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 ninth and tenth Georgia-Pacific factors.
- 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.
| Case | Outcome | Notes |
| Micro Chemical, Inc. v. Lextron, Inc., 317 F. 3d 1387 (Fed. Cir. 2003) | Reasonable Royalty Affirmed | The district did not err in allowing Plaintiff’s expert testimony regarding the availability of non-infringing alternatives at the time of the infringement. The expert testified that the fact that the Defendant modified its systems in 1997 would not have reduced the royalty rate that would have been agreed upon in a hypothetical negotiation in 1994. The expert testified that Defendant’s modified systems were not “available” in 1994 because they did not exist and, in his opinion, the evidence did not show they would have been acceptable alternatives. The testimony was not legally erroneous; it was merely based on Plaintiff’s version of the disputed facts. |
| Lucent Technologies, Inc. v. Gateway, Inc., 580 F. 3d 1301 (Fed. Cir. 2009) | Reasonable Royalty Vacated | The utility and advantages of the patented technology over old modes weighed against the jury award of $358 million. From the evidence presented, the infringing use of the technology appears to have, at best, only a slight advantage over what is arguably the closest prior art. |
| i4i Ltd. Partnership v. Microsoft Corp., 598 F. 3d 831 (Fed. Cir. 2010) | Admitting Expert Testimony on Damages | Plaintiff’s expert opined that factor 9, which examines the infringer’s need for taking a license, increased the royalty rate. The expert opined that Defendant had no commercially acceptable, non-infringing alternatives to using Plaintiff’s patent. This opinion was based on internal Defendant documents describing Defendant’s interest in creating the relevant technology, and prolonged inability to do so. 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. |
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- 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.
| Case | Outcome | Notes |
| Lucent Technologies, Inc. v. Gateway, Inc., 580 F. 3d 1301 (Fed. Cir. 2009) | Reasonable Royalty Vacated | The nature of the patented invention weighed against the jury award of $358 million. The evidence can support only a finding that the infringing feature contained in Defendant’s product is but a tiny feature of one part of a much larger program. Defendant’s product is an enormously complex program comprising hundreds, if not thousands or even more, features. Numerous features other than the patented feature appear to account for the overwhelming majority of the consumer demand. |
| 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 evidence on which it could conclude that the patented inventions were far from being tiny features in the accused products. Plaintiff’s expert testified that based on Defendant’s internal documents, the patented technology was fundamentally important to the product. And there was evidence from the parties’ promotional material that the invention was an important technology. |