The concept of basing patent infringement damages on the sale of the smallest salable patent–practicing unit (“SSPPU”) has garnered support from a significant portion of the U.S. innovation community. Some supporters contend that the SSPPU is a substantive rule for defining the appropriate royalty base for all purposes and in all contexts. In this Article, we challenge this view and conclude that the SSPPU is merely a tool used to implement the apportionment requirement created in Garretson v. Clark, 111 U.S. 120 (1884), in the context of patent infringement jury trials. This Article further clarifies the SSPPU’s role and limits in U.S. patent damage determinations. Some of these limits include its (a) inability to estimate the value of licenses in large portfolios, (b) irrelevance to standard–essential patents in FRAND licensing situations, and (c) inability to override actual market value. We believe an understanding of these limitations is necessary to avoid erroneously applying the SSPPU in contexts for which it is not intended and in which application could lead to a reduction of incentives for innovation and R&D, particularly in standards–dependent fields.
David Kappos and (The Honorable) Paul R. Michel,
THE SMALLEST SALABLE PATENT-PRACTICING UNIT: OBSERVATIONS ON ITS ORIGINS, DEVELOPMENT, AND FUTURE,
32 Berkeley Tech. L.J. 1433