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Reconsidering the Georgia-Pacific Standard for Reasonable Royalty Patent Damages

68 Pages Posted: 26 Mar 2010 Last revised: 25 Mar 2011

Christopher B. Seaman

Washington and Lee University School of Law

Date Written: February 1, 2011

Abstract

Determining damages for infringement is one of the most important and controversial issues in contemporary patent litigation. The current fifteen-factor Georgia-Pacific standard for determining a reasonable royalty has become increasingly difficult for juries to apply in patent disputes involving complex, high-technology products, resulting in unpredictable damage awards that tend to overcompensate patentees.

This Article proposes an alternative standard to Georgia-Pacific when an acceptable noninfringing substitute exists for the patented technology. Specifically, in a hypothetical bargain for a patent license, both economic and negotiation theory explain that a rational patent licensor would agree to pay only the costs it would incur to adopt and implement a noninfringing substitute technology, plus any lost benefits related to the substitute's use. Indeed, the Federal Circuit already has recognized an analogous limitation on damages in the context of lost profits, although it has defined the universe of alternatives too narrowly by refusing to consider imperfect substitutes for the patented technology.

Keywords: Reasonable royalty, reasonable royalties, damages, patent, patent infringement, Georgia-Pacific, hypothetical negotiation, Aro, noninfringing alternatives, noninfringing substitutes, Grain Processing

JEL Classification: K00

Suggested Citation

Seaman, Christopher B., Reconsidering the Georgia-Pacific Standard for Reasonable Royalty Patent Damages (February 1, 2011). BYU Law Review, No. 5, p. 1661, 2010; Chicago-Kent Intellectual Property, Science & Technology Research Paper No. 10-030. Available at SSRN: https://ssrn.com/abstract=1575805

Christopher B. Seaman (Contact Author)

Washington and Lee University School of Law ( email )

Lexington, VA 24450
United States
540-458-8520 (Phone)

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