Page 83 - Intellectual Property Disputes

Profitability and Value of the Patent

The second category of Georgia-Pacific factors addresses the economic value of the patent generally
and to the infringer specifically. "It is axiomatic that the perception of the parties to a negotiation about
the value of the patent would be important in determining the outcome of those negotiations." fn 69 A
willing buyer would agree to pay a royalty on the condition that it would expect to earn economic profits
from the use of the patent. The courts also have considered the infringer’s historical profits earned
during the infringement period. fn 70 In Interactive Pictures Corp. v. Infinite Pictures, Inc., the Federal
Circuit considered whether the infringer actually met its anticipated profit projections to be irrelevant. fn
71

The courts, however, have noted that "there is no rule that a royalty be no higher than the infringer’s net
profit margin." fn 72 Recent case law has addressed the royalty base used to determine total reasonable
royalty damages, affirming, among other things, that a reasonable royalty may exceed benchmarks such
as net profit and the cost of acceptable alternatives to infringement. Golight, Inc. v. Wal-Mart Stores,
Inc., fn 73 affirmed that a reasonable royalty may be higher than the infringer’s net profit, finding that
Golight was entitled to a reasonable royalty amount irrespective of what Wal-Mart "might have
preferred to pay" relative to its net profit. In its decision, the court cited State Industries, fn 74 which
determined that "[t]here is no rule that a royalty be no higher than the infringer’s net profit margin."
"Wal-Mart’s evidence in this case establishes nothing more than what it might have preferred to pay,
which is not a test for damages." fn 75

This same opinion was held by the district court in Marine Polymer Technologies, Inc. v. HemCon, Inc.
fn 76 The district court upheld a 34% royalty rate, allegedly higher than the defendant’s profit margin,

(continued)

• Seventh Circuit: Am. Med. Sys., Inc. v. Medical Eng’g Corp., 794 F. Supp. 1370, 1394 (E.D. Wis. 1992), aff’d in
part, rev’d in part and remanded, 6 F.3d 1523 (Fed. Cir. 1993) ("[The patentee] had little incentive to license [its]
patent. [It] was using the patent, and had the manufacturing capacity to meet demand for pre-filled self-contained
prosthesis. By granting [the infringer] a license, [it] would have been assisting the competition in a highly
competitive market, and in a sub-market where it clearly was gaining an edge.")
fn 69 Thomas, Segal, and Lyon, 3-58.

fn 70 See, e.g., Trell v. Marlee Elec. Corp., 912 F.2d 1443, 1446 (Fed. Cir. 1990). See also, Bose Corp. v. JBL, Inc., 112 F. Supp. 2d
138, 168 (D. Mass. 2000) (examining the infringer’s sales over the infringement period).

fn 71 Interactive Pictures Corp. v. Infinite Pictures, Inc., 274 F.3d 1371, 1384–85 (Fed. Cir. 2002).

fn 72 State Indus., 883 F.2d 1573, 1580 (Fed. Cir. 1989), cert. denied, 493 U.S. 1022 (1990).

fn 73 Golight, Inc. v. Wal-Mart Stores, Inc., 355 F.3d 1327 (Fed. Cir. 2004). The patent at issue is a wireless, remote-controlled
portable search light or flash light. Upon a finding of infringement, the court found damages of $464,280 ($31.80 per unit). The
defendant appealed, indicating that royalty would result in selling the accused product well below cost because it could not raise the
price.

fn 74 State Indus., 883 F.2d at 1573, 1580.

fn 75 Golight, 355 F.3d at 1327.

fn 76 Marine Polymer Techs., Inc. v. HemCon, Inc., 1:06-cv-00100 (D.N.H., 2010).

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