In-House Counsel

Adjusted for inflation, median damages in patent litigation have held steady for 12 years

By Rees Morrison

This blog has many posts about patent litigation and the costs of patent litigation (See my post of Oct. 2, 2008: costs of patent litigation, with 13 references.) so it surprised me that ?The annual median damages award since 1995 has remained fairly consistent, when adjusted for inflation.?

This finding, a jarring contrast to the constant shrieking about ?bet the company? patent litigation and soaring litigation risks, comes from an impressive study by PricewaterhouseCoopers. Adjusting for damage awards for inflation using the Consumer Price Index (CPI), PwC found the median figure has remained steadily around $3.85 million for the past dozen years.

My broader point is that all longitudinal data about costs, such as salaries or bonuses or billing rates of law firms, should be adjusted by some deflator to show the changes expressed as present-day dollars. Note that the leading metric, total legal spending as a percentage of revenue, avoids the distortions of inflation because it is a ratio ? the numerator legal spending and the denominator revenue equally inflate as prices rise.

The CPI is not the only methodology for adjusting historical costs. The J. of the Historical Soc., Vol. 9, March 2009 at 70, recommends use of the implicit GDP deflator as a more accurate way to adjust data collected over a number of years. The article refers readers to a website (MeasuringWorth.com) that explains this and five ways to compute the relative value of a U.S. dollar amount.

Full post as published by Law Department Management on April 01, 2009 (boomark / email).