EPLAW PATENT BLOG

DE – Calculation of damages for patent infringement on the basis of a substantially “increased” royalty rate

Posted: June 15th, 2011

Calculation of damages for patent infringement on the basis of a substantially "increased" royalty rate District Court Munich I, Germany, 25. March 2010, Case No. 7 O 17716/09

The District Court Munich I had to decide on a damages complaint based on patent infringement.

The starting point of the decision is the so far well-established case law of the German Federal Supreme Court, according to which damages calculated according to the calculation method of a reasonable royalty had to be based on a royalty rate, rational business parties would have agreed upon in normal course of business. However, by advancing and specifying this case law, the District Court found inter alia that rational business parties would take into account that a patent infringement lawsuit triggering the respectively substantial legal costs was necessary for collecting royalty payments. This would justify a significant increase of the royalty rate for calculating damages over a royalty rate on which rational business partners had agreed upon contractually in a pre-trial situation.

The pre-trial royalty rate typically included a discount for the uncertainty of infringement and validity in the pre-trial situation. Since such situation was not comparable with a situation in which a patent litigation has delivered significant legal certainty, a substantially increased royalty rate had to be assumed to be agreed upon by rational business partners. Therefore, the Court held that the reasonable royalty rate to be determined in damages proceedings based on patent infringement is usually substantially exceeding a royalty rate business parties would have agreed upon in normal course of business in a pre-trial situation. Thus, the present decision improves the patentee's chances to collect higher damages based on the calculation method of the reasonable royalty in the future in Germany. A more comprehensive summary on this decision will follow shortly.

Read the decision (in German) here.

Head note: Tilman Mueller-Stoy


One Response

  1. Jared says:

    Also remember that a patent infringement law suite can be a David-versus-Goliath confrontation. Defendants in patent infringement lawsuits are usually large corporations with unlimited resources, while plaintiffs in patent infringement lawsuits are often individuals or small businesses with very limited resources.

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