The Smallest Salable Patent-Practicing Unit: Observations on Its Origins, Development, and Future
The smallest salable patent-practicing unit (SSPPU) concept has often been used to argue that the royalties for a portfolio of SEPs should be limited to the cost of a key component in the implementation of the standard. The paper “The Smallest Salable Patent-Practicing Unit: Observations on Its Origins, Development, and Future” explains why the SSPPU concept was never intended to be, and isn’t, a rigid rule prescribing how patent damages and royalties must be calculated in all contexts. David Kappos and Paul Michel argue that the notion of the SSPPU rule does not restrict how patent holders may value their patents, nor does it dictate how negotiating parties may arrive at mutually agreeable licensing terms. More specifically, they discuss the following: i) the case law makes clear that the SSPPU concept is limited in application; past cases applying the SSPPU concept make clear that the motivating concern is jury confusion, ii) no case has ever held that the SSPPU concept determines the royalty base that must be used in patent licenses, iii) no court has ever held that the SSPPU approach should apply to licenses of large and diverse portfolios of patents, iv) there is no support for the contention that SSPPU is a requirement of FRAND terms and conditions under which holders of SEPs often agree to grant licenses; no case has imposed such a requirement.