Page 85 - Intellectual Property Disputes

showed that Monsanto would not agree to an unconditional license in exchange for a payment of the
technology fee. fn 85

The reasonable royalty was not limited to the technology fee because the fee compensated the patent
holder for use of the patent within an agreed-upon set of constraints, and because the infringer used the
patents at issue outside the constraints "for a variety of economic reasons," the royalty would be
different.

In Paymaster Technologies, Inc. v. United States, the eighth factor of Georgia-Pacific was discussed.
That factor addresses the established profitability of the product made under the patent, its commercial
success, and its current popularity. "We affirm the damages judgment as to the royalty rate of 3.5%."
The trial court concluded that the eighth factor had a "neutral" impact on the royalty rate. The Federal
Circuit found that although the defendant (the United States Postal Service) is a not-for-profit entity, the
success of the accused product should be determined by the instances of use — 1.5 billion forms used in
10 years — and not simply the infringer’s profitability. "We hold that this equates to commercial
success. Thus, the courts could have sustainably found that Factor 8 was proven by Paymaster.
However, that it did not fail to rise to the level of clear error." "That it termed factor eight ‘neutral’ did
not, in any event, prejudice Paymaster and was at most harmless error." fn 86

The courts also have recognized that the infringer’s expected profits may include collateral benefits,
which should be taken into consideration in the hypothetical negotiation. fn 87 A potential licensee
"would consider the profits that it would obtain from convoyed sales of parts, supplies, accessories, and
related products, as well as those profits that flow or would be expected to flow from the right to
manufacture, use or sell that patented invention." fn 88 The theory is that "[w]here a hypothetical licensee
would have anticipated increased convoyed sales as a result of a patent license, such sales may be
considered in fixing a reasonable royalty rate because the licensee would in theory be disposed to pay a
higher royalty if it could expect such collateral benefits." fn 89

The relative contribution of the patented feature to the overall commercial success is also a factor taken
into account. If the contribution of the patented invention is significant, "a large portion of the realizable
profit should be attributed to the uniqueness of the invention patented." fn 90 Conversely, a patent with an
insignificant contribution would not be commensurate with a higher royalty. According to Rite-Hite, one
may look to whether the patent was a "pioneer patent," under the theory that a pioneer patent has

fn 85 Id.

fn 86 Paymaster Techs., Inc. v. United States, 180 Fed. Appx. 942 (Fed. Cir. 2006). The patent at issue relates to form sets for use with
an imprinting apparatus for imprinting money orders. The plaintiff’s expert suggested a reasonable royalty rate of 5% to 6%, and the
defendant’s expert suggested a reasonable royalty rate of 1.5%. The trial court (Court of Federal Claims) determined a reasonable
royalty rate of 3.5%.
fn 87 A&L Tech. v. Resound Corp., 1995 WL 415146 (N.D. Calif. 1995).

fn 88 J.T. Thomas, D.A. Segal, and H.M. Lyon, Intellectual Property Law Damages and Remedies: Updated through Release 18,
Terence P. Ross, ed. (New York: Law Journal Press), 3-58.

fn 89 A&L Tech., 1995 WL at 415146.

fn 90 Golight, Inc. v. Wal-Mart Stores, Inc., 216 F. Supp. 2d 1175, 1184 (D. Colo. 2002).

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