Performing a License Agreement Comparability Analysis in Patent Litigation Key Decisions and Considerations

Performing a License Agreement Comparability Analysis in Patent Litigation Key Decisions and Considerations

February 27, 2024

For cases including claims of patent infringement, economic damages experts performing a damages analysis will frequently immediately inquire about prior license agreements for the patent-in-suit and the production of any other relevant license agreements. Experts are also keen to understand the terms and other details of those license agreements relative to the facts and circumstances of the case at hand.

The attention paid to license agreements is not undue — a carefully performed license analysis can make or break a reasonable royalty damages opinion — if not under the Daubert standard, then in the eyes of a finder of fact or on appeal. At a minimum, a carefully performed license analysis demonstrates diligence on the part of the expert — even in cases where an expert concludes there are no comparable licenses.

This article describes the foundational Federal Circuit decisions regarding license agreement analyses and then discusses some of the considerations that a damages expert should understand when performing such an analysis.

Georgia-Pacific v. United States Plywood Corp. (1970)

More than 50 years ago, in a landmark case, Georgia-Pacific v. United States Plywood, the District Court articulated a 15-factor analytical framework, which has since become the most common method to analyze reasonable royalty damages.

Since this ruling, the Federal Circuit has approved numerous reasonable royalty damages findings based on well-reasoned Georgia-Pacific Analyses. While Georgia-Pacific Factors One, Two, and Twelve recommend courts to consider relevant licenses, all 15 Georgia-Pacific Factors can inform the extent to which comparable licenses inform the reasonable royalty that would result from the hypothetical negotiation. 

The decision in Georgia-Pacific was significant because it required that damages opinions — which up to that time had frequently been based upon irrelevant and speculative evidence and guesswork — be based instead on a close analysis of the record. However, the decision provided little guidance as to the relative weight given to each of the factors, and as a result, damages opinions under a Georgia-Pacific Analysis continued to be criticized, but less for unsound methodologies and more for being based upon an overemphasis of cherry-picked factors. A comparable license analysis under Georgia-Pacific was particularly criticized as having been based on licenses with no cognizable relationship to the facts of the case while virtually being the sole basis for the reasonable royalty opinion given.

Lucent v. Gateway (2009) 

In the late 2000s, the Federal Circuit began to more actively scrutinize damages opinions that relied on analyses of comparable licenses, emphasizing the importance that such analyses be sufficiently tethered to the facts of the case. In Lucent v. Gateway, the Federal Circuit vacated the jury award of $358 million that had been based on a comparable license analysis, reasoning that the license agreements used by Lucent’s expert included payment structures and technologies that were not aligned with the facts and circumstances of the case. 

In its opinion, the Federal Circuit held that in attempting to establish a reasonable royalty, the “licenses relied on by the patentee in proving damages [must be] sufficiently comparable to the hypothetical license at issue in suit,” but the licenses relied upon were from “vastly different situation[s],” or the subject matter of certain agreements relied upon by Lucent was not even ascertainable from the evidence presented at trial.

Finjan v. Secure Computing (2010)

In Finjan v. Secure Computing, the Federal Circuit again addressed the comparable license analysis presented to the jury and reiterated that any such analysis “must account for differences in the technologies and economic circumstances of the contracting parties.” However, in its Finjan ruling, it acknowledged that there were several differences between the one and only license relied upon and the hypothetical negotiation — most notably that 1) Finjan did not compete with the licensee in the reference agreement as it did with the defendant in the case, and 2) that the reference agreement involved a lump sum rather than a running royalty. Nevertheless, it affirmed the admissibility of the license comparability opinions because those differences had been analyzed by the parties’ damages experts and were presented to the jury at trial.

ResQNet v. Lansa (2010)

In ResQNet v. Lansa, the Federal Circuit vacated the damages award from the district court because the comparable license analysis used to support the plaintiff’s damages analysis “relied on speculative and unreliable evidence.” In ResQNet v. Lansa, the Federal Circuit reiterated the importance of considering technological and economic differences when evaluating prior agreements, ruling that failure to do so could result in the exclusion of certain reference agreements and related opinions, especially when the reference agreements do not include the same rights as the patents-in-suit. The court also held that settlement-related evidence can be proof of damages in subsequent litigation.

