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 sixth Georgia-Pacific factor.
- 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.
| Case | Outcome | Notes |
| Deere & Co. v. International Harvester Co., 710 F. 2d 1551 (Fed. Cir. 1983) | Affirming Reasonable Royalty | The district court did not err by taking into account the impact of anticipated collateral sales of an admittedly noninfringing product line in the hypothetical negotiation. |
| Trans-World Mfg. Corp. v. Al Nyman & Sons, Inc., 750 F. 2d 1552 (Fed. Cir. 1984) | Exclusion Of Evidence Reversed | By supplying the patented product for displaying the unpatented product, the defendant used the patented invention in promoting sales of the nonpatented product. Plaintiff may be able to prove that Defendant’s infringing use of the invention played an important part in the retail sales of unpatented product. The extent of the profits from such sales could be relevant in determining the amount of a reasonable royalty. If, for example, sales were increased because of the infringing use of the invention, that fact could affect that amount of royalties a potential licensee would be willing to pay. |
| State Industries, Inc. v. Mor-Flo Industries, Inc., 883 F. 2d 1573 (Fed. Cir. 1989) | Reasonable Royalty Affirmed | The district court did not err by factoring collateral sales into the royalty rate. The patented invention was used to promote Defendant’s product line. And it was not inappropriate for the district court to consider gross profits. |
| Interactive Pictures v. Infinite Pictures, 274 F. 3d 1371 (Fed. Cir. 2001) | Reasonable Royalty Affirmed | Plaintiff’s expert permissibly included all Defendant’s products in the royalty base, and the expert did not provide for an unfair double recovery by factoring the bundling and convoying sales into the royalty rate. The jury was entitled to rely on evidence of bundling and convoyed sales in determining the proper scope of the royalty base. |
| Micro Chemical, Inc. v. Lextron, Inc., 317 F. 3d 1387 (Fed. Cir. 2003) | Reasonable Royalty Affirmed | The district court did not err by allowing Plaintiff’s expert to consider sales of Defendant’s other products in arriving at a reasonable royalty. Before trial, the district court ruled that Plaintiff could not include sales of non-patented items in the royalty base but could demonstrate that those sales were relevant in determining a reasonable royalty. The expert testified that the reasonable royalty on Defendant’s infringing systems would increase because they would promote sales of the defendants’ other products. |
| 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 to reduce the royalty to 4%. The district court should’ve assessed whether the evidence of these negotiations, in which Minks was able to secure sales of non-patented items, was sufficient to support a reasonable royalty rate higher than 4%. |
| Fujifilm Corp. v. Benun, 605 F. 3d 1366 (Fed. Cir. 2010) | Reasonable Royalty Affirmed | The jury was entitled to rely on evidence of bundling and convoyed sales in determining the proper scope of the royalty base. Based on Defendant’s inability to separate the infringing products from the non-infringing products, Plaintiff’s expert included both infringing and non-infringing products in the royalty base. The expert testified that in a hypothetical negotiation the royalty rate would have changed inversely to royalty-base changes, resulting in a consistent royalty amount. The fact that bundling and convoyed sales affected Plaintiff’s estimate of both the royalty base and the royalty rate is not a sufficient reason to nullify the jury’s award. |
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