Although the Federal Circuit has “never described the Georgia–Pacific factors as a talisman for royalty rate calculations, district courts regularly turn to this 15–factor list.” Ericsson v. D-Link. The factors derive from Georgia-Pacific v. U.S. Plywood. The Federal Circuit does “not require that witnesses use any or all of the Georgia–Pacific factors when testifying about damages” in patent infringement cases. Whitserve v. Computer Packages. “If they choose to use them, however, reciting each factor and making a conclusory remark about its impact on the damages calculation before moving on” is not sufficient. Id. “When performing a Georgia–Pacific analysis, damages experts must not only analyze the applicable factors, but also carefully tie those factors to the proposed royalty rate.” Exmark v. Briggs & Stratton.
The fifteen factors are:
- The royalties received by the patentee for the licensing of the patent in suit, proving or tending to prove an established royalty.
- The rates paid by the licensee for the use of other patents comparable to the patent in suit.
- The nature and scope of the license, as exclusive or non-exclusive; or as restricted or non-restricted in terms of territory or with respect to whom the manufactured product may be sold.
- The licensor’s established policy and marketing program to maintain his patent monopoly by not licensing others to use the invention or by granting licenses under special conditions designed to preserve that monopoly.
- The commercial relationship between the licensor and licensee, such as, whether they are competitors in the same territory in the same line of business; or whether they are inventor and promotor.
- The effect of selling the patented specialty in promoting sales of other products of the licensee; the existing value of the invention to the licensor as a generator of sales of his non-patented items; and the extent of such derivative or convoyed sales.
- The duration of the patent and the term of the license.
- The established profitability of the product made under the patent; its commercial success; and its current popularity.
- The utility and advantages of the patent property over the old modes or devices, if any, that had been used for working out similar results.
- The nature of the patented invention; the character of the commercial embodiment of it as owned and produced by the licensor; and the benefits to those who have used the invention.
- The extent to which the infringer has made use of the invention; and any evidence probative of the value of that use.
- The portion of the profit or of the selling price that may be customary in the particular business or in comparable businesses to allow for the use of the invention or analogous inventions.
- The portion of the realizable profit that should be credited to the invention as distinguished from non-patented elements, the manufacturing process, business risks, or significant features or improvements added by the infringer.
- The opinion testimony of qualified experts.
- The amount that a licensor (such as the patentee) and a licensee (such as the infringer) would have agreed upon (at the time the infringement began) if both had been reasonably and voluntarily trying to reach an agreement; that is, the amount which a prudent licensee — who desired, as a business proposition, to obtain a license to manufacture and sell a particular article embodying the patented invention — would have been willing to pay as a royalty and yet be able to make a reasonable profit and which amount would have been acceptable by a prudent patentee who was willing to grant a license.
This post will analyze the twelfth and thirteenth Georgia-Pacific factors.
- The portion of the profit or of the selling price that may be customary in the particular business or in comparable businesses to allow for the use of the invention or analogous inventions.
- The portion of the realizable profit that should be credited to the invention as distinguished from non-patented elements, the manufacturing process, business risks, or significant features or improvements added by the infringer.
| Case | Outcome | Notes |
| Lucent Technologies, Inc. v. Gateway, Inc., 580 F. 3d 1301 (Fed. Cir. 2009) | Reasonable Royalty Vacated | Factor 13 did not support the jury award of $358 million. The only reasonable conclusion is that most of the realizable profit must be credited to non-patented elements, such as the manufacturing process, business risks, or significant features or improvements added by Defendant. The accused product consists of millions of lines of code, only a tiny fraction of which encodes the patented feature. Although the weighing of Factor 13 cannot be reduced to a mere counting of lines of code, the glaring imbalance between infringing and non-infringing features must impact the analysis of how much profit can properly be attributed to the use of the patented feature compared to non-patented elements and other features of the accused product. Here, numerous features other than the date-picker appear to account for the overwhelming majority of the consumer demand and therefore significant profit. |
| Wordtech Systems, Inc. v. Integrated Networks Solutions, Inc., 609 F. 3d 1308 (Fed. Cir. 2010) | New Trial on Reasonable Royalty Granted | The lump sum award of $250,000 was unsupported by the evidence. Even if Plaintiff is correct that its patents account for the entire value of the accused product, its profit arguments rest on speculation. Plaintiff’s methodology assumes Defendant incurred zero costs with its product. Moreover, Plaintiff argues a theory it did not present to the jury. Instead of providing plausible explanations for the verdict, these unsupported rationalizations highlight the speculative nature of the evidence. |
| Finjan, Inc. v. Secure Computing Corp., 626 F. 3d 1197 (Fed. Cir. 2010) | Reasonable Royalty Affirmed | The jury’s $9.18 million award was properly supported. The jury heard evidence on which it could conclude that the patented inventions were far from being tiny features in the accused products. Plaintiff’s expert testified that based on Defendant’s internal documents, the patented technology was fundamentally important to the product. And there was evidence from the parties’ promotional material that the invention was an important technology. .” From this evidence, the jury could infer that a substantial fraction of the accused products’ profits stemmed from the patented feature. |
| Exmark Mfg. Co. v. Briggs & Stratton Power Prods. Grp., LLC, 879 F.3d 1332 (Fed. Cir. 2018) | Reasonable Royalty Vacated | Exmark’s damages expert’s opinion was inadmissible because it failed to adequately tie the proposed royalty rate to the facts of the case. The expert failed to conduct an analysis indicating the degree to which non-patented elements of the accused product impacted the suggested 5% royalty rate. The expert acknowledged that other elements of the accused product affect sales and profits, including durability, reliability, brand position, dealer support, and warranty. But the expert failed to conduct any analysis indicating the degree to which these considerations impact the market value or profitability of the accused product. |
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