The Economic Valuation of Patents

The Economic Valuation of Patents

Methods and Applications

New Horizons in Intellectual Property series

Edited by Federico Munari and Raffaele Oriani

The Economic Valuation of Patents provides an original and essential analysis of patent valuation, presenting the main methodologies to value patents in different contexts.

Chapter 10: Economic Approaches to Patent Damages Analysis

Paola Maria Valenti

Subjects: economics and finance, economics of innovation, intellectual property, innovation and technology, economics of innovation, intellectual property


Paola Maria Valenti 10.1 INTRODUCTION In both the US and Europe, the guiding principle in computing patent damages is that of compensating the patent owner for the infringement of his intellectual property rights.1 If the patent holder is able to prove infringement of a valid patent, US patent law states that patent damages should be ‘adequate to compensate for the infringement’.2 Similarly, the EU Directive states that damages should ‘allow for compensation based on an objective criterion’.3 Compensatory damages are meant to restore the patent holder to the situation in which he would have been had the patent infringement not taken place. When a valid and enforceable patent is infringed, there are two sources of potential damages to the patent holder. First, the patent holder may lose profits – for example, the infringing sales made by the infringer are sales that the patent holder may potentially make.4 Secondly, the patent holder may forego royalties on the infringer’s use of the patented technology.5 Accordingly, in both the US and Europe, the patent holder may recover compensatory damages in the form of lost profits, a reasonable royalty, or a combination of the two. In both the US and Europe, the plaintiff is entitled to claim lost profits on the sales that he can demonstrate he would have made but for the infringement and a reasonable royalty on the sales that he would not have been able to make.6 In the US, the award of a reasonable royalty is the statutory floor for patent...

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