Reasonable royalties have become the primary form of relief in patent infringement lawsuits. Once a patent is found valid and infringed, royalties are calculated based on a hypothetical license negotiation between the patent owner and infringer said to take place at the moment infringement began. The calculations seek to arrive at a royalty amount the parties would have agreed upon had an actual license been negotiated. But there is disagreement among courts as to what information should inform the royalty amount. Some take the hypothetical negotiation literally and disallow post-infringement information from entering the calculations because such information would have been unknown to parties in an actual negotiation. Yet other courts view the hypothetical negotiation figuratively and allow both pre- and post-infringement information to play roles in arriving at a royalty amount. This comment examines the contradictive reasoning used by courts and proposes a set of judicial rules that, if applied, would aid in keeping reasonable royalty awards aligned with the statutory requirements of reasonableness and adequate compensation, while also helping to make damage awards more predictable.
Michael J. Carrozza, Are Royalties Reasonable in Patent Infringment Suits? Using Hindsight at the Hypothetical Negotiating Table, 12 J. Marshall Rev. Intell. Prop. L. 241 (2012)