Although indisputably correct, the Federal Circuit ruling earlier this year that patentees could not rely on the “25% rule” in calculating damages can only serve to increase billings for experts and litigators, and raise costs for patentees. The 25% rule was an accepted “rule of thumb” that a reasonable patent license fee would typically be 25% of the profits earned from sales of the infringing product. In situations where damages were difficult to quantify, and comparable license fee figures were not available, patentees would use the 25% rule as a basis for their money demand. So long as courts accepted that, patentees could sometimes avoid the extremely difficult, if not actually impossible task of quantifying damage when good data was not available.
The Federal Circuit in Uniloc v. Microsoft exposed the absence of sufficient statistical foundation for the 25% percent rule in most situations. Moreover, the court explained that even if the rule had statistical validity, courts should not make damage awards based on results in other circumstances. The court’s message to patentees is that they will not be permitted to cut corners on their damage proof; to prove damages patentees are going to have to do the often extremely hard work.
That, of course, will lead to more hours billed by experts and litigators. Experts to dig for more data and create defendable formulae. Litigators to argue over whether the experts have done it successfully. Although intellectually correct, rejection of the 25% rule further increases the expense of patent litigation and further cements its inaccessibility to many individuals and small businesses.