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 seventh and eighth Georgia-Pacific factors.
- The duration of the patent and the term of the license.
| Case | Outcome | Notes |
| 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 that the patents do not expire until 2017 or 2021 and that long expiration dates support higher hypothetical royalty rates, particularly in the software industry. |
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- The established profitability of the product made under the patent; its commercial success; and its current popularity.
| Case | Outcome | Notes |
| Paymaster Technologies, Inc. v. U.S., 180 Fed. Appx. 942 (Fed. Cir. 2006) | Analysis Of Georgia Pacific Factors Affirmed
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The district court did not commit reversible error in finding this factor neutral. Plaintiff’s expert asserted that the patented technology was popular and highly profitable for the defendant. Defendant’s expert disagreed, arguing that no profits were made. The district court could have found that this factor was proven given that there was evidence that defendant purchased 1.5 billion forms relating to the patented technology, showing commercial success. |
| Lucent Technologies, Inc. v. Gateway, Inc., 580 F. 3d 1301 (Fed. Cir. 2009) | Reasonable Royalty Vacated | The jury award of $358 million was not supported by the evidence. The profitability of the products supports a higher reasonable royalty, given the unrebutted evidence that the products at issue are sold with an approximately 70-80% profit margin. But other factors substantially go against the jury award. |
| 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. After determining operating profit margins for both the products, Plaintiff’s expert considered a variety of factors to conclude that the parties in a hypothetical negotiation would have agreed upon a “one-third/two-third split” of operating profit margins. The expert admitted that he used Defendant’s company-wide, instead of product-specific, gross profits to calculate royalty rates. In calculating operating profit, the expert discounted certain expenses in Defendant’s financial statements not related to product manufacture, sales, and marketing. The jury was entitled to rely on this reasoning. |