Wednesday, October 28, 2009

Red Bend v. Google Chrome -- No Damages?

Matt Asay over at CNet had an interesting idea in terms of the ability of patent plaintiff's ability to collect damages over Google's use of open source software. He opined that under the proposed patent reform act, plaintiffs would be unable to collect damages for patent infringement because, under the proposed legislation, damages would be calculated based on the difference between using the infringing technology and using the next best non-infringing substitute. He theorized that this might be the reason that Google was supporting patent reform.

In my view, however, this same result would occur even under current law. Currently, damages are calculated (or are supposed to be) based on a "hypothetical negotiation" between the patentholder and the infringer. Damages are supposed to be awarded based on what the parties would have licensed the patent for in that negotiation. If, in the Red Bend situation, Google could have replaced the Red Bend compression algorithm with another open source algorithm at no cost (other than the cost of changing the algorithm), it would have paid very little to Red bend to license the patented algorithm -- in fact, in that situation, the patent would be virtually worthless. The damages awarded for the infringement of a worthless patent which is easily worked around are very low -- even under current law.

Thus, if Google does its damages analysis right, it should be able to get out of this case cheaply.

And, if open source software provides lots of low cost or free substitutes, the same should apply across the board.

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