The Patent Damages Gap: An Economist's Review of U.S. Patent Damages Apportionment Rules

Abstract

As an economist, I find the current state of the law regarding damages for patent infringement – most particularly that relating to apportionment – frustrating at best and woefully incomplete at worst. Namely, damages case law for utility patent infringement provides two very different, but insufficient, guidance frameworks for calculating damages: the entire market value rule (EMVR) versus the smallest salable patent practicing unit (SSPPU) principle. The modern pair of EMVR and SSPPU options is far narrower than the approaches afforded by the original 1884 Supreme Court ruling establishing apportionment for damages, Garretson. In this paper, I present the economic case for expanding the allowable damages frameworks beyond EMVR or SSPPU, to fill in the gap in reasonable damages approaches created by an EMVR and SSPPU dichotomy.

Keywords: damages, apportionment, patent infringement, EMVR, SSPPU

JEL Classification: K11, K41, O34