When we buy things such as apples or cars or a ticket to a movie, we implicitly understand that the amount we’re paying for those things reflects, in some sense, their value. We also understand that the amount we’re paying can go up or down over time depending on a number of factors such as the supply, the demand, the quality and the like. Businesses also operate under these principles, such as when they order parts, stock up on inventory or set prices for their own products. Indeed, economists have long studied and codified the behavior of valuation and price for all kinds of items and can predict where things will move over time.

When we see the amounts being demanded and paid recently for patents, can we assume they follow these same principles? After all, much like apples and cars, patents are items of personal property that can be created, transferred, sold and otherwise monetized for profit. So when a company spends a million dollars to buy a patent, is it fair to assume that patent was worth the money? Similarly, when a company spends over a billion dollars to buy a portfolio of patents, such as Microsoft recently did in purchasing the bulk of AOL’s patent portfolio, can we conclude that this amount actually reflected their value? The answer is perhaps it was to the one doing the buying.

Overall, though, the clear trend has been towards higher valuations for patent portfolios. As discussed in my last column, there are many examples of recent patent portfolio sales and prospective sales with amounts being offered in the hundreds of millions if not billions of dollars. The amounts being paid are unprecedented. Given the dramatic increases in amounts over the past couple of years, one would think that patents themselves were becoming inherently more valuable, and that changes in the law were supporting these higher valuations. This doesn’t seem to be the case, however.

Indeed, at the same time patent valuations have been soaring, the stewards of the patent system have been taking steps which would normally have the effect of reducing the value of patents in general. Over the past few years Congress, the courts, the Patent Office and other governmental agencies, and even the industry itself have consistently been taking steps to curtail damages recoverable by patent owners, limit the availability of injunctions, make it easier to challenge patent validity, lower the standard of obviousness, increase the cost of prosecuting patents, put roadblocks before the patent trolls and others who prefer to choose favorable venues and many other similar steps. Yet despite all these changes, patents seem to be getting more and more valuable.

A few examples may be telling. In response to rising damage awards from juries such as the $1.5 billion jury award to Lucent in its case against Microsoft, in early 2011 the Federal Circuit ruled that patent damages needed to be based on the value attributable to the specific infringing feature within an overall product and not based on the value of the entire product itself. This was deemed particularly applicable to software products and services having a variety of features, and courts have applied this rule fairly consistently since then. More recently, in both the Apple v. Motorola and Oracle v. Google smartphone litigations, the trial courts cut back or eliminated all damages based on various rules used to limit patent damages. Nevertheless, despite the trend in the courts to limit the amounts of patent damages, patents themselves have continued to increase in value.

Similarly, courts have been cutting back on the availability of enhanced damages for willful infringement, a key issue that has often motivated accused infringers to settle to mitigate risk. In a case just decided, the Federal Circuit raised the standard and ruled that an infringer won’t be held liable for willful infringement unless the patent owner can prove the infringer ignored an objective risk it was infringing. Perhaps equally important, the Federal Circuit ruled that the assessment based on the facts of whether the infringer acted reasonably could be made by the judge, as most defendants would prefer, rather than by the jury. This ruling was the latest in a series of rulings over the past few years raising the bar on patent owners seeking enhanced damages. Yet despite the added challenge to patent owners in proving and getting enhanced damages, patents themselves have continued to increase in value.

Congress has also acted recently. In its passage of the America Invents Act in late 2011, Congress, among other things, barred patent owners from filing suits against multiple unrelated defendants, a tactic commonly used by the patent plaintiffs to obtain access to desirable venues and for other reasons deemed advantageous. In addition, Congress added new procedures for challenging the validity of patents at the Patent Office, which take effect in September. Yes, despite the addition of these tools which purport to benefit companies accused of patent infringement, patents themselves have continued to increase in value.

As these few examples show, there has been an inverse relationship in recent years between the legislative and judicial efforts being made to cut back on the risks and damages associated with patent infringement and the actual values being assigned to patents. Perhaps this is a sign that these measures are not sufficient to stem the tide. Perhaps it means that increases in market value of the underlying technology such as the web and smartphones more than make up for these devaluing effects. Perhaps it will take longer for these changes to have the effect apparently desired by those in the government. Until then, we can expect to continue to see deals of this size and scope.