Comparable License Agreements

6. Dezember 2020

Prism had also sued AT-T for the same patents. The case was consolidated to some extent with the Sprint case, but they were attempted separately. The trial continued first and, on the last day of the trial, just before closing, AT-T and Prism were retracted and the case was dismissed. Sprint proved that the AT-T transaction agreement was not considered evidence during the trial, as it was not comparable to the hypothetical licence, for FRE 403 reasons. Sprint also excluded the testimony of Prism`s injury expert, James Malackowski. Both applications were denied. Economic differences arise either when the economic situation that led to the licence does not reflect hypothetical negotiations, or when a licence is not a mere licence for the disputed claims. Examples of economic differences are that when considering the price of a licence, comparable licences are an important factor to consider. The amount for which independent parties who have granted a similar intellectual property (IP) licence can provide an indication of a reasonable royalty. Market transactions considered useful for the establishment of reasonable royalties are generally conducted between independent parties whose country of intellectual protection is at the heart of the transaction. Transactions that are most often cited as useful indications for reasonable royalties are licensing agreements that reveal the compensation conditions for other licences for which the ip is reviewed. In addition, it is often used to analyze licensing transactions during a similar investigation period in order to deduct reasonable royalties. Licenses of patented technology can be particularly instructive for a reasonable calculation of royalties.

Relying on licenses to prove a reasonable fee, it is not enough to rely on loose or vague comparability between different technologies or licenses. Although a flat fee can be mathematically converted into a current licence amount if total sales are known in the royalty base, the economic basis for such a transformation must first be considered. An economic analysis of the form of the preferential royalty could include a number of factors such as the parties` risk aversion characteristics, the costs associated with observing covered sales, the existence of other licensees, the price elasticity of the products conceded, the information asymmetries between the parties and whether the expected use of the technology is known at the time of negotiation. The TLD analysis supports the view that an ongoing royalty rate is not automatically preferred for many types of agreements. The TLD indicates that more than 40% of all software patent licenses submitted to the SEC report financial consideration either as a lump sum or a royalty per unit sold, not as a percentage of revenue. However, a basis for comparison must be provided when a reasonable flat fee is compared to previous flat-rate licences. First, the court considered Sprint`s citation, Rude v. Westcott, 130 U.S. 152 (1889) – the pioneering case of „established royalties“ as damages – for the thesis that „Rude categorically prohibits the admission of litigation on the issue of a reasonable (but not „established“ royalty.

Slip op.