Richard Lloyd

Damages in patent infringement lawsuits fell in 2016 compared with the year before according to the 2017 edition of PwC's annual Patent Litigation Study. This may indicate that if conditions are improving for patent owners in the US, court awards are yet to reflect this.

The median damages award last year was $6.1 million, compared with $10.2 million in 2015, according to the research. This fall came despite the biggest payout in US patent history. which saw Idenix Pharmaceuticals, a subsidiary of Merck, awarded $2.5 billion in a case against Gilead Pharmaceuticals involving a hepatitis C drug.

The drop in 2016 coincided with the Supreme Court’s decision in two cases — Halo v Pulse and Stryker v Zimmer — in which the court lowered the bar somewhat for a patent owner to obtain enhanced damages. This overturned the Federal Circuit’s three-pronged test established in Seagate Technology, although the prospect of triple damages will still only be reserved for the most egregious cases. It will take some time for that ruling to have an effect on the median damages award, but it has definitely prompted some hopes in the IP-owning community that there will be an increase in court payouts; and that, in particular, this will prompt more defendants to settle.

As PwC’s study shows, any growth will be from a pretty low base and it remains a distinct possibility that the average award is actually settling at a low rate - something that may also help to keep royalty payments at lower levels. If conditions do improve for patent owners and there is a recovery in damages, then it will be interesting to track royalties to see if they also tick upwards, or we settle into a new normal where deals are more likely to happen but patent owners get lower returns.  

The December 2016 damages award to Idenix makes it the sixth billion dollar-plus award to an IP owner in a patent case since 2007. That includes an award for just over $1 billion to Apple against Samsung as part of the pair’s long-running spat over smartphone patents and a $1.5 billion award to Lucent Technologies in a case involving Microsoft over MP3 technology. As PwC points out, however, every one of the awards in its damages top 10, apart from the new Idenix number one, has been changed in some way (either through the courts or via a settlement) or is still under appeal.