Section 18 A Reasonable Royalty

• Library: Intellectual Prop 2004

Under 35 U.S.C. § 284, the compensatory damages will in no event be less than a reasonable royalty for the use made by the infringer of the invention.

When the patent owner is exploiting the invention by licensing it, a reasonable royalty is not only the floor but also the ceiling on damages because that is exactly what has been lost as a result of the infringer’s actions. Moreover, the evidence as to the reasonable royalty rate is readily available to the patent owner in that case. It is merely the royalty rate charged in existing licenses. See, e.g.,In re Cambridge Biotech Corp., 186 F.3d 1356, 1377 (Fed. Cir. 1999) (upholding a bankruptcy court’s use of an existing license agreement as a basis for calculating a reasonable royalty).

Determination of a reasonable royalty when the patent owner has not actively licensed the patent is more difficult. In Railroad Dynamics, Inc. v. A. Stucki Co., 727 F.2d 1506 (Fed. Cir. 1984), cert. denied, 469 U.S. 871 (1984), the court held that three licenses on products that were entirely distinct from the patented product, albeit in...