Active Video Networks v. Verizon (2012)

In Active Video v. Verizon, the Federal Circuit deferred to the District Court’s discretion in allowing a comparable license analysis that incorporated licenses that post-dated the hypothetical negotiation. Curiously, the Federal Circuit ruled that the district court had “legitimate reason” to exclude one of the agreements because it post-dated the hypothetical negotiation by four years, but it ruled that the district court was within its discretion to allow ActiveVideo’s expert to rely on another license which post-dated the hypothetical negotiation by two years because its admissibility was not challenged by Verizon.

Notably, since this decision, the Federal Circuit appears to have allowed more flexibility in the use of reference agreements that differ significantly from the hypothetical negotiation date, provided that these differences are adequately accounted for (for example, see VirnetX v. Cisco, discussed below).

LaserDynamics v. Quanta Computer (2012)

In 2012, in LaserDynamics v. Quanta Computer, the Federal Circuit provided a more nuanced discussion of a comparable license analysis. In this case, the Federal Circuit stressed that one of the agreements used by LaserDynamics to support its reasonable royalty opinions should have been excluded by the district court because 1) the licensee was at a severe legal and procedural disadvantage when it entered into the agreement, 2) the majority of the 29 licenses for the patents-in-suit in the record were far more comparable (and LaserDynamics improperly ignored them in favor of less probative information), and 3) the settlement agreement was entered into years after the hypothetical negotiation date and the technological and financial landscape for the infringing product had substantially changed over this period.

In its LaserDynamics v. Quanta Computer opinion, the Federal Circuit also noted:

  • Federal Rule of Evidence 408 specifically prohibits the admission of settlement offers and negotiations to prove the amount of damages
  • Actual licenses to the patented technology are probative as to the amount and form of a reasonable royalty for those rights
  • Vague comparability between different technologies or licenses does not suffice for establishing technological comparability
  • Loose reliance on the findings of general licensing surveys is not appropriate for establishing license comparability
  • Consideration of all the Georgia-Pacific factors might well justify a departure from the amount or even the form of past licensing practices, if appropriate evidence and reasoning is provided

VirnetX v. Cisco (2014)

In VirnetX v. Cisco, the Federal Circuit again ruled that a comparable license analysis relying on agreements that “were undoubtedly differen[t] between the licenses at issue and the circumstances of the hypothetical negotiation” was admissible because the jury had been entitled to hear expert testimony with respect to those differences. Some of the differences discussed included distinctions in the royalty bases, agreement dates, and the number of patents licensed under the reference and hypothetical agreements. 

The Federal Circuit’s opinion in this case also rejected the application of the Nash Bargaining theorem to determine the incremental profits associated with the use of the patented technology, stating that such application is not appropriate without establishing that the premises of the theorem actually apply to the facts of the case, ruling that the proposed use of this theorem by VirnetX’s damages expert was an inappropriate “rule of thumb.”

CSIRO v. Cisco (2015)

In CSIRO v. Cisco, the Federal Circuit addressed the issue of apportionment in a comparable license analysis, ruling that the opinions in question were admissible because they focused on the royalty rates that had been previously discussed by the parties for the patent-in-suit, and therefore, the necessary apportionment was already “built-in.” The Federal Circuit issued a similar holding on the issue of apportionment in Ericsson, Elbit v. Hughes and Bio-Rad v. 10X Genomics.

Prism v. Sprint (2017)1

In Prism v. Sprint, the Federal Circuit revisited the use of settlement agreements as comparable licenses. The Federal Circuit ruled that a settlement agreement could be probative of the technology’s value, particularly if that agreement covered the same technology as the case at hand.

Furthermore, it reasoned that the further along in the litigation process the settlement was reached, the more the issues would have been explored and tested, thereby allowing for a more informed and instructive settlement.

