Entire market value rule

A damages doctrine that permits a patent owner to use the entire revenue of a multi-component product as the royalty base only when the patented feature drives consumer demand for the entire product. Courts have substantially narrowed application of the entire market value rule following decisions such as Cornell v. HP and LaserDynamics v. Quanta, pushing patent damages toward the smallest salable patent-practicing unit as the appropriate base. For litigation funders, the viability of an entire market value rule argument can dramatically change projected damages — and therefore return modeling — since the royalty base difference between a component and an end product can be tenfold or greater. Funders pressure-test whether plaintiffs' damages experts can survive Daubert challenges on royalty base theory before underwriting large commitments.

Whether an entire-market-value theory survives Daubert can move a damages estimate by an order of magnitude, so funders test the plaintiff's demand-driver evidence — specifically, proof the patented feature, not the product as a whole, drives customer purchasing decisions — before crediting the larger royalty base in their return model. Cases resting on an aggressive entire-market-value theory are underwritten with a bifurcated valuation: the base case assumes the smallest-salable-unit base will prevail, with the larger base treated as unpriced optionality rather than baseline recovery.