During a recent webinar on the current state of patent valuation, Ashley Keller, co-founder and Managing Director of Gerchen Keller, and I discussed the phenomenon of efficient infringement.
Efficient infringement, which can be a rather cold-hearted business calculation, is when a decision is made to infringe regardless (or in spite of) the presence of patents and whether the underlying activity will constitute patent infringement. Rather than seek out or take an offered patent license, it is determined that it would be better, cheaper and certainly more expedient to simply infringe.
To my surprise, Keller did not really have a problem with efficient infringement. Rather, Keller’s issue is more nuanced. Efficient infringement is an acceptable business decision but those that choose to efficiently infringe should be required to pay for infringement when caught, which is where the system is breaking down presently.
What follows is the part of our conversation on efficient infringement. To hear the entire webinar CLICK HERE.
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QUINN: When I say efficient infringer is that me like taking a metal claw and running it down a chalkboard to you?
KELLER: Not quite. I’m a student of the Chicago school so I understand the Holmesean analogy and the fact that sometimes when you’re making business decisions it makes sense to breach a contract or to infringe a patent. But — and here’s the critical but — the efficient infringer, just like the efficient breacher of a contract, which is the Holmesean analogy, is supposed to have pay. So, yeah, it might be efficient to infringe a patent — and, listen, I have some sympathy to this. If you’re Apple and you’re making the iPhone, which has so many component parts and there are probably thousands, if not tens of thousands of patents, that potentially cover all of those components, it really would be a Herculean effort for you to go out and try and search the world for every possible patent that your invention practices. So it doesn’t make you a bad guy, particularly because patent infringement is a strict liability tort to necessarily go out and say, hey, I’m gonna deliver value to the marketplace by selling this product and if I infringe a patent someone can sue me for it but I’m gonna infringe anyway because I can’t efficiently go out and conduct my daily business affairs looking for patents that I might infringe. I would spend my entire life looking for patents and not actually making things. So it’s not a chalkboard-scratching event for me. However, when you do infringe a patent, even if it was efficient for you to do so, the upshot should be you have to pay. You have to pay a reasonable royalty associated with that infringement so that the innovator who came up with the innovation can also be compensated for the research and development that they did to generate that innovation in the first place. So efficient infringement existence, in and of itself, is not the concern for me. The concern is it is now legally possible, I think in many circumstances, for someone to not only be an efficient infringer but also to get away with infringing and never paying and that is problematic from a societal perspective because it will dramatically reduce the returns to R&D, and society will lose out on the advancement of technology that R&D inevitably produces.
Tags: Ashley Keller, efficient infringement, patent, patents
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