Tuesday, August 30, 2011

Importance of Patent to Plaintiff's Business and Contentious Past Relationship With Defendant Warrant 20% Royalty Rate

The court awarded plaintiff a royalty rate of 20% for defendant's infringement of its golf repair tool patent despite evidence that "most royalty rates are ten percent or less and that manufacturing companies with a gross profit between forty and fifty percent would warrant a royalty between six and eight percent." "96% of plaintiff’s overall sales were from the patented device thus making it an extremely valuable component of plaintiff’s business. . . . [I]t is highly unlikely that plaintiff would have issued a license to [defendant] to sell the infringing tools as [defendant] was a direct competitor with knowledge of plaintiff’s pricing structure and the ability to sell the product for a lower royalty amount. Further, the owner of [defendant] had been previously fired from plaintiff’s employ thus making a future business relationship unlikely. . . . If, however, the parties could have agreed to a willing licensor-licensee relationship after this course of events, the Court finds it reasonable to infer that a high royalty rate would be assessed. Accordingly, the Court concludes a royalty rate of 20% is appropriate here."

Divix Golf Inc v. Mohr, et. al., 3-05-cv-01488 (CASD August 19, 2011, Order) (Houston, J.)

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