While the cases that result in large damages awards attract the most media attention, the majority of cases result in damages awards of far less than those in the above cases. Since 1982, approximately 75 percent of damages awards were less than $10 million. However, the percentage of cases resulting in damages greater than $10 million has increased over time from 15 percent of cases from 1982 to 1989 to 31 percent of cases from 2000 to 2006. Exhibit 7 segregates damages awards into categories by dollar amounts over time.

Various damages measures are available to a successful patentee, including its actual damages, in the form of lost profits, and/or a reasonable royalty. Since 1982, approximately 20 percent of total dollars awarded were based on lost profits, and 36 percent were based on a reasonable royalty. Of the other types of damages components, 21 percent of the total dollars awarded were based on interest, 19 percent enhanced damages, 2 percent price erosion, and 2 percent attorney fees. Because the Polaroid case was litigated for such an extended period, over 11 years, the interest portion of the damages award was over $400 million. Excluding the Polaroid case, of the remaining total damages, 40 percent were based on a reasonable royalty, 18 percent on lost profits, 25 percent on enhanced damages, 12 percent interest, 3 percent price erosion, and 2 percent attorney fees.

Looking at damages components over time highlights trends in how damages are awarded. During the 1990’s there was a shift toward lost profits from reasonable royalty. This trend has reversed, and during the 2000’s, the percentage of damages awards based on a reasonable royalty has returned to the level experienced in the 1980’s. The percentage of damages based on interest has decreased steadily over time, which would appear to indicate that cases are being resolved more quickly. Enhanced damages awards have increased steadily over time. Refer to Exhibit 8.

Patent law prescribes that a reasonable royalty determines the floor of patent infringement damages. This remedy is available to a patentee that cannot prove lost profits or for whom lost profits are not available. Of the cases in which a reasonable royalty was awarded, approximately 60 percent had reasonable royalty rates in the range of 5.00 percent to 19.99 percent. The remaining 40 percent of cases were split evenly between reasonable royalty rates less than 5.00 percent and reasonable royalty rates equal to or greater than 20.00 percent. Refer to Exhibit 9. Average royalty rates, as well as the number of cases with awards falling into the various rate ranges, have remained relatively constant over time.

While information is minimal regarding the sources the courts have relied upon to determine a reasonable royalty rate, in particular jury awards, the available information shows the most prevalent sources include existing agreements and industry averages.

Of the approximately 96 cases where reasonable royalty damages were awarded and a royalty rate was reported, 10 were based on a royalty rate equal to or greater than 25 percent. Two of these cases were decided in the 1980s, seven were decided in the 1990s, and one was decided in the 2000s. The largest royalty rate awarded, 70 percent of net sales, occurred in 1987 in the

Further trends are noted when you break the cases into groups based on the trier of fact. Overall, the trier of fact has been almost evenly split between a judge (52 percent) and a jury (48 percent) since 1982. However, in the past decade, there has been a clear trend toward jury trials. Refer to Exhibit 11. In the period from 1982 to 1989, decisions came from the bench in 82 percent of the cases. In the 1990s, the trend toward more jury trials began so that beginning in 2000 and up to 2006, 73 percent of the decisions came from juries.

The median damages award over the entire period of approximately $3.3 million for jury decisions is nearly four times the median of $830,000 for bench decisions. The data also clearly shows that a higher percentage of large damages awards are issued by juries. Of the top 10 damage awards, listed in Exhibit 6, 7 were jury decisions. This trend is consistent with the decrease in bench trials in concert with the increase in damage awards.

Historically, there have not been large discrepancies in damages awards between juries and the bench in terms of the different damages components. The most notable difference is that enhanced damages comprise 30 percent of the damages awarded by juries and only 14 percent of damages awarded by the bench. Refer to Exhibit 13.

In terms of reasonable royalties, damages are most frequently based on a royalty rate between 0 percent and 20 percent by both the bench and juries. However, damages awards by the bench are split almost evenly into the 0 percent–10 percent range and 10 percent-20 percent range. Jury awards have tended to be in the lower range, with 65 percent of the awards in the 0 percent–10 percent range. Exhibit 10, previously discussed, shows that 7 of the 10 highest royalty rates, used in determining an award of damages based upon a reasonable royalty, came in cases decided by the bench.

Go PTSC Onwards and Upwards!

Cheers~