Reconsidering the Georgia-Pacific Standard for Reasonable Royalty Patent Damages
Christopher B. Seaman
Washington and Lee University School of Law
February 1, 2011
BYU Law Review, No. 5, p. 1661, 2010
Chicago-Kent Intellectual Property, Science & Technology Research Paper No. 10-030
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.
Number of Pages in PDF File: 68
Keywords: Reasonable royalty, reasonable royalties, damages, patent, patent infringement, Georgia-Pacific, hypothetical negotiation, Aro, noninfringing alternatives, noninfringing substitutes, Grain Processing
JEL Classification: K00
Date posted: March 26, 2010 ; Last revised: March 25, 2011