©2014. Published in Landslide, Vol. 6, No. 6, July/August 2014, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.
On January 4, 2011, the Federal Circuit released its landmark decision in Uniloc USA, Inc. v. Microsoft Corp.,1 abolishing use of the so-called 25 percent rule, under which a hypothetical licensee would be expected to pay as a reasonable royalty 25 percent of the expected profits of the product incorporating the patent. The court found that this “rule of thumb” was “a fundamentally flawed tool” for determining a baseline royalty rate in the hypothetical negotiation that sets the reasonable royalty to which the patentee is entitled under 35 U.S.C. § 284.2 Because the 25 percent rule fails to tie the reasonable royalty rate to the particular facts of the case at issue, expert testimony relying on that rule is inadmissible under Daubert.3
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