In an earlier post dated December 1, 2010 (http://patent-damages.com/2010/12/detailed-opinion-on-ongoing-royalties-from-arizona-court/), we addressed a case between Bard and W.L. Gore from the District of Arizona involving ongoing royalties (i.e., royalties awarded after post-judgment motions). The case presented an interesting and detailed study in the analysis of ongoing royalties, even including a license agreement at the end of the opinion.
The case was appealed to the Federal Circuit, which issued its decision on February 10, 2012, affirming the award of ongoing royalties. The Federal Circuit held the district court had not abused its discretion in setting the ongoing royalty rate. Although the treatment of this issue spanned only 2+ pages, the court made some observations that will serve as guidance for district courts addressing this issue in the future. Some key points:
- The “district court must explain the reasoning in establishing the appropriate royalty rate.” Slip op. at page 38.
- District court can set different royalty rates for different products, depending on economic factors.
- One such factor is where the patentee and infringer compete against one another for sales of the product at issue. Such competition may support a higher royalty rate than for infringing products where there is no competition. “[T]aking economic market forces into account is a reasonable and valid assumption by the district court.” Id.
- Another factor is the infringer’s profits from the infringing product—large profit margins will support a higher rate.
- Changed status post-verdict may support an ongoing royalty rate higher than that set by the jury. In particular, the court suggested that willful infringement and continued post-verdict infringement may lead to a higher post-verdict royalty. In addition, a patentee that lacks incentive to accept a below-market deal may inflate the post-verdict rate.
- However, if the infringer has added value to an infringing product (beyond the patented feature), that fact may drive down the ongoing royalty rate.