Patent ‘Hold-Up,’ Infringement Remedies, and the Operation of Standards-Setting Organizations: How the FTC’s Ill-Advised Campaign Against Innovators Threatens Incentives

Roger Brooks, Cravath, Swaine & Moore LLP

11/10/2011
(Original Publish Date: 9/7/2011)

We conclude that the FTC's starting assumption that there is a systemic "patent hold-up" problem is empirically unfounded, and that indeed the great weight of industry comment says that there is not. In standardized industries in particular, SSOs uniformly report that their existing licensing policies have avoided any hold-up problems. We further conclude that the recommendation to cap patent damages by an "incremental value" measure is both theoretically incorrect and impossible for courts to apply, and that any attempt to do so would severely discourage investment in innovation. We also find that the proposal to move the time of a "hypothetical negotiation" analysis is misguided, and would encourage infringement at the expense of the voluntary negotiation of licenses - a value-destroying shift that again would discourage investment and damage consumers as well as industry participants. Finally, we find no justification for any further restriction of the patentees right to injunctive relief beyond the limitations imposed by the Supreme Court's decision in eBay.