Explaining the “unpredictable”: An empirical analysis of U.S. patent infringement awards

- We investigate whether patent damages are explained by observable factors.
- We analyze 340 US district court cases from 1995 to 2008 using 120 variables.
- We find that the distribution of award levels is highly skewed.
- We find that infringement damages are highly explainable, with R2 over .75.
- We also identify certain significant factors associated with higher awards.

Patent infringement awards are commonly thought to be unpredictable, which raises concerns that patents can lead to unjust enrichment and impede the progress of innovation. We investigate the unpredictability of patent damages by conducting a large-scale econometric analysis of award values. We begin by analyzing the outcomes of 340 cases decided in US federal courts between 1995 and 2008 in which infringement was found and damages were awarded. Our data include the amount awarded, along with information about the litigants, case specifics and economic value of the patents-at-issue. Using these data, we construct an econometric model that explains over 75% of the variation in awards. We further conduct in-depth analysis of the key factors affecting award value, via targeted regressions involving selected variables. We find a high degree of significance between award value and ex ante-identifiable factors collectively, and we also identify significant relationships with accepted indicators of patent value. Our findings demonstrate that infringement awards are not systematically unpredictable and, moreover, highlight the critical elements that can be expected to result in larger or smaller awards.