Patent Damages Law in the United States

Damages available under the 1952 Patent Act

Since 1952, 35 USCA § 284 has regulated the award of damages in patent cases. Section 284 provides:

“Upon nding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by
the court.

When the damages are not found by a jury, the court shall assess them. In either event the court may increase the damages up to three times the amount found or assessed.

The court may receive expert testimony as an aid to the determination of damages or of what royalty would be reasonable under the circumstances.”

The only category of patent damages provided by 35 USCA § 284 is that “damages adequate to compensate for the infringement.” There are many methods of computing damages, but the U.S. judicial system has used, on damages awards, a “maximum recovery rule” which restricts an excessive jury award to the highest amount the jury could “properly have awarded based on
the relevant evidence.” (Shockley v. Arcan, Inc. ). In the same judicial opinion, the Tribunal said that “a damages award must be set aside if the verdict is against ‘the clear or great weight of the
evidence.’ ”

Only two Supreme Court cases have dealt with § 284 since it In the Supreme Court case Aro Manufacturing Co. v. Convertible Top Co. (1964), the Tribunal held that the “question to be
asked in determining damages [under § 284] is ‘how much had the Patent Holder and Licensee suffered by the infringement. And that question [is] primarily: had the Infringer not infringed,
what would Patent Holder-Licensee have made?’

In the case of General Motors Corp. v. Devex Corp. (1983), the Supreme Court held that prejudgment interest, in general, should be applied (in damages awards).

In eBay Inc. v. MercExchange, L.L.C., (2006), the Supreme Court ended the near-automatic
Injunctions.

Patents in the U.S. Code

The United States Patent Code appears in Title 35 of the United State Code.

Contents

This section covers:

• Overview of damages available under the 1952 Patent Act
• Overview of basic damages theories (see below)
• Lost profits (see below)
• Infringer’s profits (design patent cases)
• Reasonable royalty, including Methodologies for determining a reasonable royalty and Factors relevant to the hypothetical negotiation methods
• Prejudgment interest
• Costs
• Post-judgment interest
• Enhancement of damages: willful infringement (see below)
• Attorney’s fees
• Limitations on damages (see below)
• Practical problems in patent damages, including Infringer myths about patent damages

Overview of basic damages theories

This section covers:

• “Lost profits” and “reasonable royalty”
• Infringer’s profits
• Enhancement of damages
• Ongoing (or post-judgment) royalties
• Limitations on damages

Lost profits

This section covers:

• Lost profits theories
• Economics of lost profits
• Proving lost profits

Enhancement of damages: willful infringement

This section covers:

• Punitive nature of enhanced damages and the court’s discretion
• Infringer’s good faith and opinion of counsel as a defense

Limitations on damages

This section covers:

• Time limitations on damages
• Section 287(a): patent marking and notice to infringers
• Section 287(b): process patents
• Limitation on performance of medical activities
• Laches
• Estoppel
• Limitations on damage based on precluded or intervening rights, lack of standing, and multiple recoveries