Patent Damages: Reasonable Royalties, Lost Profits and the Georgia-Pacific Factors

Sources: 35 U.S.C. § 283, § 284, § 285, § 286, § 287; Halo Electronics, Inc. v. Pulse Electronics, Inc., 579 U.S. 93 (2016); Mentor Graphics Corp. v. EVE-USA, Inc., No. 2015-1470 (Fed. Cir. 2017); Lucent Technologies, Inc. v. Gateway, Inc., No. 2008-1485 (Fed. Cir. 2009). Each row is explained below.

Under § 284 the court "shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court." When a jury does not find the damages, the court assesses them, and "in either event the court may increase the damages up to three times the amount found or assessed" (increased damages do not apply to provisional rights under § 154(d)). And the court "may receive expert testimony as an aid to the determination of damages or of what royalty would be reasonable under the circumstances."

The Federal Circuit summarized the principles in Lucent Technologies v. Gateway (2009). The burden of proving damages falls on the patent owner. The question is the one the Supreme Court posed in Aro: "had the Infringer not infringed, what would [the] Patent Holder[] have made?" The two categories are lost profits and a reasonable royalty, which is "merely the floor below which damages shall not fall."

Sources: 35 U.S.C. § 284; Lucent Technologies, Inc. v. Gateway, Inc., No. 2008-1485 (Fed. Cir. Sept. 11, 2009).

Lost profits put the patent owner where it would have been without the infringement. The patent owner must show "but for" causation: that it would have made the sales, or earned the profits, that the infringer took. In Mentor Graphics v. EVE-USA (2017) the Federal Circuit said there is "no particular required method to prove but for causation," and called the Panduit test, first articulated by the Sixth Circuit in 1978, a "useful, but non-exclusive" method. Under it, a patent owner is entitled to lost profits if it can establish four things:

1. demand for the patented product;
2. absence of acceptable non-infringing alternatives;
3. manufacturing and marketing capability to exploit the demand; and
4. the amount of profit it would have made.

The court noted that damages under Panduit "are not easy to prove." It also held that apportionment, discussed below, is "necessary in both reasonable royalty and lost profits analysis," and that on the undisputed facts of that record "satisfaction of the Panduit factors satisfies principles of apportionment," because proving demand for the product and the absence of non-infringing alternatives ties the damages to the patented features.

Source: Mentor Graphics Corp. v. EVE-USA, Inc., No. 2015-1470 (Fed. Cir. Mar. 16, 2017).

Whatever else is proved, damages may never fall below a reasonable royalty. Lucent described two approaches. The analytical method starts from the infringer’s projections of profit for the infringing product. The more common hypothetical negotiation (the "willing licensor-willing licensee" approach) "attempts to ascertain the royalty upon which the parties would have agreed had they successfully negotiated an agreement just before infringement began." It "assumes that the asserted patent claims are valid and infringed," and any result "necessarily involves an element of approximation and uncertainty."

In the en banc EcoFactor decision (2025) the court called the hypothetical negotiation "a sound approach, well supported in our precedent," and stressed that a critical consideration is "the amount that the alleged infringer would agree to pay as a willing licensee." Quoting its earlier LaserDynamics decision (2012), the court added that actual licenses to the patented technology are "highly probative," because they "most clearly reflect the economic value of the patented technology in the marketplace," and that actual licenses to the patents in suit are probative "not only of the proper amount of a reasonable royalty, but also of the proper form of the royalty structure."

Sources: Lucent Technologies, Inc. v. Gateway, Inc. (Fed. Cir. 2009); EcoFactor, Inc. v. Google LLC, No. 2023-1101 (Fed. Cir. May 21, 2025) (en banc).

The factors come from Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970). That opinion is not on an official court site we can link, so the list below is the Federal Circuit’s statement of the factors in i4i v. Microsoft (2009), quoted in full:

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 or nonexclusive, restricted or non-restricted 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 invention and the value of that use;
12. the portion of profit or of the selling price that may be customary in that particular business to allow for use of the invention 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 experts; and
15. the results of a hypothetical negotiation between the licensor and licensee.

How courts use them. The list is a framework, not a formula. In Ericsson v. D-Link (2014) the Federal Circuit said it has "never described the Georgia-Pacific factors as a talisman for royalty rate calculations," observed that courts "often parrot all 15 factors to the jury, even if some of those factors clearly are not relevant," and said that reciting each factor with a conclusory remark about its impact does little more than list what could be considered.

Standard-essential patents. For patents subject to a commitment to license on reasonable and non-discriminatory (RAND) terms, Ericsson held that factors 4 and 5 do not fit the commitment and factors 8, 9 and 10 need adjusting, because the standard, not the invention’s merit, may drive the technology’s use. The court must also instruct the jury on the patent owner’s actual RAND promises, not just a general obligation to license on RAND terms.

Sources: i4i Limited Partnership v. Microsoft Corp., No. 2009-1504 (Fed. Cir. Dec. 22, 2009), footnote 3; Ericsson, Inc. v. D-Link Systems, Inc., No. 2013-1625 (Fed. Cir. Dec. 4, 2014); EcoFactor v. Google (Fed. Cir. 2025) (en banc) (quoting factor 1).

When an accused product has patented and unpatented features, the Federal Circuit explained in Ericsson that the "entire market value rule" really has two parts:

• A substantive rule (apportionment). "The ultimate combination of royalty base and royalty rate must reflect the value attributable to the infringing features of the product, and no more." The award "must be based on the incremental value that the patented invention adds to the end product." That can be done through the royalty base, the rate, or both, and apportionment applies to lost profits too.
• An evidentiary principle (the royalty base). Where a multi-component product is at issue and the patented feature is not what gives the combination its value, care must be taken not to mislead the jury by emphasizing the value of the entire product. Only where the entire value of the product is "properly and legally attributable to the patented feature" may damages be calculated from that value.