The Federal Circuit’s opinion also discussed that prior settlement amounts may be too low or too high depending upon the facts and circumstances that led up to the settlement. For example, they would likely be too low if the settlement amounts reflect the licensor’s costs of continued litigation or its determination of the probability of losing on validity or infringement or both (whereas, in the hypothetical negotiation construct, the asserted patents are assumed to be valid and infringed). Prior settlement amounts would likely be too high if they incorporate the licensee’s risk of enhanced damages or if the licensee sought to avoid further litigation costs.

Lastly, the Federal Circuit acknowledged that non-litigation license agreements, like settlement agreements, are negotiated with at least the potential for litigation (“… a license is, at its core, [an] elimination of the potential for litigation”).

Elbit v. Hughes (2019)

In Elbit v. Hughes, the Federal Circuit revisited the question of whether settlement agreements can be used in a comparable license analysis. Again, ruling settlement agreements can be probative, the Court explained that similarities and differences in technologies, market conditions, and the state of the earlier litigation from which the prior settlement agreement arose must be compared to the case for which it is being used — and “soundly accounted for.”

Vectura v. GlaxoSmithKline (2020)

In Vectura v. GlaxoSmithKline, the Federal Circuit affirmed the district court’s reasoning that a party relying on a sufficiently comparable license can adopt the comparable license’s royalty rate and royalty base without further apportionment and without demonstrating that the infringing feature was responsible for the entire market value of the accused product, provided that the parties’ positions in the subject case are comparable to those in the reference agreement, with any differences adequately accounted for. The Federal Circuit also disagreed with GSK’s arguments on appeal that Vectura’s comparable license opinions did not adequately account for the fact that the prior license encompassed rights to more than 400 patents and that the royalty established in that license was subject to a cap for sales above a certain amount because Vectura’s expert had indeed addressed those differences in her opinions.

MLC v. Micron (2021)

In MLC v. Micron, the Federal Circuit agreed with the district court’s decision to strike portions of the report by plaintiff MLC’s damages expert because MLC had failed to identify information during fact discovery — in response to particular requests for such information — that MLC later claimed via its damages expert to be evidence relating to damages. The information that was ruled to not be adequately disclosed included 1) MLC’s view of what was an appropriate royalty rate, 2) MLC’s view that certain lump-sum licenses reflected a specific reasonable royalty rate, and 3) documents related to prior negotiations for licenses to the patent-in-suit.2

Omega v. Calamp (2021)

In Omega v. Calamp, the Federal Circuit agreed with the district court that a party cannot avoid the task of establishing license comparability by simply relying on a party’s claim of having an internal licensing policy to charge the same licensing fee regardless of what patents were included or what technology was covered.

I. Key Considerations for Performing a License Comparability Analysis

As demonstrated by the various opinions on license comparability outlined above, to effectively determine the extent to which a license is comparable, one should consider both the technical and economic comparability of the reference agreement in relation to the hypothetical negotiation.

a. Economic Comparability

From an economic perspective, the damages expert analyzes how various terms and conditions of the real-world license affect the economic comparability of the reference agreement relative to the hypothetical agreement. It may be possible to account for differences in geographic scope, exclusivity, payment structure, the royalty base, market size, stage of product development, other IP rights in the referenced agreement, the competitive circumstances, and other factors. Whether these adjustments are necessary or need to be considered by the damages expert is case specific.

Geographic Scope

Geographic scope can influence the total amount paid under an agreement, which, all else equal, typically increase with broader scope. However, patent infringement cases brought in the U.S. can only be brought for alleged infringement of U.S. patents, and therefore, damages experts generally assume that the hypothetical agreement would only be for U.S. rights, without geographic or customer-specific restrictions within the U.S. All else equal, a license that has fewer geographic or customer-specific limitations may command a higher royalty. Accordingly, when the geographic scope of the reference agreement is broader than the U.S., the damages expert may examine whether that difference was likely to have a meaningful impact on the consideration paid under the reference agreement.


