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.

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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