Calculating Reasonable Royalty Damages for Indirect Infringement

Many of the most publicized patent infringement suits are based on theories of indirect liability, codified in the Patent Act under 35 U.S.C. ' 271(b) (inducement of infringement) and ' 271(c) (contributory infringement). For example, a scenario that gives rise to inducement claims under ' 271(b) is the defendant's manufacture and sale of a device capable of performing a claimed method, accompanied by instructions on how to use the device in a manner that would infringe the method. See, e.g., Moleculon Research Corp. v. CBS, Inc., 793 F.2d 1261 (Fed. Cir. 1986) (method for solving Rubik's cube); see also i4i Ltd. Partnership v. Microsoft Corp., 598 F.3d 831 (Fed. Cir. 2010), cert. granted, 2010 WL 3392402 (U.S. Nov. 29, 2010), (method of using custom XML editor). Since suing directly infringing end users, like one's customers, may be impractical or inadvisable, plaintiffs often opt to go after manufacturers who “aid and abet” infringing conduct. Given the importance of indirect liability in patent law, it is troubling that the state of the law on calculating damages in judgments of indirect infringement appears to be in disarray. The confusion centers on the relevance of the extent of directly infringing conduct for figuring a “reasonable royalty,” which is the statutory minimum for patent infringement damages, 35 U.S.C. ' 284; the reasonable royalty method is used far more frequently than the alternative “lost profits” approach.