Reasonable Royalties Are An Equitable Remedy

In a patent case, if the issue were one that
would have been tried to a jury at common law
at the time of the founding of our country, or
analogous to such an issue, the Seventh
Amendment requires a jury trial on that issue.
Markman v. Westview Instr., 517 U.S. 370 (1996).
Trial court’s future ongoing royalties were an
equitable remedy in lieu of an injunction.
No Seventh Amendment right to trial for
damages that are given as an equitable
Paice LLC v. Toyota Motor Corp.,
504 F.3d 1293 (Fed. Cir. 2007), cert. denied, 128 S.Ct. 2430 (2008).
Actions that seek only injunctive relief,
attorneys’ fees, costs, or other solely equitable
relief do not give rise to Seventh Amendment
Tegal Corp. v. Tokyo Electron Am., Inc., 257 F.3d 1331 (Fed. Cir. 2001).
1790 patent act (the first patent act), all claims
for patent infringement were actions at law and
the statute explicitly required the jury to set the
Federal Courts had no equity jurisdiction prior
to 1819. All patent cases in federal courts prior
to that date were brought as actions at law.
To bring an action in equity, for an injunction
and accounting, the case had to be filed in a
state court.
1870 Patent Act, patentee could elect to proceed in equity and
recover infringer's profits and an injunction, or to proceed in law
and recover "as damages, compensation for pecuniary injury
he suffered by the infringement." Birdsall v. Coolidge, 93 U.S.
(3 Otto) 64, 68-69, 23 L.Ed. 802 (1876).
 However, patentee was required to choose between these
paths of recovery.
See, Nike v. Wal-Mart Stores, 138 F.3d 1437 (Fed. Cir. 1997) for a history
of patent act amendments and their impact on law and equity.
Prior to merger of law and equity, recovery in
law was limited to patentee’s actual loss, such
as lost profits or a mathematical formula for
damages or loss of an established royalty where
patentee had licensees.
In an action at law, if no actual loss could be
proven according to legal standards, then jury
had to be instructed to find nominal damages.
Coupe v. Royer, 155 U.S.565, 583 (1895).
In a 1915 case in equity, the U.S. Supreme
Court endorsed the remedy of a “reasonable
royalty” where no damages could be shown.
The Court expressly noted that Coupe v. Royer
was an action at law in distinguishing that case
from the equity case at hand.
The Court explicitly relied on principles in
equity in adopting this remedy.
Dowagiac Mfg. Co. v. Minnesota Moline Plow, Co., 235 U.S. 641 (1915).
In Dowagiac Mfg. Co., the Court relied on
equitable principles to endorse reasonable
royalty damages:
“As was said in Tilghman v. Proctor, 125 U.S. 136, 145,
31 L. Ed. 664, 667, 8 S. Ct. 894: 'It is inconsistent with the
ordinary principles and practice of courts of chancery,
either, on the one hand, to permit the wrongdoer to profit
by his own wrong, or, on the other hand, to make no
allowance for the cost and expense of conducting his
business, or to undertake to punish him by obliging him to
pay more than a fair compensation to the person
In Dowagiac Mfg. Co., the Court further
explained its application of equitable principles
to justify reasonable royalty damages:
“But, as the patent had been kept a close monopoly,
there was no established royalty. In that situation it
was permissible to show the value by proving what
would have been a reasonable royalty, considering
the nature of the invention, its utility and advantages,
and the extent of the use involved.”
"The actual damages which will sustain a judgment must
be established, not by conjectures or unwarranted
estimates of witnesses, but by facts from which their
existence is logically and legally inferable. The
speculations, guesses, estimates of witnesses, from no
better basis of recovery than the speculations of the jury
themselves. Facts must be proved, data must be given
which form a rational basis for a reasonably correct
estimate of the nature of the legal injury and of the
amount of the damages which resulted from it, before a
judgment of recovery can be lawfully rendered."
Central Coal & Coke Co. v. Hartman, 111 F. 96, 98 (8th Cir. 1901).
After the 1938 merger of law and equity in the
Federal Courts,
If any damages at law could be proven, even if minimal,
then equitable remedy of a reasonable sum was not
 No equitable damages could be awarded in the unified
system when there was a legal damages remedy.
 This was so even if damages at law were less than what
could have been sought in equity.
UCLA Journal of Law & Technology, Vol. 13, Issue 2, Erick S. Lee, at page 7.
January 10, 1950, House Judiciary Committee Report to what is
now 28 U.S.C. Section 284
Former Equity Damages Statute R.S. 4921 (Excerpted
in relevant part):
Former Damages Statute for Action at Law
May 12, 1953 House Report, p. 29
H. 82-2.7
Georgia-Pacific is the leading case on reasonable
royalties and the hypothetical negotiation model for
them in patent cases.
The Second Circuit opinion in Georgia-Pacific cited
the 1952 legislative history and also described
“reasonable royalty” in classic equity terms:
“The whole notion of a reasonable royalty is a
device in aid of justice, by which that which is
really incalculable shall be approximated, rather
than that the patentee, who has suffered an
indubitable wrong, shall be dismissed with empty
 Georgia-Pacific Corp. v. US Plywood-Champion Papers Inc.,
446 F. 2d 295, at fn. 5 (2d Cir. 1971)
In Innogenetics v. Abbott Labs, 512 F.3d 1363, 1380
(Fed Cir. 2008), the court vacated an injunction
because the royalty awarded was mainly a market
entry fee, which included at least partial payment for
future use.
Innogenetics demonstrates that the flexibility of the
hypothetical negotiation model for a reasonable
royalty (including speculation on money towards
future infringement), is an equitable remedy.
The1952 Patent Acts’ “reasonable royalty” derives from
equity: It is a combination of the Revisions from 1870
Patent Act’s equitable remedies’ statute R.S. 4912.
Hypothetical negotiation not available in action at law.
In 1970, Georgia-Pacific: Second Circuit discusses
reasonable royalty in classic equitable terms.
In 2007, Paice shows future royalties are equitable and
no right to a jury trial under Seventh Amendment.
In 2007, Innogenetics shows that a single lump sum
hypothetical negotiation-reasonable royalty damage
award can include payment for future use that will not
permit for an injunction going forward.
Reasonable Royalty is a form of equitable damages.

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