In its purest form, an exclusive license means that no one else can practice the patented invention (including the licensor) without the licensee’s permission. In the other extreme, a license grant can be non-exclusive, which means the license agreement does not prevent the licensor from granting the same rights it has granted in the reference agreement to other licensees. Unless there is strong evidence indicating otherwise, damages experts typically assume that the licensor will want to retain the right to practice the patented technology itself or to license it to other parties; therefore, they assume that the hypothetical agreement would be non-exclusive. All else equal, an exclusive license tends to command a higher amount than a non-exclusive license. Accordingly, unless it can be shown that the accused infringer’s use was effectively exclusive, when the reference agreement is exclusive, it tends to be viewed as less comparable to the hypothetical agreement.

Payment Structure

In the context of real-world transactions, payment terms are defined and agreed upon by the parties involved. Conversely, in the hypothetical negotiation, payment terms are not predetermined but rather estimated based on the facts of the case. It is the role of the damages expert to ultimately opine on the royalty rate, royalty base, and payment terms of the hypothetical license agreement. Support for the payment structure (such as a running royalty, upfront lump sum payments, paid-up license, milestones, tiered royalties, and caps on payments) can be based on the licensing history of the parties, stated preferences of the parties, unique economic considerations, or comparable third-party licenses. While the reference agreement might not provide a direct answer to the exact royalty that would be agreed upon at the hypothetical negotiation, the terms of reference agreements can still serve as reference points for understanding industry norms and tailoring royalty structure to the unique context of the hypothetical negotiation.

For example, as discussed in LaserDynamics v. Quanta Computer and Omega v. Calamp, the damages expert may convert a lump sum payment structure from a reference agreement to a running royalty structure for use in the hypothetical negotiation (or vice versa) if sound reasoning and analysis is provided.

The damages expert may also consider the value of any other payment terms and consideration paid under the reference agreement outside of the main royalty payment(s) (including equity stakes, royalties on convoyed sales, profit-sharing arrangements, sublicensing, milestone payments, minimum payments, maximum payments [“caps”] etc.) and explain whether they would indicate a higher or lower royalty rate in the hypothetical agreement.

Lastly, the damages expert may also determine whether the patents in the reference agreement or the patent(s)-in suit is part of an industry standard (i.e., standard essential patents [SEPs]) and whether the patent owner has agreed to license the patented technology on a reasonable and non-discriminatory (RAND) basis.3 If the patent(s)-in-suit is a SEP and subject to RAND terms, then license agreements for patents not licensed under RAND terms could be less useful for comparison purposes.

Royalty Base

For payment structures based on a running royalty, the royalty base on which the royalties are paid will be evaluated. The most common royalty bases in patent license agreements include net sales, gross sales, units sold, and profits. For a reference agreement’s royalty rate to be comparable to the hypothetical agreement’s royalty rate, the royalty bases in both agreements must also be comparable. If there are significant differences between the royalty bases, the damages expert should consider and account for those differences.

The damages expert may also examine other terms in the reference agreement that relate to the royalty base, including, for example, convoyed sales, payments linked to market share, research and development costs, and manufacturing costs, if applicable, and explain how these terms would differ from and affect the hypothetical agreement.

Dates of the Agreements

As the Federal Circuit’s opinion in Active Video v. Verizon demonstrates, the expert may also consider and account for any substantial differences in the dates of the reference agreement and the hypothetical negotiation. Significant differences in the timing of the reference agreement and the hypothetical negotiation can raise a number of economic issues for the expert to evaluate, including, among other things, differences in 1) supply and demand conditions in the relevant market, 2) general economic conditions, 3) the costs and availability of alternative technologies to the patented technology, 4) the importance of the patents-in-suit to the infringer, the patent-holder, and customers, 5) the length of time to patent expiration, 6) prevailing and expected prices of the accused products, 7) barriers to entry, and 8) the bargaining strength of the parties to the agreements. The specific methods that economic experts use to account for the differences in the timing of the hypothetical negotiation and the reference agreement will vary depending on the specific facts of the case. However, the general goal remains: to estimate what a willing licensor and a willing licensee would have agreed to in a hypothetical negotiation at the date of the hypothetical negotiation.

