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 first Georgia-Pacific factor.
- The royalties received by the patentee for the licensing of the patent in suit, proving or tending to prove an established royalty.
| Case | Outcome | Notes |
| Trell v. Marlee Electronics Corp., 912 F. 2d 1443 (Fed. Cir. 1990) | Reasonable Royalty Vacated | The district court erred in relying solely on the fee set forth in a prior Plaintiff license as a reasonable royalty. Defendant’s infringement related to only one aspect of plaintiff’s invention, as compared with the scope of the prior license. The district court also failed to consider the fact that the prior license was exclusive and that it encompassed the right to other inventions. |
| Odetics, Inc. v. Storage Technology Corp., 185 F. 3d 1259 (Fed. Cir. 1999) | Exclusion of Licenses Affirmed | The district court did not err in excluding 2 Plaintiff licenses under the asserted patent. The district court ruled that because these license agreements were negotiated four and five years, respectively, after the date of first infringement, they were irrelevant. |
| Minks v. Polaris Industries, 546 F.3d 1364 (Fed. Cir. 2008) | Judgement Reducing the Reasonable Royalty Vacated | The district court relied on a recent agreement where Plaintiff received a 4% royalty on total gross sales of patented and unpatented items. But under a previous agreement, Plaintiff received a 10% royalty based on the sale of patented items. The district court should’ve assessed the sufficiency the testimony to support an established royalty of 4%, 10%, or some other rate. |
| ResQNet. com, Inc. v. Lansa, Inc., 594 F. 3d 860 (Fed. Cir. 2010) | Reasonable Royalty Vacated | The expert based his damages on 7 Plaintiff licenses, 5 of which had no relation to the claimed invention. These 5 licenses furnished products, as well as services such as training, maintenance, marketing, and upgrades, in exchange for ongoing revenue-based royalties. None of these licenses even mentioned the patents in suit or showed any other discernible link to the claimed technology. The rates in these 5 licenses were significantly higher other 2 licenses in the record. These 2 “straight” licenses arose out of litigation over the patents in suit, and were the most reliable licenses in the record. |
| Wordtech Systems, Inc. v. Integrated Networks Solutions, Inc., 609 F. 3d 1308 (Fed. Cir. 2010) | New Trial on Reasonable Royalty Granted | Plaintiff’s 13 prior licenses cannot support the lump sum award of $250,000. Of the 13 licenses, only 2 were lump-sum agreements. The two prior lump sum agreements did not describe how the parties calculated each lump sum, the licensees’ intended products, or how many products each licensee expected to produce. The remaining 11 licenses, which used running royalties, also fail to support the verdict because they reveal no basis to compare the running royalties to the lump sum. |
| Finjan, Inc. v. Secure Computing Corp., 626 F. 3d 1197 (Fed. Cir. 2010) | Reasonable Royalty Affirmed | The jury’s $9.18 million award for infringement of 3 patents was properly supported despite a prior worldwide license by Plaintiff for $8 million covering its entire patent portfolio. There were multiple differences between the prior licensing scenario and the hypothetical negotiation with Defendant. For example, Plaintiff did not compete with the prior licensee but does compete against Defendant; Plaintiff received significant intangible value from the prior licensee’s endorsements; and the prior license involved a lump sum instead of a running royalty. |
| Whitserve, LLC v. Computer Packages, Inc., 694 F.3d 10 (Fed. Cir. 2012) | Reasonable Royalty Vacated | The lump sum payments negotiated by Plaintiff cannot support the jury’s running royalty rate without testimony explaining how they apply to the facts of the case. Plaintiff’s expert did not explain how the two licenses could be converted to a royalty rate. Even if the jury award is meant to be a lump sum, which it does not appear to be, the court notes the jury’s verdict of $8.3 million was over 3 times the average of the lump sum licenses presented. |
| ActiveVideo Networks v. Verizon Communications, 694 F. 3d 1312 (Fed. Cir. 2012) | Excluding Some Expert Testimony on Comparable Licenses, And Admitting Some | The district court did not abuse its discretion by preventing Defendant’s expert from relying on a previous Plaintiff agreement which post-dated the hypothetical negotiation by several years.
