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7$%/(2)&217(176 I. INTRODUCTION ...... 1316 II. THICKETS, HOLDUP, AND STACKING ...... 1321
A. THE CONCEPTUAL TRIPLET ...... 1321 1. Patent Thickets ...... 1321 2. Royalty Stacking ...... 1322 3. Patent Holdup ...... 1323 B. IDEAS MATTER: POLICY ACTIONS BASED ON THE CONCEPTUAL TRIPLET ...... 1324 1. The Seminal Case: eBay Inc. v. MercExchange, L.L.C. (2006) ...... 1327 2. “Patent Ambush” Enforcement Actions (1995, 2002, 2008) ...... 1330 3. Business Review Letters (2006, 2007, 2015); IEEE Royalty Rate Policy Shift (2015) ...... 1332 4. Judicial Erosion of Injuctions: RAND Royalty Litigations (2013–14) ...... 1334 5. Administrative Erosion of Injuctions: Motorola Mobility/Google Consent Decree (2013) ...... 1337 III. REVISITING THE CONCEPTUAL TRIPLET: WEAK EVIDENCE, WEAK THEORY ...... 1338 A. PATENT THICKETS REVISITED ...... 1339 1. Biomedical Research ...... 1339 2. Evidence for Market Self–Correction: Collective Rights Organizations and Patent Pools ...... 1341 3. Historical Research: Revisiting the “Clear Cases” of Patent Thickets ...... 1342 4. Reevaluation: Why Evidence for Patent Thickets Is So Weak ...... 1343 B. PATENT HOLDUP AND STACKING REVISITED ...... 1344 1. Evidence in the “2007 Article” ...... 1345 2. Recent Evidence ...... 1351 3. Reevaluation: Why Evidence for Holdup and Stacking Is So Weak ...... 1356 IV. RE–APPRECIATING THE IMPORTANCE OF INJUNCTIVE REMEDIES ...... 1361 A. BACKGROUND AND APPROACH ...... 1361 B. COST–BENEFIT ANALYSIS ...... 1362 1. Legal Mispricing ...... 1363 2. Organizational Distortion ...... 1367 3. Monopsony Risk and Rent Diversion ...... 1371 C. WEIGHING THE RISKS ...... 1379 V. CONCLUSION ...... 1379 %(5.(/(<7(&+12/2*</$:-2851$/>9RO
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INTRODUCTION ...... 1434 II. THE LAW OF PATENT DAMAGES, BRIEFLY ...... 1437 III. THE “SMALLEST SALABLE PATENT–PRACTICING UNIT”: ORIGINS AND DEVELOPMENT ...... 1438 A. GENESIS OF THE SSPPU: CORNELL UNIVERSITY V. HEWLETT-PACKARD CO...... 1438 B. SSPPU IN THE FEDERAL CIRCUIT ...... 1440 IV. CORRECTING MISUNDERSTANDINGS ABOUT THE SSPPU CONCEPT ...... 1444 A. THE SSPPU CONCEPT APPLIES NEARLY EXCLUSIVELY IN JURY TRIALS ...... 1444 B. THE SSPPU CONCEPT DOES NOT LIMIT THE FREEDOM OF PRIVATE PARTIES NEGOTIATING A LICENSE AGREEMENT ...... 1446 C. THE SSPPU CONCEPT IS NOT USEFUL IN ESTIMATING THE VALUE OF A LICENSE TO A LARGE AND DIVERSE PORTFOLIO ...... 1447 D. THE SSPPU CONCEPT HAS NO AUTOMATIC RELEVANCE TO STANDARD-ESSENTIAL PATENTS OF FRAND ...... 1448 E. THE SSPPU CONCEPT CANNOT BE USED TO OVERRIDE ACTUAL MARKET VALUE ...... 1449 F. THE SSPPU CONCEPT DOES NOT COMPEL USING THE COST OF A COMPONENT AS THE ROYALTY BASE FOR CALCULATING DAMAGES ...... 1450 G. THE SSPPU CONCEPT NEITHER COMPELS NOR SUPPORTS USING THE COST OF A COMPONENT AS THE ROYALTY BASE ...... 1451 H. APPLYING THE SSPPU CONCEPT AS AN ACTUAL RULE WOULD DEFEAT THE GOAL OF DAMAGES LAW ...... 1452 V. 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INTRODUCTION ...... 1490 II. EMPIRICAL AND THEORETICAL CHALLENGES TO THE ANTICOMMONS ...... 1494 A. IDENTIFYING “ANTICOMMONS” SITUATIONS ...... 1494 B. COMPLEX PRODUCTS WITH MANY TANGIBLE INPUTS SUPPLIED BY DIFFERENT SUPPLIERS ...... 1496 C. INFRINGEMENT, ACCESS, AND SELF–ENFORCEMENT...... 1498 D. PATENTS, THE ANTICOMMONS, AND THE COASE THEOREM...... 1501 E. STANDARDS, STANDARD ESSENTIAL PATENTS, FRAND, AND THE “ANTICOMMONS” ...... 1506 F. EVIDENCE FROM BIOTECH AND MOBILE PHONES ...... 1508 III. THE “TRAGEDY OF THE ANTICOMMONS” FALLACY...... 1511 IV. PATENT DAMAGES AND THE AMPLIFIED SOCIAL WELFARE LOSSES WITH GENERAL–PURPOSE TECHNOLOGIES ...... 1515 A. SOCIAL RETURN TO INVESTMENT IN R&D COMPARED TO PRIVATE RETURNS ...... 1516 B. SOCIAL RETURNS TO GPT ...... 1520 V. THE LIMITATIONS OF LICENSING AS A VALUE CAPTURE (BUSINESS) MODEL FOR GPT TECHNOLOGIES ...... 1522 VI. 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INTRODUCTION ...... 1529 II. AN ESTIMATE OF THE AVERAGE CUMULATIVE ROYALTY YIELD IN THE SMARTPHONE INDUSTRY ...... 1534 A. METHODS ...... 1534 B. THE ESTIMATE OF THE AVERAGE CUMULATIVE ROYALTY YIELD ...... 1536 C. PUTTING THE ESTIMATE INTO PERSPECTIVE ...... 1537 III. MONOPOLY POWER, ROYALTY STACKING AND THE TRAGEDY OF THE ANTICOMMONS ...... 1538 A. THE MARKET FOR SMARTPHONES ...... 1538 B. THE ROYALTY SET BY A PATENT MONOPOLY ...... 1540 C. ROYALTY STACKING AND THE TRAGEDY OF THE ANTICOMMONS ...... 1543 IV. ESTIMATING THE ROYALTY YIELD WHEN PATENT HOLDERS EXERCISE MONOPOLY POWER ...... 1547 V. CAN THE “MONOPOLY ROYALTY” CLAIM BE SAVED? ...... 1551 A. WHAT IF THE OBSERVED ROYALTY IS GENERATED BY A PROCESS OF ROYALTY STACKING AFTER ALL? ...... 1551 B. BUNDLING PATENTS WITH OTHER COMPONENTS ...... 1552 C. EXCESSIVE ROYALTIES AND THE NEXT–BEST TECHNOLOGY ...... 1553 VI. WHY IS THE OBSERVED AVERAGE CUMULATIVE ROYALTY YIELD SO LOW? ...... 1554 VII. 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