A Restitution Perspective on Reasonable Royalties

Abstract

I. INTRODUCTION.....336II. REASONABLE ROYALTIES IN PATENT LAW.....337A. Reasonable Royalties in the Suite of Patent Remedies...... ..338B. Rise of the Reasonable Royalty Remedy 340C. Fall of Patent Law 's Disgorgement Remedy 344D. Apportionment and Other Reasonable Royalty Challenges.........346III. RESTITUTION PRINCIPLES FOR LIABILITY AND REMEDIES.........347A. Restitution Primer........348B. The Third Restatement on Restitution and Remedies for Intellectual Property Infringement........3531. Restitution Foundations in the Third Restatement 3542. The Third Restatement and Intellectual Property........3583. Assigning Remedies for Infringement.......360C. Restitution 's Reticulated Approach to Monetary Relief........ 3621. Alternative Measures of Unjust Enrichment........3622. Definition and Significance of Fault or Responsibility........3653. Sensitivity to Law's Purpose and Evidentiary Burdens 369IV. CROSS-POLLINATION POSSIBILITIES FOR REASONABLE ROYALTIES.........370A. Additional Economic Measures or Factors......371B. A More Reticulated Approach to Fault or Responsibility........373V. Conclusion 376I. IntroductionPatent law commonly confronts problems of uncertainty and technical difficulty. Some of these questions, such as those centered on the definition and implementation of patentability standards of subject-matter eligibility, enablement, and nonobviousness, are relatively unique to patents. But recent debates over patentinfringement remedies reflect fundamental issues with respect to the enforcement and valuation of rights-or of injury from the violation of those rights-that courts have encountered in a wide variety of contexts. Consequently, remedies debates offer substantial opportunities for patent law to draw instruction from other legal fields.Questions about how to assess reasonable royalties for patent infringement offer particularly fruitful opportunities for crosspollination.1 The law of restitution is an especially good candidate for comparative study. Decades ago, U.S. patent law shed a traditional disgorgement remedy commonly associated with restitution. Although we are not looking to the law of restitution to argue for this remedy's revival, we are looking to see what the legal architecture of restitution's approach to monetary relief suggests about ways to improve reasonable royalty analysis within U.S. patent law's current remedies structure.There is reason to hope that restitution law might have much to teach. Most prominently, there is the practical fact that, despite patent law's formal elimination of a disgorgement remedy, its retained reasonable royalty remedy has long operated in a quasi-disgorgement fashion by posing the question of what percentage of an infringer's revenue a patentee should receive. Because the restitution law itself does not generally demand full disgorgement of a wrongdoer's profits, the partial-disgorgement character of many reasonable royalty awards directly overlaps with the nature of relief that restitution often affords.As one would expect from this overlap in practical content, restitution law has substantial experience in addressing issues that also appear in the assessment of reasonable royalties. These issues include problems of reasonably apportioning value among multiple contributions to an overall activity or outcome, assigning burdens of production and proof with respect to valuation and apportionment, and assuring consistency of remedies with statutory law or other expressions of public policy. In contrast with the often relatively blunderbuss approach of patent law, the law of restitution has responded to such problems in at least three context-sensitive ways: (1) by developing an array of alternative measures for monetary relief, (2) by tying deployment of these measures to similarly reticulated classifications of parties' relative responsibility, and (3) by showing sensitivity to practicalities of proof and background policy concerns. …

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