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Ga.-Pacific Corp. v. United States Plywood Corp. - 318 F. Supp. 1116 (S.D.N.Y. 1970)

Rule:

The "willing buyer and seller" rule - used to determine damages in a patent infringement case - requires consideration not only of the amount that a willing licensee would have paid for the patent license but also of the amount that a willing licensor would have accepted. Where a willing licensor and licensee are negotiating for a royalty, the negotiations do not occur in a vacuum of pure logic. They involve a marketplace confrontation of the parties, the outcome of which depends upon, e.g., their relative bargaining strength, the anticipated amount of profits that the prospective licensor thinks he would lose as a result of licensing the patent as compared to the anticipated royalty income, the anticipated amount of net profits that the prospective licensee thinks he will make, the commercial past performance of the invention in terms of public acceptance and profits, and the market to be tapped.

Facts:

Plaintiff Georgia-Pacific Corporation ("GP") sued defendant United States Plywood Corporation ("USP") for patent infringement. USP counterclaimed for infringement. The District Court found USP's three patents (one Deskey and two Bailey patents) invalid for lack of invention, not infringed by GP's product and further, that there was no proof that GP engaged in acts of unfair competition. The United States Court of Appeals reversed and remanded, finding that USP had failed to establish the invalidity of the patents and that infringement was indisputable, and it remanded to the District Court for a damages award. 

Issue:

In an action for a declaratory judgment of invalidity and non-infringement of three patents, was plaintiff GP entitled to damages based on a royalties estimate for the amount of patented product made and sold?

Answer:

Yes

Conclusion:

On remand, the District Court awarded damages  to GP based on a royalties estimate for the amount of patented product made and sold by defendant. The Court reasoned that, although GP could not establish its lost profits, USP's profits, or an established royalty, GP could still receive an estimated reasonable royalty. The pertinent factors in estimating a reasonable royalty included the nature of GP's patent property, the extent to which defendant took it, and its utility and commercial value (with the commercial success of the patented product being of greatest significance).

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