(Un)Reasonable Royalties

Abstract

Though reasonable royalty damages are ubiquitous in patent litigation, they are only one-hundred years old. But in that time they have become deeply misunderstood. This Article returns to the development and origins of reasonable royalties, exploring both why and how courts originally assessed them.

It then turns a harsh eye toward all that we think we know about reasonable royalties. No current belief is safe from criticism, from easy targets such as the 25% “rule of thumb” to fundamental dogma such as the hypothetical negotiation. In short, the Article concludes that we are doing it wrong, and have been for some time.

This Article is agnostic as to outcome; departure from traditional methods can and has led to both over- and under-compensation. But it challenges those who support departure from historic norms — all the while citing cases from the same time period — to justify new rules, many of which fail any economic justification.