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The Value of Medical Device Patents Cheat Sheet by

medical     device     factors     patents     valuation     georgia     pacific

Introd­uction

When a party is found to have infringed a valid and enforc­eable medical device patent, the patent laws entitle the patent owner to damages adequate to compensate for the infrin­gement. At a minimum, the patent owner is entitled to receive a “reaso­nable royalty” for the use made of the patented invention by the infringer.

A reasonable royalty is often defined as payment that a patent holder and the infringer would have agreed to in a hypoth­etical negoti­ation taking place at the time prior to when the infrin­gement first began. The jury (or judge in a bench trial) is to consider all the facts known and available to the parties at the time the infrin­gement began. In most cases, the following 15 factors, known as the Georgia Pacific factors,11 are considered in the reasonable royalty determ­ina­tion.

Georgia Pacific Factors

1. Royalties received by the patent owner for the licensing of the actual patent­(s)­-in­-suit
2. Rates paid for other comparable patents
3. Nature and scope of comparable licenses
4. Patent owner’s establ­ished licensing policy
5. Commercial relati­onship between the patent owner and licensee, such as whether they are compet­itors in the same territory in the same line of business
6. Effect of selling the patented product on sales of collateral products
7. Duration of the patent and the license
8. Establ­ished profit­abi­lity, commercial success, and current popularity of the product made under the patent
9. Utility and advantages of the patented product over the old devices
10. Nature and benefits of the patented invention
11. Extent of use of the invention
12. Customary royalty rates in comparable businesses
13. Portion of the realizable profit credited to the invention as distin­guished from non-pa­tented elements
14 Opinion of qualified experts
15. Amount that patent­-holder and infringer would have agreed upon (at the time the infrin­gement began) if both had been reasonably and volunt­arily trying to reach an agreement
 

Intell­ectual Property

Lost Profit Entitl­ement

In certain cases, the patent holder may be entitled to its “lost profits” in lieu of or in addition to reasonable royalty. When pursing a lost profits claim, the patent owner is claiming that had there been no infrin­gement; it would have made some portion of the sales that the infringer made. In assessing a claim of lost profits for patent infrin­gement, many courts consider whether the patent owner has made a showing that:

1. There was demand for the patented product
2. There are no non-in­fri­nging substi­tutes
3. The patent owner had the manufa­cturing and marketing capability to actually exploit the demand absent the infringing conduct
4. The amount of profit the patentee would have made absent the infringing conduct

The patent owner may also be awarded enhanced damages of up to three times its reasonable royalty or lost profits damages upon a finding of willful infrin­gement

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