Twenty Percent Royalty Rate Appropriate Where Plaintiff Was Highly Unlikely to License Its Patent to Defendant, a Direct Competitor

After the district court determined that the plaintiff's patent was infringed and was not invalid based on anticipation or obviousness, the district court held a bench trial on the issue of damages. The district court first analyzed the issue of lost profits. Finding that the plaintiff could not meet several of the Panduit factors because, among other things there were acceptable, non-infringing substitutes in the marketplace during the relevant time period, the district court denied plaintiff's request for lost profits. "As plaintiff has not shown a reasonable probability that it would have made the majority of [defendant's] sales given the existence of non-infringing switchblade divot repair tools on the market, the Court finds plaintiff has not met its burden in this regard." The district court next analyzed whether the plaintiff was entitled to a reasonable royalty. Plaintiff contended that it was entitled to a 20% royalty on the gross profits of defendant's infringing tools because the patented tools sold by the plaintiff had a high gross profit of 70%, there were few competitors, the tools were an impulse buy because they had a low price, the tools were an effective and low-cost promotional product, they had a unique design and function and the tools were accepted and known in the marketplace. The defendant argued for royalty rate of 5% of net profits.

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