That pesky valuation problem

Today, the U.S. Court of Appeals for the Federal Circuit threw out the 25% royalty rate rule of thumb for calculating damages in a patent infringement case (see the Wall Street Journal “Court Changes Law on Patent Damages“). The court said the 25% rule of thumb was arbitrary and that damages needed to be tied to a fact based reasonable royalty rate. That fact based rate, obviously, needs to be based on the value of the patent to the patent licensee – and gets us back to that pesky need for good valuations of intangible assets.
As OceanTomo’s in-depth analysis of the case notes, “Today’s decision follows generally a trend by the Federal Circuit to require a fact specific nexus between a claim for damages and the patents in suit.” It also puts more pressure on get the valuation issue right.

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One thought on “That pesky valuation problem”

  1. Seems like we’re going to be seeing more such cases — with this kind of judicially-legislated “patent reform” — until Congress and/or the courts finally get a handle on acceptable damage award standards for patent infringement cases. The lack of any kind of controlling baseline is worrisome to many; also troubling to me, however, is this kind of ad-hoc approach that we’re seeing in the courts.

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