How is a reasonable royalty calculated in a US patent case?
Courts apply the Georgia-Pacific factors to construct a hypothetical negotiation between a willing licensor and licensee at the time infringement began. The result is a royalty rate applied to an apportioned royalty base — the value attributable to the patented feature, not the entire product, under the entire market value rule limits.
What is the entire market value rule?
The entire market value rule limits when a patentee can use the total product price as the royalty base. Generally the base must be apportioned to the value of the patented feature unless the patented feature drives consumer demand for the entire product. Improper use of the full product value is a common ground for overturning damages awards.
Can patent damages be tripled in the US?
Yes. Under 35 U.S.C. section 284, a court may increase damages up to three times the amount found once willful infringement is established (per Halo Electronics v. Pulse, 2016). Enhancement is discretionary and reserved for egregious conduct, and courts may also award attorney fees in exceptional cases.
What is the difference between lost profits and a reasonable royalty?
Lost profits compensate the patentee for sales it would have made but for the infringement, requiring proof of demand, absence of non-infringing substitutes, capacity, and the profit margin (the Panduit test). A reasonable royalty is the statutory floor available when lost profits cannot be proven, and typically yields a smaller award.