Patent Damages: Established Royalty

An established royalty is one way to measure damages for patent infringement (others include lost profits and reasonable royalties).

When the patent owner has licensed its patent for comparable acts to those engaged in by the infringer, those prior licenses may define an established royalty rate. The federal circuit has said “When the patentee has consistently licensed others to engage in conduct comparable to the defendant’s at a uniform royalty, that royalty is taken as established and indicates the terms upon which the patentee would have licensed the defendant’s use of the invention.” Monsanto Co. v. McFarling, 488 F.3d 973, 979 (Fed. Cir. 2007).

For prior negotiated royalties to provide an established royalties they need to be: (1) paid or secured before the present infringement, (2)  paid by a sufficient number of persons/entities as to  indicate a general acquiescence in the  reasonableness of the royalty, (3) uniform at the places where the licenses where issued, (4) not paid under threat of suit, and (5) for similar rights or activities as those at issue in the present infringement. Rude v. Westcott, 130 U.S. 152 (1889).

Therefore, in many cases it will be hard to show there is an established royalty unless the patent owner is engaged in a campaign of licensing outside of litigation. Established royalties are different from reasonable royalties, which I will discuss in a later post.