Books and Articles that Influenced and Anticipated Changes in Patent Law

The courts routinely redefine patent law.  The courts have changed the law and adopted legal standards John Schlicher previously described in his book Patent Law; Legal and Economic Principles and various articles. These are some examples.

 

Federal Circuit Adopts the Market Value and Marginal Value Approaches to Damages - Grain Processing 

 

In 1992, Schlicher said that the damage measures should be designed to determine the market value of an invention, and should measure market value by the difference between the profits available from exclusive use of that invention and the profits available from use of the next best, available noninfringing substitute invention.  In 1995, Judge Frank Easterbrook (sitting by designation in a district court) applied this approach.  Grain Processing Corp. v. American Maize-Products Co., 893 F.Supp. 1386 (N.D. Ind. 1995).  Schlicher highlighted this development in the 1996 supplement to his book.  In 1999, the Court of Appeals for the Federal Circuit relied on the author’s analysis and adopted these concepts as the controlling standard for determining lost profits in Grain Processing Corp. v. American Maize-Products Company, 185 F.3d 1341, 1351 (Fed. Cir. 1999)(Rader, J.) (“Moreover, only by comparing the patented invention to its next best available alternative(s) - regardless of whether the alternative(s) were actually produced and sold during the infringement - can the court discern the market value of the patent owner's exclusive right, and therefore his expected profit or reward, had the infringer's activities not prevented him from taking full economic advantage of this right. … John W. Schlicher, Patent Law: Legal and Economic Principles §.05[2][1] (1997).”).

 

Federal Circuit Corrects Defects in Evaluating the “But For” Market Conditions on Which Lost Profits Are Calculated – Mahurkar 

 

In 1992, Schlicher pointed out several other deficiencies in the way damages were determined.  Among others, he wrote that where infringement reduced price, the patent owner’s lost profits should be measured by the lower quantities that would have prevailed at the higher price, not the larger quantities that were sold (in the case of price erosion damages) or would have been sold (in the case of lost sales) at historical lower prices.  Judge Easterbrook applied this approach in Matter of Mahurkar Double Lumen Litigation, 831 F.Supp. 1354, 1383-94 (N.D.Ill. 1993)(“The correct way to compensate Firm #1 is to award it $3 times the number of units it would have sold had there been no infringement - or to put it differently, the monopoly output times the monopoly profit, a profit made lawful by the patent.  The patent holder does not receive the monopoly price times the competitive output. See generally John W. Schlicher, Patent Law: Legal and Economic Principles § 9.05 (1992).”).  The Court of Appeals affirmed.  71 F.3d 1573 (Fed. Cir. 1995).  In 2001, in Crystal Semiconductor Corp. v. TriTech Microelectronics Int’l, Inc., 246 F.3d 1336, 1360 (Fed. Cir. 2001), the Court of Appeals for the Federal Circuit held that the patent owner’s lost profits must be measured based on the higher prices and lower quantities that would have prevailed absent infringement.

 

Federal Circuit Refines the Approach to Identifying the Effect of Noninfringing Substitutes on Damages – Bic 

 

In 1992, he said lost profits damages may not be determined sensibly without considering the relative prices of the patented and noninfringing substitute products.  In 1993, the Federal Circuit said this was correct, and relative prices must be considered. Bic Leisure Prods. v. Windsurfing Int’l, 1 F.3d 1214, 1218-19 (Fed. Cir. 1993).

JOHN W. SCHLICHER

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