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Finding Reasonable Royalty Damages

A Contract Approach to Patent Infringement

There is considerable controversy regarding the calculation of damages in patent infringement cases. To help resolve this controversy, the Article introduces a contract approach to patent infringement and develops a methodology for finding reasonable royalty damages. The contract approach complements approaches based on property and tort, thus providing a more complete understanding of damages. The Article introduces the concept of an “informed contract” as the basis for damages. The Article argues that an “informed contract” improves estimation of damages by taking into account information revealed during the period of infringement. The Article also introduces a “market value method” for calculating reasonable royalty damages based on patent transfer prices. The contract approach helps calculate reasonable royalty damages based on royalties in comparable patent licenses. The contract approach addresses various controversies over reasonable royalty damages.

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