The district court did not err by failing to exclude the testimony of Plaintiff’s damages expert. The degree of comparability of the prior license agreements as well as any failure on the part of Plaintiff’s expert to control for certain variables are factual issues best addressed by cross examination and not by exclusion. |
| LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F. 3d 51 (Fed. Cir. 2012) | New Trial on Reasonable Royalty Granted | The district court erred in admitting a previous settlement agreement. The settlement agreement here appears to be the least reliable license in the record by a wide margin. The $6 million lump sum license fee is six times larger than the next highest amount paid for a license to the patent-in-suit, and ostensibly reflects not the value of the claimed invention but the strong desire to avoid further litigation under the circumstances. Plaintiff executed 29 licenses for the patent-in-suit, the vast majority of which are not settlements of active litigation and do not involve the unique coercive circumstances of the particular prior settlement agreement, and which are therefore far more reliable for they hypothetical negotiation.
The district court erred in admitting Plaintiff’s expert’s opinion concerning a 6% royalty rate. The past licensing programs using that rate were not sufficiently comparable to the hypothetical license. One of the licensing program did not involve the asserted patent and no evidence shows that it even involved the specific technology. The other licensing program was not even limited to any particular industry. Moreover, the prior licenses to the patents-in-suit were generally for lump sums not exceeding $1 million. The expert’s 6% royalty rate cannot be reconciled with this evidence. |
| ePlus, Inc. v. Lawson Software, Inc., 700 F. 3d 509 (Fed. Cir. 2012) | Exclusion of Expert Testimony Affirmed | The district court had sufficient basis to preclude Plaintiff’s expert from presenting damages testimony. Plaintiff entered into 5 litigation settlements and in 2 of them obtained much higher amounts than in the other 3. Moreover, the two larger agreements were paid in lump-sums; whereas one of the smaller three included a royalty percentage. The expert gave great weight to the two highest paying agreements, explaining that the remaining three were not as informative. The district court did not err in finding that the license agreements were not sufficiently probative because they were obtained during litigation and included lump-sums received for multiple patents and cross-licensing deals. The district court did not err in finding that had ignored the settlements that produced smaller rates, even though some included a percentage rate rather than a lump sum. |
| Apple Inc. v. Motorola, Inc., 757 F. 3d 1286 (Fed. Cir. 2014) | Exclusion of Licenses Testimony Reversed | The district court erred in excluding damages expert’s testimony on comparable licenses relating to Plaintiff’s past licenses. Whether these licenses are sufficiently comparable for a reasonable royalty goes to the weight of the evidence, not its admissibility. |
| VirnetX, Inc. v. Cisco Systems, Inc., 767 F. 3d 1308 (Fed. Cir. 2014) | Permitting Expert Testimony on Reasonable Royalty | The district court did not abuse its discretion by permitting expert testimony regarding the proper royalty rate based on the allegedly comparable licenses. 4 of the 6 challenged licenses relate to the actual patents-in-suit, while the others were drawn to related technology. Moreover the differences between the licenses and the asserted patents were presented to the jury, allowing the jury to fully evaluate the relevance of the licenses. |
| Ericsson, Inc. v. D-Link Systems, Inc., 773 F. 3d 1201 (Fed. Cir. 2014) | Refusal to Exclude Expert Testimony Affirmed | The district court did not err by refusing to exclude the license testimony here. Although the prior licenses were calculated as some percentage of the value of a multi-component end product, that a license is not perfectly analogous generally goes to the weight of the evidence, not its admissibility. Moreover the expert explained to the jury the need to discount reliance on a given license to account only for the value attributed to the licensed technology. |
| SUMMIT 6, LLC v. Samsung Electronics Co., Ltd., 802 F. 3d 1283 (Fed. Cir. 2015) | Affirming Reasonable Royalty | The prior license supports the jury verdict. Plaintiff’s damages expert testified that the prior license conveys the rights to the patent in suit, and that both the prior licensee and Defendant are similarly situated with respect to the products sold. And the jury heard evidence regarding the royalty amount in the prior license and about Defendant’s sales volume in comparison to the prior licensee. |
| Sprint Communs. Co., L.P. v. Time Warner Cable, Inc., 760 F. App’x 977 (Fed. Cir. 2018) | Reasonable Royalty Affirmed | The jury royalty rate of 5% of relevant revenue was supported in party by two other licenses from Plaintiff for the patented technology. The fact that two other licenses were granted for the same technology, together with a prior verdict—all of which were for the same royalty rate—provides strong support for Plaintiff’s argument that the damages award in this case reflected the incremental value of the inventions and thus satisfied the requirement of apportionment. |
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