Using judicial factors for determining patent damages

When an inventor commercializes his invention, the question always arises as to what it is worth if you sell of license it to someone. A new product has no history and it can be difficult to truly ascertain a value without hiring expensive valuation or appraisal experts. Where does the inventor and his attorney begin the process of placing a dollar value on the technology?

One part of dealing with patent infringement is assessing the damages caused by the defendant. What do you use to quantify the losses perceived by the plaintiff as a result of the defendant’s patent infringement? Georgia – Pacific Corp v. U.S. Plywood Corp 318 F Supp 1116, 1120 (S.D.N.Y. 1970) set forth 15 factors for determining patent damages:

  1. royalties the patentee has received for licensing the patent to others;
  2. rates paid by the licensee for the use of comparable patents;
  3. the nature and scope of the license (exclusive, restricted or nonrestricted by territory or product type);
  4. any established policies or marketing programs by the licensor to maintain its patent monopoly by not licensing others to use the invention or granting licenses under special conditions to maintain the monopoly;
  5. the commercial relationship between the licensor and licensee, such as whether they are competitors;
  6. the effect of selling the patented specialty in promoting sales of other products of the licensee;
  7. the duration of the patent and license term;
  8. the established profitability of the product made under the patent, including its commercial success and current popularity:
  9. the utility and advantages of the patent property over old modes or devices;
  10. the nature of the patented invention and the benefits to those who have used the invention;
  11. the extent to which the infringer has used the inventions and the value of that use;
  12. the portion of profit or the selling price that may be customary in that particular business to allow for use of the inventions or analogous inventions;
  13. the portion of the realizable profit that should be credited to the invention as opposed to its non-patented elements;
  14. the opinion testimony of qualified expert; and
  15. the results of a hypothetical negotiation between the licensor and licensee.

Many of these same factors can be used to establish a value of an invention or technology for a sale or license (royalty). Use this checklist as a good starting point to determine what you should charge/pay for use of a technology protected by patent.

The checklist is what an attorney would look at to evaluate the product. As a business owner, how do you evaluate what something is worth and how much you would pay – is it all about costs, or do you consider time, resources and speed to market in your evaluation? Post your ideas below and start discussing what you do or would do.