Reasonable royalty damages

The minimum measure of patent infringement damages under 35 U.S.C. § 284, calculated as the royalty a willing licensor and willing licensee would have agreed to at a hypothetical negotiation on the date infringement began. Reasonable royalty analysis is the most commonly litigated damages theory in patent cases and the primary basis on which funders model expected recovery in technology and pharmaceutical disputes. The methodology — governed by the Georgia-Pacific factors — is highly expert-dependent, and damages opinions in the same case can diverge by orders of magnitude. Funders scrutinize royalty base selection (entire product versus smallest salable patent-practicing unit), comparability of licenses, and the patent's contribution to the accused product's value when sizing investments.

Because the royalty base and rate are both contestable, funders build independent damages ranges rather than accepting the plaintiff's expert's number, applying their own view of the correct royalty base — entire product versus smallest salable unit — before sizing a commitment. The spread between plaintiff and defense damages experts is often wide enough that a funder's return depends less on winning liability than on which royalty-base theory a court accepts at the Daubert stage, making early exposure to that ruling a first-order underwriting task rather than a trial-phase concern.