Settlement Agreements

The summary of the Federal Circuit opinions above shows that the courts’ views on the probative value of settlement agreements to the hypothetical agreement have varied from being dismissive in some cases to finding them to be the most probative evidence in other cases. Indeed, courts are more likely to find settlement agreements as probative evidence when the only agreement(s) in the record that contains the patent(s)-in-suit is a settlement agreement.

Further, as demonstrated in the Federal Circuit’s opinions in Prism v. Sprint and Elbit v. Hughes, when the reference agreement is a settlement agreement, the damages expert also needs to consider whether the stage of the litigation at which the agreement was entered had a meaningful impact on the terms of the settlement agreement. For example, all else equal, a settlement agreement entered on the eve of trial may be viewed as more comparable to the hypothetical negotiation than a settlement agreement entered near the time of the complaint because, ostensibly, more facts about the extent and nature of the alleged infringement and what terms the parties would likely agree to are better known as the case progresses.4

Validity and Infringement

When providing a reasonable royalty damages opinion, the damages expert assumes that the patent(s)-in-suit is both valid and infringed as a matter of law. This assumption is typically not present in real-world patent license negotiations. All else equal, the assumption of validity and infringement in the hypothetical negotiation suggests a higher royalty rate than the reference agreement, which is typically negotiated without the assumption of validity and infringement.

In some cases, a settlement agreement may reflect an assumption of validity and infringement of the patent(s)-in-suit if the agreement is reached after a court or jury has already ruled that the patents are valid and infringed or if there is strong evidence that the parties expect such a ruling.

We have also recently seen an uptick in the use of clauses in license agreements that address the validity and infringement of licensed patents, as well as whether the payments made under the agreement are to be viewed as reasonable royalties. In particular, we have observed an increased frequency for settlement agreements to contain clauses that state that the agreement should not be construed as an admissibility of validity or infringement of the licensed patents. We have also observed an increased frequency of agreements to contain clauses that either state that the amounts paid under the agreement are representative of a reasonable royalty or that they do not represent a reasonable royalty. It is unclear at this point if these types of clauses will impact the determinations by courts on license comparability.

Use of Other Evidence that Contextualizes the Reference Agreements or the Value of the Patent-in-Suit

In some cases, there may also be written or oral evidence in the record that sheds light on what led to the terms of the reference agreement. There can also be instances where there is no executed agreement but there is evidence in the form of offers or other documents prepared during negotiations that show what one or more of the parties had considered the patented technology to be worth. The damages expert should not rely on this type of evidence as the sole basis for opining to a reasonable royalty — especially in cases where the only evidence is unsupported testimony from a witness of an interested party, as shown in Omega v. Calamp.

Nonetheless, when available, along with a corresponding entered agreement, this type of information should not be ignored by the damages expert. This type of information, to the extent it is legally allowed to be considered (see FRCP Rule 408 discussed above), can be helpful to the damages expert in understanding the reasoning behind the terms of the reference agreement and the parties’ views on the value of the patented technology. The conclusion of the terms in the reference agreement may also shed light on the parties’ bargaining positions when compared to the terms offered during negotiations.

Commercial Relationship of the Parties

The commercial relationship of the parties to real-world license agreements can range from parties that directly compete for sales of virtually identical products with the same customers to parties that do not compete in any meaningful dimension. No competition is found, for example, when the licensor in the hypothetical negotiation is a non-practicing entity (NPE), which means that the licensor does not sell any products or conduct any commercial activities. An NPE does not make, use, or sell any product made under the patent. All else equal, a license between competitors tends to command a higher royalty rate than a license between non-competing parties.

The competitive dynamics of the parties of real-world negotiations and the markets in which they compete also influence the negotiations and the relative bargaining strength of the parties in real-world agreements. In real-world license negotiations, the relative bargaining power of parties can significantly affect the terms of the negotiated royalty. Frequently, the party with a stronger bargaining position may secure more favorable terms while the relatively weaker party may have to settle for less favorable terms. 

