Page 74 - Intellectual Property Disputes

Licensing Activity

Prior licensing agreements entered into by the patent owner or other participants in the industry can play
"an important role in determining a reasonable royalty award." fn 23 A patent owner may recover under
an established royalty when the patent owner has consistently licensed to others at a uniform royalty and
comparable in manner to that of the defendant. In order for past agreements to constitute an established
royalty, the following five criteria generally must be met: fn 24

1. Paid or secured before the infringement began

2. Paid by a sufficient number of persons to indicate the reasonableness of the rate

3. Must be uniform in amount

4. Must not have been paid under threat of suit or in settlement of litigation

5. Must be for comparable rights or activity under the patent

The standard for establishing the existence of an established royalty is high. As a result, in many
instances, parties are unable to satisfy the five criteria. In the absence of an established royalty, prior or
existing rates "are carefully weighed by the courts in determining a reasonable royalty." fn 25 Actual
agreements that have been reached between a willing seller and a willing buyer may provide insight into
the hypothetical negotiation between patent owner and the defendant at the time of infringement. fn 26
However, like the requirements for demonstrating an established royalty, the ability to apply other
license agreements to a hypothetical negotiation also carries a high burden. In relying on other licenses
for purposes of the hypothetical negotiation, it is important to consider whether there exists technical
and economic comparability "compared to what the defendant has appropriated. If not, a prevailing
plaintiff would be free to inflate the reasonable royalty analysis with conveniently selected licenses
without an economic or other link to the technology in question." fn 27

fn 23 Thomas, Segal, and Lyon, 3-58.

fn 24 ResQNet.com, Inc. v. Lansa, 594 F.3d 860 (Fed. Cir. 2010).

fn 25 Thomas, Segal, and Lyon, 3-58.

fn 26 See, for example, the cases in the following two circuits:

• First Circuit: Bose Corp. v. JBL, Inc., 112 F. Supp. 2d 138, 165 (N.D. Mass. 2000) ("Lacking an established royalty
rate, the Court must retroactively construct a hypothetical ‘arms-length’ negotiation between a willing licensor and
willing licensee to determine the royalty rate upon which the parties would have agreed.").

• Seventh Circuit: Northlake Marketing & Supply, Inc. v. Glaverbel, 72 F. Supp. 2d 893, 902 (N.D. Ill. 1999) ("Such a
reasonable royalty is determined based upon a hypothetical negotiation between the patent owner and the infringer,
at the time the infringement began, with both parties to the negotiation assuming that the patent is valid and would
be in-fringed but for the license.")

fn 27 Uniloc USA, Inc. v. Microsoft Corporation, 632 F.3d 1292 (Fed. Cir. 2011).

70 © 2020, Association of International Certified Professional Accountants