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In the
event that a defendant is found liable for infringing one or more
patent claims the patent owner is entitled to request various
remedies, some of which are routinely granted and others of which are
rather rare. Below are the various potential remedies.
To obtain as damages the profits on sales the patent owner would have
made absent the infringement (i.e., the sales made by the infringer)
a patent owner must prove: (1) demand for the patented product, (2)
absence of acceptable noninfringing substitutes, (3) his
manufacturing and marketing capability to exploit the demand, and (4)
the amount of the profit he would have made.
When actual damages in the form of lost profits cannot be proved the
patent owner is entitled to receive a reasonable royalty as payment
for infringement by the defendant. From a conceptual starting point,
a reasonable royalty is an amount which a person, desiring to
manufacture and sell a patented article, as a business proposition,
would be willing to pay as a royalty and yet be able to make and sell
the patented article, in the market, at a reasonable profit. |
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The setting of a reasonable royalty after infringement, however,
cannot be treated as the equivalent of ordinary, arms-length
negotiations among a truly willing patent owner and potential
licensee. If the setting of a reasonable royalty after the fact did
not take into account the distressed nature presented by forced
litigation it would make an election to infringe a handy means for
competitors to impose a compulsory license upon every patent owner.
In fact, except for the limited risk that the patent owner might meet
the heavy burden of proving the four elements required for recovery
of lost profits, the infringer would have nothing to lose and
everything to gain if he could count on paying only the normal,
routine royalty non-infringers might have paid.
The amount of a reasonable royalty after infringement turns on the
facts of each case, as best they may be determined. Among the
relevant facts are:
1. The royalties received by the patentee for the licensing of the
patent in suit, proving or tending to prove an established royalty.
2. The rates paid by the licensee for the use of other patents
comparable to the patent in suit.
3. The nature and scope of the license, as exclusive or non-xclusive;
or as restricted or non-restricted in terms of territory or with
respect to whom the manufactured product may be sold.
4. The licensor’s established policy and marketing program to
maintain his patent monopoly by not licensing others to use the
invention or by granting licenses under special conditions designed
to preserve that monopoly.
5. The commercial relationship between the licensor and licensee,
such as, whether they are competitors in the same territory in the
same line of business; or whether they are inventor and promotor.
6. The effect of selling the patented specialty in promoting sales of
other products of the licensee; the existing value of the invention
to the licensor as a generator of sales of his non-patented items;
and the extent of such derivative or convoyed sales.
7. The duration of the patent and the term of the license.
8. The established profitability of the product made under the
patent; its commercial success; and its current popularity.
9. The utility and advantages of the patent property over the old
modes or devices, if any, that had been used for working out similar results.
10. The nature of the patented invention; the character of the
commercial embodiment of it as owned and produced by the licensor;
and the benefits to those who have used the invention.
11. The extent to which the infringer has made use of the invention;
and any evidence probative of the value of that use.
12. The portion of the profit or of the selling price that may be
customary in the particular business or in comparable businesses to
allow for the use of the invention or analogous inventions.
13. The portion of the realizable profit that should be credited to
the invention as distinguished from non-patented elements, the
manufacturing process, business risks, or significant features or
improvements added by the infringer.
14. The opinion testimony of qualified experts.
15. The amount that a licensor (such as the patentee) and a licensee
(such as the infringer) would have agreed upon (at the time the
infringement began) if both had been reasonably and voluntarily
trying to reach an agreement; that is, the amount which a prudent
licensee -- who desired, as a business proposition, to obtain a
license to manufacture and sell a particular article embodying the
patented invention -- would have been willing to pay as a royalty and
yet be able to make a reasonable profit and which amount would have
been acceptable by a prudent patentee who was willing to grant a license.
These 15 factors have become known as the Georgia-Pacific factors.
They were first set out in Georgia-Pacific Corp. v. U.S. Plywood
Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970) by Judge Tenney of the
Southern District of New York. Although it is rare for the United
States Court of Appeals for the Federal Circuit to defer to any
court, let alone a district court, time and time again the Federal
Circuit endorses these factors as the appropriate factors to consider
in making a determination regarding the appropriateness of any award
of reasonable royalties.
