Patent infringement damages start from a floor and go up.
The statute guarantees at least a reasonable royalty for the use made of the invention. That is the minimum, not a target.
Lost profits sit above it, and require proving the patentee would have made the sales itself.
Everything else is subtraction — apportionment, the six-year limit, marking — and one multiplier, for willfulness.
The two measures
| Reasonable royalty | Lost profits | |
|---|---|---|
| Status | Statutory floor | Above the floor |
| Available to | Any patentee | Practising patentees only |
| Proof | Hypothetical negotiation | Four Panduit factors |
| Typical size | Lower | Substantially higher |
| Non-practising entities | Only this | Not available |
A patentee that does not sell a product cannot claim lost profits, because there were no sales it would have made. That single fact shapes NPE and operating-company cases differently from the outset.
Both measures can appear in one case, applied to different portions of the infringing sales.
Reasonable royalty: the hypothetical negotiation
A reconstruction of what willing parties would have agreed just before infringement began.
| Georgia-Pacific factor | What it addresses |
|---|---|
| Established royalties for the patent | Actual comparables |
| Rates paid for comparable patents | Market context |
| Nature and scope of the licence | Exclusive, field, territory |
| Licensor's licensing policy | Whether it licenses at all |
| Commercial relationship | Competitors or not |
| Convoyed sales | Derivative value |
| Duration and term remaining | How long the right runs |
| Profitability of the product | Ability to pay |
| Advantages over old modes | The technical delta |
| The patented feature's contribution | Apportionment |
| Extent of the infringer's use | Volume |
| Customary rates in the industry | Sector norms |
| Portion attributable to the invention | Apportionment again |
| Expert testimony | — |
| The hypothetical outcome | The conclusion |
Comparable licences carry the most weight, and comparability is contested hard. A licence covering a different field, a portfolio rather than one patent, or a settlement rather than an arm's-length deal may be excluded.
The negotiation is hypothetical but the date is not. It is fixed just before infringement started, so later developments are generally excluded. See patent royalty rates.
Lost profits: the Panduit factors
| # | Factor | What must be shown |
|---|---|---|
| 1 | Demand | For the patented product |
| 2 | No acceptable non-infringing substitutes | The hardest one |
| 3 | Capacity | Manufacturing and marketing capability |
| 4 | Profit | The amount that would have been made |
Factor two decides most lost profits cases. Where an acceptable substitute existed, the infringer's customers might have bought that instead, and the causal chain to the patentee's sales breaks.
Acceptable means acceptable to the buyers, not merely technically available. A substitute lacking the patented advantage may not qualify if buyers wanted that advantage.
Market share allocation is the common middle ground. Where several suppliers competed, a patentee may recover lost profits on its market share of the infringing sales and a royalty on the rest.
Apportionment
The requirement that damages track the patented feature.
| Situation | Base |
|---|---|
| Patent covers the whole product | The product |
| Patent covers one component | Smallest saleable patent-practising unit |
| Even the SSPPU has unpatented features | Further apportionment |
| Patented feature drives demand for the whole | Entire market value rule |
The entire market value rule is narrow. Applying it requires showing the patented feature drives consumer demand for the entire product, not merely that it is important or that the product would not work without it.
Apportionment applies to both measures. It is not a royalty-only doctrine.
This is where the largest swings occur. A 3% rate on a $900 device is $27; on the $40 module the patent covers it is $1.20.
The six-year limit
| Recovery period | 6 years before the complaint |
| Effect | Caps damages, does not bar the claim |
| Older infringement | Not recoverable, still relevant to notice |
| Laches | No longer a defence to damages within the period |
A patentee who waits does not lose the case, but loses everything before the six-year window.
Which makes delay expensive rather than fatal. Infringement running for ten years yields six years of damages.
Marking can eliminate most of it
| Situation | Damages run from |
|---|---|
| Patentee sells marked products | The infringement |
| Patentee sells unmarked products | Actual notice |
| Patentee sells nothing | The infringement |
| Virtual marking (a URL) | Same as physical marking |
Non-practising entities are not caught by marking because there is nothing to mark, which is a structural advantage.
An operating company that failed to mark can lose years of recovery — the damages period starts at the notice letter or the complaint, not at the first infringing sale.
