The decision says the georgia pacific factors must be adjusted to account for the purpose of the frand commitment and, accordingly, modified emphasis mine in both quotes. In its opinion, the federal circuit emphasized the flexibility of its jurisprudence in deciding damages with an understanding that actual licensing much less a hypothetical negotiation is complicated and inexact. An assignments effect on hypothetical negotiation thursday, feb 07, 2008 a number of the georgiapacific factors depend on the identities of the willing licensor and willing licensee in a damages calculation using a hypothetical negotiation to establish a reasonable royalty under 35 u. At no point did the court say that the hypothetical negotiation approach using 15 factors it identified was intended to be an allencompassing checklist for determining a reasonable royalty under 35 u. This factor requires the consideration of the amount a licensor and licensee would negotiate had they both been reasonably and voluntarily trying to reach an agreement. The fifteen factor georgia pacific analysis provides guidance as to what would happen at a hypothetical negotiation between the patentee and the accused infringer just before the infringement began. Evaluation of these factors generally requires a more intensive analysis than for an established royalty and the factfinder is often aided by. Appellate court scowls at 25% rule, smiles upon georgia pacific factors. The final two georgia pacific factors addressed in the appeal of the finjan award concern issues distinct from those addressed in lucent, resqnet or wordtech. Georgia pacific factors the most critical georgia pacific factor is the last one, or whats known as the hypothetical negotiation. Georgia pacific factor 2 with respect to factor 2, lucent. The rates paid by the licensee for the use of other similar patents. Sep 17, 2009 the decision signals unwavering approval for the continued use of a hypothetical negotiation or willing licensorwilling licensee approach to determining a reasonable royalty as a basis for patent damages award, and embraces the venerable georgia pacific factors as a framework for calculating such damages. Reasonable royalty georgiapacific factors business.
Locating time frames for the hypothetical negotiation new. Specifically, in a hypothetical bargain for a patent license, both economic and negotiation theory explain that a rational patent licensor would agree to pay only the costs it would incur to adopt. The final georgia pacific factor summarizes the hypothetical negotiation and is also somewhat of a catchall. Jan 17, 2018 a reasonable royalty for the infringers use of the invention is one way to measure damages for patent infringement others include lost profits and established royalties. When considering many of these factors, a specific royalty rate is not indicated, but qualitative indications are provided for a higher, lower, or neutral adjustment to some sort of benchmark royalty rate. In intellectual property infringement cases, business valuation experts often use the georgiapacific model to determine reasonable royalty rates.
Suing for patent infringement if the government takes your. Judge michel wrote that the georgia pacific factors avoid a highly speculative award when each factor is tied into. The licensors established policy and marketing program to maintain his patent. Indeed, the georgia pacific factors are not, and were never intended to be, a generally applicable framework for determining reasonable royalty damages. Georgiapacific factors may be used but not all factors always applicable. Washington district court establishes a framework for. In determining the royalty, courts typically consider the nonexhaustive list of factors in the georgiapacific this court does not endorse georgiapacific as setting forth a test for royalty calculations, but only as a list of admissible. However, equal bargaining position is rarely the case. The decision signals unwavering approval for the continued use of a hypothetical negotiation or willing licensorwilling licensee approach to determining a reasonable royalty as a basis for patent damages award, and embraces the venerable georgia pacific factors as a framework for calculating such damages. A comparison of the georgiapacific factors and the standard of a hypothetical negotiation to the evidence of record in this case makes clear that the district courts reduction of compensatory damages necessarily amounted to an assessment of the sufficiency of the evidence, and as such, the option of a new trial was required. Institute of technology law, national chiao tung university, taiwan.
The time has come to break the georgia pacific habit. To date, the georgia pacific list has been the main framework used by u. Patent infringement and damages in computer hardware. Judges diverge on use of patent license negotiations to. The most critical georgia pacific factor is the last one, or whats known as the hypothetical negotiation. Ignoring the georgiapacific factors in ongoing infringement analyses on remand of amado, the central district of california rejected the idea of using the georgiapacificfactors to determine an ongoing royalty, reasoning that the. The georgia pacific case sets for a long list of factors, which the federal circuit has approved, that are relevant in determining a reasonable royalty. In this months uniloc decision, the federal circuit confirmed microsofts liability for infringing a patent on antipiracy software that microsoft infringed via the copy protection keys used in sales of office and windows.
