Because plaintiffs win less than 75% of the time, we can disregard both the damages and value of injunctions for purposes of patent valuation. So, since our "analysis" concludes that patent value is based only on the value of the remaining remedies (or, alternatively, on the damages awards in cases where the defendant prevails completely). But the value when the defendant prevails is zero, so because the value of patents depends entirely on the value of these remedies we've just "proved" that no patents have any value at all.

Beyond the assumption on injunctions, the "analysis" also seems to assume that lost profits awards are unavailable to all plaintiffs. (It looks like he calculates the reduction in aggregate patent value by discounting estimated total value of all U.S. patents by the percentage decrease in reasonable royalty awards, so implicitly both the possibility of an injunction and potential lost profits damages have a combined value of zero).

Then again, I could be wrong about all this. I was an English major, so I'm definitely not a competent statistician and I'm definitely not a patent attorney ...

DISCLAIMER

This Blog/Web Site ("Blog") is for educational purposes only and is not legal advice. Use of the Blog does not create any attorney-client relationship between you and Peter Zura or his firm. Persons requiring legal advice should contact a licensed attorney in your state. Any comment posted on the Blog can be read by any Blog visitor; do not post confidential or sensitive information. Any links from another site to the Blog are beyond the control of Peter Zura and does not convey his, or his past or present employer(s) approval, support, endorsement or any relationship to any site or organization.

The 271 Patent Blog © 2008. Template by Dicas Blogger.

TOPO