Volume IX

Issue : 9: January 13, 2011

• U.S. Court of Appeals Rejects 25% Profit Rule for Patent Damages
• Michigan Man Charged with Reading Wife's Email
• Canadian Sues Google Over Its Buzz Program
• Apple's iPhones and iPads Alleged to Breach Privacy Rights
• Sony Complains of Patent Infringement by LG
• Photo of Placenta on Facebook Results in Expulsion from School for Student
• 'The Hurt Locker' Antipiracy Fight Continues

Home > Volume IX > Issue 9: January 13, 2011 > U.S. Court of Appeals Rejects 25% Profit Rule for Patent Damages

U.S. Court of Appeals Rejects 25% Profit Rule for Patent Damages

In what may turn out to be a landmark decision on patent damages, the United States Court of Appeal for the Federal Circuit has rejected the rule of thumb measure of using 25% of expected profits as an estimate for the damages on patent infringement, both as a starting point for the analysis and as a final conclusion.  

In Uniloc USA, Inc. v. Microsoft Corp., Court of Appeals Nos. 2010-1035, -1055 (Fed. Cir. Jan. 4, 2011), one of the issues on appeal was whether or not the $388 million award in damages was supported by the facts, as it relied on application of this rule of thumb which has been tacitly approved for years.  Although infringement was upheld, the damages were sent back for a new trial. 

This ruling brings many existing damages awards into question; and will undoubtedly make proving damages both more complex and costly for litigants.  The rule derives from an assumption that arm’s length manufacturers would pay patentees 25% of profits as a reasonable royalty in negotiations concluded at the time infringement commenced.  Future litigants, including those in the case at issue, are now directed to start from sound economic theory applied to the factual record, without recourse to this now rejected tool. 

For additional information, visit:
http://tinyurl.com/4ljwe6x

For the Court of Appeals decision, visit: 
http://www.cafc.uscourts.gov/images/stories/opinions-orders/10-1035.pdf