However, the impact of competitive dynamics on hypothetical negotiations can be a major point of disagreement among damages experts due to the judgment involved in assessing hypothetical market conditions and the positions of the parties to the agreement.

When considering the commercial relationship between the parties, the damages expert may also analyze whether the reference agreement involves an intercompany transfer between related parties. If it is an intercompany transfer, it is appropriate to establish whether the agreement adheres to arm’s-length pricing standards. (Arm’s-length pricing reflects the fair market value of a transaction between unrelated parties. In the context of intercompany transfers, it ensures that the pricing aligns with market norms and is not influenced by the relationship between the parties.)

Further, the damages expert may also examine whether there are other reasons why a licensor may have agreed to an amount that was less than their settlement demand or damages claim. For example, when analyzing the comparability of a settlement agreement to the hypothetical agreement, damages experts might also consider whether the licensor needed funds to continue its licensing campaign when it entered the agreement or whether the licensee could afford to pay a reasonable royalty. These circumstances can sometimes push the agreed-upon consideration away from the true amount that would have been paid under the agreement without them.

Apportionment (Economic Considerations)
Apportionment in patent litigation is the process of determining a reasonable royalty that only reflects payment for the value of the patented technology. This is necessary because infringing products often contain other non-patented features or elements that contribute to their value. In the many cases where the entire market value rule (EMVR) (i.e., circumstances when the patented technology is shown to be the entire basis for customer demand5) does not apply, the Federal Circuit has stated that apportionment is required to ensure that an award of damages for patent infringement aligns with the “claimed invention’s footprint in the marketplace”6 and reflects the “incremental value that the patented invention adds to the end product.”7 A common and accepted method of apportionment is to limit the royalty base to the smallest saleable patent practicing unit (SSPPU) and then apportion that amount further if the SSPPU still contains non-patented elements of meaningful value.8

Further, the damages expert may not need to apportion if they can establish to a reasonable degree of economic certainty that the reference agreement already reflects the value of the patented technology — that is, the apportionment is “built-in” to the reference agreement. The concept of built-in apportionment is discussed in the Federal Circuits opinions in CSIRO v. Cisco and Vectura v. GlaxoSmithKline, which are outlined above.

When it cannot be established to a reasonable degree of economic certainty that apportionment is built into the reference agreement, the damages expert must attempt to apportion either the royalty base, the consideration paid under the agreement, or both so that the reasonable royalty opinion only reflects the value of the patented technology. To perform this analysis, the damages expert considers many economic and technical factors, many of which are described herein.

b. Technological Comparability

Issues of technological comparability when performing a comparable license agreement analysis arise when the licensed technology in the reference agreement differs from the patented technology or when the reference agreement includes broad technology grants beyond the scope of the asserted patent.

To account for differences in technical comparability, the damages expert develops an understanding of how the subject matter of the reference agreement (e.g., product, industry/application, patent claims) compares to the hypothetical negotiation.

In performing such an analysis, the damages expert may examine and account for the technical nature and scope of the rights granted in the reference agreement, including 1) the number (and value) of non-asserted patents in the reference agreement, 2) the relationship of the non-asserted patents and IP to the asserted patent within the reference agreement, and 3) other related, but not patented, IP contained in the reference agreement, such as trademarks, copyrights, or know-how. This is important because in matters involving claims for only patent infringement, a reasonable royalty analysis is typically based on the value of the stand-alone patent(s)-in-suit. The alleged infringer receives no additional know-how, IP rights, or technical support from the patent holder.

To be comparable, the subject matter of the license should be the same or similar to that of the hypothetical license. Ideally, the license will include the patent(s)-in-suit. In the absence of a license containing the patent-in-suit, the damages expert could 1) search for licenses involving comparable technology, 2) examine whether the real-world license includes rights to patents cited as prior art in the patent(s)-in-suit or rights to other patents used in accused products, and 3) review whether the patents included in a real-world license are classified under the same Cooperative Patent Classification (CPC) or U.S. Patent Classification (USPC) codes as the patent(s)-at-issue.

