“Excessive Royalty” Prohibitions and the Dangers of Punishing Vigorous Competition and Harming Incentives to Innovate

By Douglas H. Ginsburg, Bruce H. Kobayashi, Koren W. Wong-Ervin, and Joshua D. Wright

This article discusses the dangers of regulating royalties, including the difficult — if not impossible — task of determining whether a particular royalty is “excessive,” and suggest that agencies not apply to IPRs, including SEPs, their laws prohibiting excessive pricing. Should an agency be required by law to apply the prohibition to IPRs, then at the very least it should focus primarily upon the prices of comparable licenses, which are the best available evidence of the market value of a patent.