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 second and third Georgia-Pacific factors.
- The rates paid by the licensee for the use of other patents comparable to the patent in suit.
| Case | Outcome | Notes |
| Lucent Technologies, Inc. v. Gateway, Inc., 580 F. 3d 1301 (Fed. Cir. 2009) | Reasonable Royalty Vacated | The rates paid by the licensee weighed strongly against the jury award of $358 million. Some of the licenses relied on by Plaintiff to support the jury lump sum award are radically different from the hypothetical agreement, and the rest of the licenses do not show the subject matter of the agreements, so the court is unable to understand how the jury could have evaluated the probative value of the agreements. The testimony offered by Plaintiff provides no analysis of the lump sum license agreements, other than, for example, noting the agreement was a cross-license of a large patent portfolio and the amount paid. Plaintiff had the burden to prove that the licenses were sufficiently comparable to support the lump-sum damages award. The running royalty agreements can’t support the jury lump sum because Plaintiff hasn’t provided sufficient basis for comparison. |
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- 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.
| 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. The district court failed to consider the fact that the prior license was exclusive and that it encompassed the right to other inventions. |
| i4i Ltd. Partnership v. Microsoft Corp., 598 F. 3d 831 (Fed. Cir. 2010) | Admitting Expert Testimony on Damages | Plaintiff’s expert opined that factor 3, which considers the license’s terms, lowered the royalty rate because his hypothetical license did not give Defendant know-how, additional cooperation or trade secrets, just nonexclusive use in the United States. Other factors tended to raise the royalty rate. Defendant points out various weaknesses in the damage calculations by Plaintiff’s expert. Defendant’s disagreements are with the expert’s conclusions, not his methodology. These disagreements go to the weight, not admissibility, of his opinion. |
| 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. |