Under the patent laws, in appropriate cases the damages may be
trebled. In the situation where there has been a finding of
infringement and the patent owner has requested treble damages the
district court must first determine whether willful
infringement was proven at trial. Once a finding of
willfulness or bad faith has been made, the district court judge has
the discretion to enhance damages, up to three times the amount of
actual damages awarded to the prevailing party. It is important to
realize that this decision whether or not to award enhanced damages
is within the discretion of the district court. However, once the
jury has found willful infringement, and the court has held that
substantial evidence supports such a finding of willfulnees, the
district court is bound by the jury’s finding of willfulness and
may not reweigh the evidence on the topic.
A finding of willful infringement
does not mandate that damages be enhanced, much less mandate treble
damages. With respect to the multiplier used, the amount of the
enhancement must bear some relationship to the level of culpability
of the conduct. With respect to whether enhanced damages are
appropriate, in deciding to grant enhancement the district court must
consider the egregiousness of the defendant’s conduct based on
all facts and circumstances. Furthermore, the court must consider
mitigating factors.
Often, an award of prejudgment interest is necessary to ensure that
the plaintiff is placed in the same position as he would have been in
if the defendant had entered into a reasonable royalty agreement. In
light of that purpose, prejudgment interest should ordinarily be
awarded, absent some justification for withholding such an award. For
example, it may be appropriate to limit prejudgment interest, or
perhaps even deny it altogether, where the patent owner has been
responsible for undue delay in prosecuting the lawsuit.
Assuming prejudgment interest is allowable and awarded, as is
virtually always the case, it should be calculated from the date of
infringement to the date of judgment.
The rate of prejudgment interest and the issue of whether the
interest awarded should be simple or compounded are matters left
mostly to the discretion of the district court. In exercising this
discretion the district court focuses on the underlying purpose of
prejudgment interest, which is to fully compensate the patent owner
for infringement. Nevertheless, it is important to remember that
prejudgment interest can only be applied to the actual damage portion
of a damage award, as opposed to any enhancement or attorneys fees portion.
Returning to the rate at which prejudgment interest is calculated,
the district court has the discretion to determine whether to use the
prime rate, the prime rate plus a percentage, the U.S. Treasury rate,
state statutory rate, corporate bond rate, or any other rate the
court deems appropriate under the circumstances. The court may not,
however, deny prejudgment interest merely because the calculation of
the interest would be difficult. The numerous possibilities these
cases present for awarding and calculating prejudgment interest leave
fertile ground from which arguments of the parties may grow.
Given the fact that prejudgment interest is virtually always awarded,
and further given the fact that the district court has such great
discretion, patent owners who are victorious in litigation would be
better served to make a strong case for a favorable interest rate
rather than merely choose any rate.
While the district court has great discretion with respect to
prejudgment interest, there is not much discretion associated with
the awarding of postjudgment interest. Purusan to 28 U.S.C. §
1961, postjudgment interest is to be paid in every civil action in
the federal courts. This postjudgment interest is to be calculated
from the date of the entry of the judgment, at a rate equal to the
weekly average 1-year constant maturity Treasury yield, as published
by the Board of Governors of the Federal Reserve System, for the
calendar week preceding the date of the judgment. This postjudgment
interest is computed daily to the date of payment and is compounded annually.
The patent statute states that the court in exceptional cases, may
award reasonable attorney fees to the prevailing party. As a general
rule, attorneys fees may be justified by any valid basis for awarding
enhanced damages. However, conduct which a court may deem
"exceptional" and a basis for awarding attorneys fees may
not qualify for an award of enhanced damages. Similarly, where
damages are enhanced a district court may decline to award attorneys fees.
Whether attorneys fees should be awarded requires a two-step inquiry.
First, the district court must decide whether there is clear and
convincing evidence that the case is exceptional. Second, the court
must decide whether to award attorney fees to the prevailing party.
Even exceptional cases do not always mandate an award of attorney
fees in all circumstances. The United States Court of Appeals for the
Federal Circuit has acknowledged that ther are many factors which can
impact upon a decision regarding whether an award of attorney fees is
warranted in a particular case. The types of conduct that could
support a showing of exceptional circumstances resulting in the award
of attorneys fees include, but are not limited to, willful
infringement, inequitable conduct before the Patent and Trademark
Office, litigation misconduct, and vexatious or unjustified
litigation or frivolous suit.
Obtaining attorneys fees in any patent litigation is rare.
Furthermore, in order to obtain attorneys fees it is necessary to
litigate the matter to a conclusion. Given the increased role of
alternative dispute resolution in patent litigation the percentage of
cases that are fully litigated to a conclusion is continuously dropping.
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