By Donald Zuhn --
Back in January, the Manufacturing Alliance on Patent Policy (MAPP) released a report indicating that the apportionment of damages provisions H.R. 1908 -- the patent reform bill passed by the House in September 2007 -- would have severe economic effects (see "Manufacturing Alliance on Patent Policy: Apportionment of Damages Provision Will Have Adverse Effects"). The report, which was prepared by Dr. Scott Shane (at right), a Professor of Economics at Case Western Reserve University, concludes that the damages provisions would lead to a $34.4 billion to $85.3 billion decrease in the value of U.S. patents, a $38.4 billion to $225.4 billion decrease in the value of U.S. public companies, and a $33.9 billion to $66 billion decrease in annual research and development spending.
Last month, prior to the introduction of the Senate (S. 515) and House (H.R. 1260) patent reform bills, Dr. Shane met with "key House and Senate offices" to discuss his economic analysis of an apportionment approach for calculating patent damages. According to an e-mail distributed by MAPP, a number of the offices that were briefed by Dr. Shane asked him to provide a greater level of detail regarding his analysis (Dr. Shane had asked patent attorneys working in law firms to quantify the impact of an apportionment of damages approach). In particular, the Congressional offices asked Dr. Shane to determine whether patent litigators and non-litigators differed with respect to their estimates of damages awards or the impact of the damages provision on the cost of experts or number of lawsuits filed.
Dr. Shane informed Congressional staffers that of the 949 registered patent attorneys who received the survey, 209 responded, and of this number, 132 were litigators. With respect to damages estimates, Dr. Shane noted that while patent attorneys estimated that damages awards would decrease by 25.7%, patent litigators believed damages awards would drop by 28.7%. In addition, while patent attorneys estimated that expert costs would increase by 21.4%, patent litigators thought such costs would go up by 17.6%. From this last result, Dr. Shane surmised that the results of his survey "seem to indicate that the respondents do not view the apportionment legislation as simplifying the process, and that they may view it as making the process less simple." Finally, while patent attorneys thought the number of patent litigations would drop by 8.3% as a result of an apportionment approach, patent litigators believed the drop would be 6.7%. Thus, for all three measures, the mean response for all patent attorneys did not differ much from the mean response for patent litigators. Moreover, as Dr. Shane used the lower 25.7% drop in damages awards to generate his estimates of loss in patent value, business value, and R&D spending, the litigators' estimate would have yielded an even greater economic impact.
Dr. Shane informed the Congressional offices that "apportionment of damages legislation will have certain negative implications that should be taken into account by policy makers as patent legislation is considered in the future." However, he recommended that additional empirical research be conducted in order to provide Congress with a more complete picture of the likely effects of an apportionment system for determining patent damages.
Don,
Thanks for noting again the MAPP report. I didn't realize that this report came from an economist at Case Western. That could be important in getting the folks in Ohio, my state, mobilized regarding S. 515 and H.R. 1260. I believe every Congressman from Ohio voted against H.R. 1098, the predecessor to H. 1260.
Posted by: EG | March 18, 2009 at 06:54 AM