The Use Of Reasonable Royalties As The Measure Of Damages In Arbitration And Other Adr Proceedings That Adjudicate Intellectual Property Disputes - Vol. 6 No. 1 Aria 1995

I. INTRODUCTION

Litigation of issues involving intellectual property in the United States has increased manyfold since the establishment of the Court of Appeals for the Federal Circuit ("CAFC") in 1982.[1] Under the strong leadership of its first Chief Judge, Howard Markey, the Court adopted as its mission nothing less than the reestablishment of the respect and enforceability of U.S. patents. In the years immediately prior to the inception of the CAFC, more than 50% of litigated U.S. patents had been held invalid or not infringed. In several federal circuits, virtually no patents were being upheld and enforced, resulting in considerable forum shopping by litigating attorneys.
The CAFC promptly and emphatically changed this climate with the result that the majority of litigated patents were judicially held valid and infringed. The defense of patent invalidity by defendants in suits to enforce licensing agreements, which had been frequently raised since the U.S. Supreme Court decision in Lear v. Adkins,[2] became less effective. Moreover, as a reflection of the greater respect with which patents were being treated, damages levied against infringers, under 35 U.S.C. §284, were being affirmed in much larger amounts than had ever been previously experienced. Awards exceeding $25 million frequently occurred, and in some cases damages were found in the hundreds of millions of dollars.
The attractiveness of patent litigation was reenforced by two other developments. Firstly, in General Motors v. Devex[3] the principle was recognized that successful plaintiffs who have sued for patent infringement are entitled to receive pre-judgment interest, calculated in accordance with one of several yardsticks that a trial court may adopt in its reasonable discretion, that accrues from the date of the initial accusation of infringement.