Unreasonable Royalty: Realigning Economic Incentives Involving Innovation in the Age of Patent Assertion Entities

Patent litigation is a high-stakes endeavor when jury verdicts can be in the hundreds of millions or even billions. With this much at stake, the judicial system is ripe for abuse by parties that aren’t inventors or producers: nonpracticing entities. Various steps have been taken to mitigate or discourage the gaming of the system but have not been successful for various reasons. This Article proposes the novel solution of incorporating a federal damages cap into 35 U.S.C. § 284 to shift the underlying economic incentives toward innovation. After discussing some likely challenges to the proposal, this Article concludes that the damages cap would shift the underlying economic incentives to practicing entities, reduce deadweight loss to society, allocate resources more effectively, and create a net societal gain