Marking must be substantially consistent, and it extends to licensees, which is why licences should require it. See patent marking.
Enhancement for willfulness
| Maximum | Three times the compensatory award |
| Standard | Halo — egregious conduct |
| Discretionary | Yes, even after willfulness is found |
| Principal defence | A written opinion of counsel obtained before the conduct |
| Timing | The opinion must predate the infringement |
Knowledge of the patent alone does not establish willfulness. Deliberate or reckless disregard is the target, and ordinary competitive awareness is not.
The opinion must come first. One obtained after suit is filed does not address the state of mind during the conduct. See willful infringement.
Attorney fees
| Standard | Octane Fitness — exceptional case |
| Test | Stands out in substantive strength or litigation conduct |
| Direction | Available to either side |
| Frequency | Uncommon |
Fee awards run both ways, and defendants recover them in weak or abusively litigated cases. That symmetry is part of what disciplines assertion practice.
Worked example: the same infringement, four numbers
A patented sensor calibration method. 200,000 accused units at $600. The sensor module is $45. Infringement ran 9 years.
| Step | Analysis | Effect |
|---|---|---|
| Sales in the 6-year window | 140,000 units | 3 years excluded |
| Base — entire product | $600 | Requires EMVR |
| Base — SSPPU | $45 | The default |
| Rate | 4% | — |
| Royalty on SSPPU | 140,000 × $45 × 4% | $252,000 |
| Royalty on entire product | 140,000 × $600 × 4% | $3,360,000 |
| Marking failure | Notice given at year 7 | Only 2 years recoverable |
| Damages after marking | ~47,000 units × $45 × 4% | $84,600 |
| Willfulness found, 2× enhancement | — | $169,200 |
| Scenario | Damages |
|---|---|
| Entire market value, marked, 6 years | $3,360,000 |
| SSPPU, marked, 6 years | $252,000 |
| SSPPU, unmarked, 2 years | $84,600 |
| SSPPU, unmarked, 2 years, enhanced | $169,200 |
A forty-fold range on identical infringement. The base and the marking failure account for almost all of it.
Marking cost more than the six-year limit did. Three years were lost to the statute; four more were lost to not marking a product.
Interest and costs
| Component | Detail |
|---|---|
| Prejudgment interest | Normally awarded on compensatory damages |
| Rate | Court's discretion — often prime or Treasury |
| Post-judgment interest | Statutory |
| Costs | Ordinary litigation costs |
| Enhancement | Not usually subject to prejudgment interest |
Prejudgment interest is close to automatic in the absence of undue delay, and on a long damages period it is a meaningful addition.
Convoyed sales
| Type | Recoverable? |
|---|---|
| Functionally related unpatented items | Often yes |
| Items sold together for convenience | Generally no |
| Consumables required by the patented device | Frequently yes |
| Unrelated products in the same order | No |
The test is functional relationship, not commercial bundling. Selling two things in one transaction does not make the second one part of the damages base.
What settlement looks like against this
| Reality | Effect |
|---|---|
| Litigation cost | Frequently millions per side |
| Time to trial | Years |
| Validity risk | The patent can be lost entirely |
| PTAB parallel proceeding | Adds cost and risk |
| Most cases | Settle |
Damages theory sets the negotiating range rather than the outcome. The gap between an SSPPU royalty and an entire-market-value claim is the space in which settlements are found.
Validity risk cuts against the patentee throughout. A patent asserted is a patent challenged, and losing it ends the revenue as well as the case. See patent litigation.
Patent infringement damages: the checklist
- A reasonable royalty is the floor. Every prevailing patentee gets at least that.
- Lost profits require all four Panduit factors, and factor two decides most cases.
- Contest the base before the rate. Apportionment produces the largest swings.
- Treat the entire market value rule as narrow. Demand must be shown.
- Fix the hypothetical negotiation date just before infringement began.
- Six years is the recovery cap, not a bar on the claim.
- Mark your products. Failing to can eliminate years of damages.
- Require marking in every licence, since licensee conduct counts.
- Get a written opinion before launch if there is any real infringement risk.
- Price validity risk into any assertion. The patent itself is at stake.