Patent license royalty rates are strong evidence of. Mills analysis fails to tie the georgia pacific factors to a hypothetical negotiation that would have taken place between the parties. After determining operating profit margins for both the software and hardware products, he considered a variety of factors to conclude that the parties in a hypothetical negotiation would have agreed upon a onethirdtwothird split of operating profit margins. Courts often focus on the last georgia pacific factor. The courts approach for determining a rand royalty rate begins with the application of a modified version of the georgia pacific factors the fifteen factors traditionally analyzed in determining reasonable royalty damages under 35 u. A reasonable royalty for the infringers use of the invention is one way to measure damages for patent infringement others include lost profits and established royalties a reasonable royalty is a amount determined by a court to result from a hypothetical negotiation between the patent owner and the infringer. The court noted that a reasonable royalty can be calculated from an established royalty, profit projections, or a hypothetical negotiation based on the factors in georgia pacific. Locating time frames for the hypothetical negotiation. Federal circuit on applying georgiapacific factors 7 and. Reconsidering the georgiapacific standard for reasonable. The infringers willingness to pay for the patented technology is a sensible basis for the royalty and the principles of corporate finance and investment analysis. However, not all future events are considered relevant. Quantified the georgiapacific factors for calculating reasonable royalties.
An analytical solution to reasonable royalty calculations. The courts approach for determining a rand royalty rate begins with the application of a modified version of the georgiapacific factorsthe fifteen factors traditionally analyzed in determining reasonable royalty damages under 35 u. Apr 28, 20 the decision says the georgia pacific factors must be adjusted to account for the purpose of the frand commitment and, accordingly, modified emphasis mine in both quotes. Quantified the georgiapacific factors for calculating. Texas trial court judges differ over whether settlement negotiations are privileged 1. The court noted that a reasonable royalty can be calculated from an established royalty, profit projections, or a hypothetical negotiation based on the factors in georgiapacific. One frequently cited framework related to the estimation of a reasonable royalty is presented in. Hoi yan anna fong department of engineering and technology management, national university of singapore, singapore. Also, there is more involved with using a georgia pacific factor analysis in relation to. An assignments effect on hypothetical negotiation february 7, 2008, 12. A reasonable royalty is a amount determined by a court to result from a hypothetical negotiation between the patent owner and the infringer. The cpadamage expert must consider the types of available information and types of analyses to determine how to apply the georgia pacific factors to form an opinion as to a reasonable royalty. Quantified the georgia pacific factors for calculating reasonable royalties. An assignments effect on hypothetical negotiation law360.
Jan 31, 2020 the factors derive from georgiapacific v. Selection of a reasonable royalty rate to measure economic. Since no patent damages site would be complete without a listing of the georgia pacific factors the royalties received by georgia pacific for licensing the patent, proving or tending to prove an established royalty. This article proposes a more manageable alternative to georgia pacific when an acceptable noninfringing substitute for the patented technology exists. Standards damages law joint and several liability analysis patent infringement remedies. An assignments effect on hypothetical negotiation thursday, feb 07, 2008 a number of the georgia pacific factors depend on the identities of the willing licensor and willing licensee in a damages calculation using a hypothetical negotiation to establish a reasonable royalty under 35 u. They suggested that each factor that had a positive effect on the royalty rate would be awarded a value of positive 1. Navigating hypothetical negotiations 01 october 2008 maria wyckoff boyce and steven j mitby examine the impact of posthypothetical negotiation events on reasonable royalty patent damages and offer practical tips for litigators and damages experts.
The damages section of the opinion is by far the most significant portion. The rand modified hypothetical negotiation, ip strategist. Unilocs attempt to defend its experts use of the rule by pointing to the georgiapacific analysis was unsuccessful. Setting the hypothetical negotiation date and the book of wisdom doctrine.
As a patent infringement damages expert in georgia pacific factors, provide assistance to counsel as an expert consultant in patent infringement damages under 35 u. In finjan, the defendants took issue with numerous assumptions and steps employed by the plaintiffs damages expert in addressing georgia pacific factor. Reasonable royalty georgiapacific factors business advisory. Jan 18, 2011 appellate court scowls at 25% rule, smiles upon georgiapacific factors. Under georgia pacific, the royalty rates for comparable licenses are relevant even if the royalty rate is based on total.
Its not always clear where to start the hypothetical negotiation. Analyzed valuations of the patented technology around the time of the hypothetical negotiation, the drivers of demand for the software applications allegedly embodying the patentsinsuit, the parties patent licensing approaches, andthe. The result of the hypothetical negotiation process is to determine fair compensation to the patent holder for the nature. If they choose to use them, however, reciting each factor and making a conclusory remark. Therefore, in determining a reasonable royalty, an analyst. This article focuses on the federal circuits analysis of georgia pacific factors 2, 11 and, and the changing landscape for patent royalty damages. Evidentiary and atomistic approach to indirect infringement damages a. The federal circuit wrote that it is of no moment that the 25 percent rule of thumb is offered merely as a starting point to which the georgiapacific factors are then applied to bring the rate up or down. All else being equal, the elimination of the risk of invalidity or of noninfringement in the hypothetical negotiation would suggest a higher royalty rate than if those risks did exist, as is the case in many realworld licenses. In intellectual property infringement cases, business valuation experts often use the georgia pacific model to determine reasonable royalty rates.
