Georgia-Pacific
A seminal case in reasonable royalty law is Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y., 1970). The opinion lays out a number of factors (“the Georgia-Pacific factors”) that may be informative for a reasonable royalty analysis.
A comprehensive list of evidentiary facts relevant, in general, to the determination of the amount of a reasonable royalty for a patent license may be drawn from a conspectus of the leading cases. The [Georgia-Pacific factors] are some of [those] factors.
— Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y., 1970).
For example, factor 15 summarizes the concept of hypothetical negotiation.
- The amount that a licensor (such as the patentee) and a licensee (such as the infringer) would have agreed upon (at the time the infringement began) if both had been reasonably and voluntarily trying to reach an agreement.
— Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y., 1970).
Georgia-Pacific does not provide a rigid formula for calculating a reasonable royalty.
[T]here is no formula by which these factors can be rated precisely in the order of their relative importance or by which their economic significance can be automatically transduced into their pecuniary equivalent.
— Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116, 1120–1121 (S.D.N.Y., 1970).
The applicability of a given factor depends on the facts and circumstances of a case.
Although we have never described the Georgia-Pacific factors as a talisman for royalty rate calculations, district courts regularly turn to this 15-factor list when fashioning their jury instructions. Indeed, courts often parrot all 15 factors to the jury, even if some of those factors clearly are not relevant to the case at hand.
— Ericsson, Inc. v. D-Link Systems, Inc., 773 F. 3d 1201, 1230 (Fed. Cir. 2014).
When a factor is relevant, the expert should provide some explanation for how that factor weighs on their calculations.
Expert witnesses should concentrate on fully analyzing the applicable factors, not cursorily reciting all fifteen. And, while mathematical precision is not required, some explanation of both why and generally to what extent the particular factor impacts the royalty calculation is needed.
— Whitserve, LLC v. Computer Packages, Inc., 694 F. 3d 10, 31 (Fed. Cir. 2012).