## Facts

- United States Plywood Corp. owned the Deskey patent (U.S. Patent No. 2,286,068) covering striated fir plywood marketed as “Weldtex.”
- Georgia-Pacific Corp. manufactured and sold a competing striated plywood product found to infringe Claim 1 of the Deskey patent.
- Earlier proceedings resulted in an appellate ruling that Claim 1 was valid and infringed, with the case remanded for a damages determination.
- A special master initially calculated damages based on Georgia-Pacific’s profits from infringing sales, awarding $685,837.
- The district court rejected an infringer’s-profits measure as improper on these facts and required damages to be calculated as a reasonable royalty under 35 U.S.C. § 284.
- There was no established, uniform royalty rate for licensing the Deskey patent, requiring the court to estimate a royalty from market and bargaining evidence.
- The court conducted extensive evidentiary hearings to determine the reasonable royalty that would have resulted from an arm’s-length negotiation at the time infringement began.

## Issues

1. What measure and amount of “reasonable royalty” constitutes “damages adequate to compensate for the infringement” under 35 U.S.C. § 284 where no established royalty exists?
2. What analytical framework should be used to reconstruct the royalty the parties would have agreed to in a hypothetical negotiation at the onset of infringement?

## Decision

- The court determined that a reasonable royalty, rather than an accounting of Georgia-Pacific’s profits, was the proper damages measure under § 284 in this posture.
- The court applied a hypothetical negotiation approach assuming the patent’s validity and infringement at the time the infringement began.
- The court identified and applied a non-exclusive set of considerations (later known as the Georgia-Pacific factors) to evaluate the economic value of the patented technology and the parties’ likely bargaining positions.
- The court set a per-unit royalty of $50 per thousand square feet of infringing plywood.
- Based on the infringing sales volume, the court awarded $800,000 in reasonable-royalty damages.

## Legal Principles

- Under 35 U.S.C. § 284, damages must be adequate to compensate for infringement and cannot be less than a reasonable royalty for the infringer’s use of the invention.
- When lost profits or an established royalty cannot be proved, a reasonable royalty may be determined by reconstructing a hypothetical arm’s-length negotiation between a willing licensor and willing licensee at the time infringement began.
- Reasonable-royalty analysis is fact-driven and may consider multiple, non-exclusive economic and commercial factors, including: prior licensing practices, comparable royalty rates, the nature and scope of the license, the parties’ competitive relationship, the patented feature’s contribution to demand and profitability, and expert testimony.
- The royalty should reflect fair compensation for use of the patented invention while accounting for the licensee’s expected profits and the licensor’s business interests (including exclusivity concerns when licensing to a competitor).

## Conclusion

The court quantified patent damages as a reasonable royalty under § 284 by reconstructing a hypothetical negotiation and weighing a set of economic factors, ultimately fixing a per-unit rate that produced an $800,000 award for infringement of the Deskey plywood patent.


Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970)