Sources: Ericsson, Inc. v. D-Link Systems, Inc. (Fed. Cir. 2014); Mentor Graphics Corp. v. EVE-USA, Inc. (Fed. Cir. 2017).

Section 284 allows expert testimony on damages, and the en banc Federal Circuit emphasized the trial judge’s gatekeeping role over it in EcoFactor v. Google, decided May 21, 2025. The court applied Federal Rule of Evidence 702 as amended in 2023, under which an expert may testify only "if the proponent demonstrates to the court that it is more likely than not" that, among other things, the expert’s knowledge will help the trier of fact, the testimony "is based on sufficient facts or data," and it "is the product of reliable principles and methods." It quoted the Advisory Committee’s note that treating the sufficiency of an expert’s basis as a matter of weight, not admissibility, is "an incorrect application" of the rules.

In EcoFactor the patent owner’s expert testified that earlier lump-sum settlement licenses were based on a particular per-unit royalty rate. The court held that the licenses "were insufficient, individually or in combination, to support his conclusion," that the district court therefore abused its discretion in not excluding the testimony, and that a new trial on damages was required. In our view the lesson is that an expert’s royalty must rest on what the license terms and other evidence actually support, and the judge decides that before the jury weighs it.

Source: EcoFactor, Inc. v. Google LLC, No. 2023-1101 (Fed. Cir. May 21, 2025) (en banc).

Section 284 lets the court increase damages up to three times. In Halo Electronics v. Pulse Electronics (2016) the Supreme Court held that the Federal Circuit’s two-part Seagate test, which required objective recklessness proved by clear and convincing evidence, is not consistent with § 284. Under Halo:

• Enhanced damages are "not to be meted out in a typical infringement case" and "are generally reserved for egregious cases of culpable behavior."
• "The subjective willfulness of a patent infringer, intentional or knowing, may warrant enhanced damages, without regard to whether his infringement was objectively reckless."
• "Culpability is generally measured against the knowledge of the actor at the time of the challenged conduct." A reasonable defense first raised at trial does not by itself shield an infringer who did not act on it.
• The standard of proof is a preponderance of the evidence, and the district court’s decision is reviewed for abuse of discretion.

Sources: 35 U.S.C. § 284; Halo Electronics, Inc. v. Pulse Electronics, Inc., 579 U.S. 93 (2016).

Six years. "Except as otherwise provided by law, no recovery shall be had for any infringement committed more than six years prior to the filing of the complaint or counterclaim for infringement in the action" (§ 286). The Supreme Court reads this as "a judgment by Congress that a patentee may recover damages for any infringement committed within six years of the filing of the claim." In SCA Hygiene v. First Quality (2017) the Supreme Court held that laches "cannot be interposed as a defense against damages where the infringement occurred within the period prescribed by § 286."

Marking. A patent owner, and those making, selling or importing a patented article for or under it, may give notice by marking the article with "patent" or "pat." and the patent number, or with "patent" or "pat." and an internet address, free to access, that associates the article with the patent number (virtual marking); if the article cannot be marked, a label on it or its package will do. "In the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter," and then only for infringement after the notice. Filing an infringement action is notice (§ 287(a)).

• Process patents, § 287(b). Some § 271(g) infringers get no remedy against them for products they had, or had in transit, before notice of infringement.
• Medical practitioners, § 287(c). Remedies under §§ 281 and 283-285 do not apply to a medical practitioner’s performance of a medical or surgical procedure on a body, with exceptions such as use of a patented machine or composition.

Sources: 35 U.S.C. § 286; 35 U.S.C. § 287; SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, No. 15-927 (U.S. Mar. 21, 2017).

Section 285 is one sentence: "The court in exceptional cases may award reasonable attorney fees to the prevailing party." In Octane Fitness v. ICON Health & Fitness (2014) the Supreme Court rejected the Federal Circuit’s stricter test and held "that an 'exceptional' case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated." District courts decide case by case, "considering the totality of the circumstances."

Octane also rejected a clear-and-convincing standard: patent litigation "has always been governed by a preponderance of the evidence standard." Under Highmark v. Allcare (2014), as Halo recounts, fee decisions are reviewed for abuse of discretion.

Sources: 35 U.S.C. § 285; Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014); Halo Electronics, Inc. v. Pulse Electronics, Inc., 579 U.S. 93 (2016) (describing Highmark Inc. v. Allcare Health Management System, Inc., 572 U.S. 559 (2014)).

• Reciting all fifteen Georgia-Pacific factors by rote. Tie each factor used to the evidence.
• Using the whole product’s price as the base without justification. The award must reflect the patented feature’s incremental value.
• Reading a per-unit rate into lump-sum settlements. EcoFactor reversed a verdict built on testimony the license evidence did not support.
• Forgetting marking. An unmarked product can cut off damages before actual notice or suit.
• Counting on laches or delay. Within the six-year window of § 286, laches is no defense to damages.
• Treating willfulness as automatic treble damages. Enhancement is discretionary and reserved for egregious cases.

Sources: Ericsson v. D-Link (Fed. Cir. 2014); EcoFactor v. Google (Fed. Cir. 2025) (en banc); 35 U.S.C. § 287(a); SCA Hygiene (2017); Halo (2016). The latest damages and remedies decisions are on our patent remedies topic page, and more on litigation is on the district court hub.