To illustrate this concept, consider an analogy to real estate valuation. When determining the value of a property, it is crucial to compare the subject property to similar properties in the same neighborhood. The more a comparable property differs in type or location, the less relevant it becomes for comparative (and by extension, valuation) purposes. Similarly, in patent litigation, the greater the differences in the reference agreement to the hypothetical license in terms of technology and industry, the less meaningful the comparison.

These analyses should be conducted in collaboration with, or by, a technical expert who can provide a more definitive assessment of technological comparability. Opinions from the technical expert can be critical to apportionment as the technical expert can analyze the technological value of the other IP contained in the reference agreement as compared to the technology being licensed in the hypothetical agreement as well as the relative comparability of the technology licensed in the reference agreement to the patent(s)-in suit.

To ensure a comprehensive evaluation, the damages expert may also determine whether the patented technology covered by the reference agreement is employed in applications and industries comparable to those associated with the hypothetical license and account for any differences, if necessary.

II. Conclusion

A comparability analysis should account for the key licensing terms and economic conditions surrounding the hypothetical negotiation so that these factors can be compared (or contrasted) with those of potentially comparable reference agreements. These factors need to be considered in their entirety but may also be analyzed individually.

An attempt should be made to isolate any significant differences in key terms and licensing conditions so that the financial terms of a reference agreement can be apportioned between the technology of the patent(s)-in-suit and other licensed subject matter not included in the hypothetical license.

In some cases, the technical or economic dissimilarity between real-world licenses and the hypothetical negotiation may be too great to overcome, rendering the reference licenses not comparable. In other cases, the technical or economic differences may require some adjustment to the real-world licenses for use as comparable agreements or may provide directional guidance as to whether one would expect a reasonable royalty to be higher or lower than that defined in the real-world licenses. The greater the differences between key licensing terms and other licensing conditions, the more difficult it becomes to extrapolate useful information from the real-world licenses for use in determining a reasonable royalty in a hypothetical negotiation.

As many court decisions have shown, the damages expert can mitigate the risk that their license comparability opinion is excluded through careful analysis and explanation of the relevance of the licenses relative to the facts and circumstances of the hypothetical negotiation.

Authors: Bill Miras and Ava Giannella

  1. For a more detailed discussion of the damages aspects of this Federal Circuit opinion, see “Prism v. Sprint: Shedding Light on Usefulness of Settlement Agreements”.
  2. For a more detailed discussion of the damages aspects of this Federal Circuit opinion, see "Federal Circuit Opinion Supports Early Engagement of Damages Experts".
  3. RAND is also known as FRAND (fair, reasonable, and non-discriminatory).
  4. Prism Technologies LLC v. Sprint Spectrum L.P., No. 16-1456 (Fed. Cir. 2017) (“The reason is simple: such a settlement can reflect the assessment interested and and adversarial parties of the range of plausible litigation outcomes on that very issue of valuation. And given the necessary premise that discovery and adversarial processes tend to move a legal inquiry toward improved answers, the parties’ agreement especially probative if reached after the litigation was far enough along that the issue already well explored and well tested. See AstraZeneca, 782 F.3d at 1336–37.”).
  5. Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1549 (Fed. Cir. 1995); VirnetX, 767 F.3d at 1326.
  6. VirtnetX, Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1327 (Fed. Cir. 2014) (quoting from, Inc. v. Lansa, Inc., 594 F.3d 860, 869 (Fed. Cir. 2010)).
  7. Finjan, Inc. v. Blue Coat Systems, Inc., 879 F.3d 1299, 1311 (Fed. Cir. 2018) (quoting from Ericsson, Inc. v. D-Link Sys., Inc., 773 F.3d 1201, 1226 (Fed. Cir. 2014)).
  8. LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 67 (Fed. Cir. 2012); Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1327-1329 (Fed. Cir. 2011); Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., 904 F.3d 965, 979 (Fed. Cir. 2018).