In recent articles and commentaries, authors have theorized a growing trend of large corporations allegedly engaging in a business technique known as “efficient infringement.” This technique, the authors have argued, involves a calculation by which a company weighs the benefits of manufacturing or selling a product patented by a third party against the likelihood a court will hold it liable for infringement. According to the theory, if the benefits outweigh the costs, the company will infringe.
The use of a cost-benefit analysis to determine whether the risk of infringing outweighs the costs of developing a noninfringing alternative is rooted in contract law. In a typical example, a party to a contract will find a breach more “efficient” if its profits arising from the breach exceed the damages owed to the nonbreaching party. Applied to patent law, the costs or risks involved require an understanding and analysis of patent law. For example, one would assess the likelihood of a court or jury finding infringement; finding the applicable patent claims not invalid; finding the patent not unenforceable; issuing a remedy more severe than payment of a reasonable royalty; issuing an injunction; and finding willful infringement, thereby opening the door to potential treble damages and attorney fees.