Federal circuit on applying georgiapacific factors 7 and 8. In order to help assess the likelihood of unequal bargaining positions, the 15 georgia pacific factors address a hypothetical negotiation and the respective bargaining strength of the patentee and infringer. Evicam moved to exclude any argument, evidence, or testimony regarding how watchguard would have behaved at a hypothetical negotiation. Jun 25, 2014 lawtons report instead proposes a per unit damages assessment for apples alleged infringement of the patent claims in suit. Apr 19, 2010 1971, sending a strong message that in the hypothetical negotiation model, the georgia pacific factors provide a framework for damages that can and should be sufficient to deal with apportionment and any other issues. Beyond georgiapacific how market data can be used to. Ultimately, the case is being sent back for a new trial because the jurys award was not. Hypothetical negotiation factor 15 the final georgia pacific factor summarizes the hypothetical negotiation and is also somewhat of a catchall. Is the federal circuit instituting patent reform on its own. Sunstein llp federal circuit holds litigants to strict.
Patent infringement damages expert georgia pacific factors. Georgia pacific sets forth fifteen factors to be considered in the context of a hypothetical negotiation between a willing licensee and a willing licensor at the time of the infringement. Reasonable royalty damages, apportionment and expert opinions. The federal circuit does not require that witnesses use any or all of the georgiapacific factors when testifying about damages in patent infringement cases. Notwithstanding their widespread use, the georgia pacific factors have become outdated and impractical. The licensors established policy and marketing program to maintain his. Hypothetical negotiation 066 the amount that inventor as the patent holder and gamers 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. Since the hypothetical negotiation occurs immediately prior to. Intensity determined and opined on an economically reasonable outcome of a hypothetical negotiation between the parties for a license to the patents that is consistent with the georgia pacific factors. January 5, 2011 damages experts in patent cases can no longer.
Mar 19, 2015 in determining a reasonable royalty for patent infringement damages, district courts often use the hypothetical negotiation analysis. The hypothetical negotiation attempts to determine continue reading patent. Sullivan, hypothetical negotiation date, judge andrews, ssppu, unaccepted offers leave a comment. Under georgiapacific, the following 15 factors may be considered.
Certain other license agreements may lack some degree of comparability because they. In many cases cpadamage experts use this factor as a place to summarize their analysis and list the pros and cons that the licensor and licensee. No formal requirement outlines how one should consider the hypothetical negotiation. Pacific factors are used in the hypothetical negotiation approach to. 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.
Damage approach found acceptable to the court at the. Sep 14, 2009 although the parties had both used the georgia pacific factors to support their hypothetical negotiation analysis, they had disagreed as to form of the royalty that would have been the result of that negotiation. It is important to remember that georgia pacific does not provide a specific formula to determine a royalty rate. Methodologies for determining reasonable royalty damages fish.
In addition, georgia pacific factor 11 specifically relates to the extent the infringer has made use of the invention and the value of that use, all of which must occur after the hypothetical negotiation, which is set at the instant the infringement begins. Determining an appropriate royalty rate for reasonable. Paragraph 92 explains that the hypothetical negotiation under a frand obligation must be different than the typical georgia pacific analysis historically. But to account for the unique considerations present in the standardessential patent rand licensing context, judge robart modified the g. Methodologies for determining reasonable royalty damages. But some experts are now embracing a marketbased alternative.
A key inquiry in the analysis is what it would have been worth to the defendant, as it saw. As in many patentrelated cases, the court here used the factors outlined in georgia pacific corp. In precedential case, federal circuit discusses application of georgia pacific factors to royalty rate. Likewise, the hypothetical negotiation approach based on the georgiapacific factors is incorporated into many, though not all, model jury instructions for determining a reasonably royalty. The hypothetical negotiations are, therefore, timeplaced in february 1955 and the relevant factors are viewed in that frame of timereference. In particular, the parties disagreed as to whether the reasonable royalty should consist of a single upfront payment or a running. Damages analysts, therefore, should be prepared to. Such a negotiation, the court held, should limit the patent holder to a reasonable royalty on the economic value of. Published by intellectual property law360 contract law360.
Dec 06, 2010 after noting that the hypothetical reasonable royalty calculation occurs before litigation and that litigation itself can skew the results of a hypothetical negotiation, the federal circuit ordered the trial court to reconsider the reasonable royalty calculation. Nov 03, 2015 intensity determined and opined on an economically reasonable outcome of a hypothetical negotiation between the parties for a license to the patents that is consistent with the georgia pacific factors. Hypothetical negotiation at time of first infringement methodology. Nash bargaining solutions in patent damages experts on. He arrived at these royalty rates by considering the georgiapacific factors. Federal circuit discusses application of georgia pacific factors to royalty rate. The licensors established policy and marketing program to maintain its patent. Likewise, the hypothetical negotiation approach based on the georgia pacific factors is incorporated into many, though not all, model jury instructions for determining a reasonably royalty. Courts typically apply factor 15 to establish the framework for the hypothetical negotiation used to determine a reasonable royalty.
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