Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970), modified & aff'd, 446 F.2d 295 (2d Cir. 1971)
Georgia-Pacific v. United States Plywood is the foundational modern case for calculating reasonable royalty damages in patent infringement.
When no established royalty exists and lost profits are not proven, what methodology and considerations should a court use to determine a reasonable royalty for patent infringement under 35 U.S.C. § 284, and how should the court apportion value attributable to the patented invention versus non-patented features?
Under 35 U.S.C. § 284, a patentee is entitled to damages adequate to compensate for infringement, but in no event less than a reasonable royalty. When there is no established royalty and lost profits are not proven, the reasonable royalty is determined by positing a hypothetical negotiation between a willing licensor and a willing licensee at the time the infringement began. The court may consider all relevant economic and factual circumstances, including the following non-exhaustive Georgia-Pacific factors: 1) Royalties received by the patentee for licensing the patent in suit (established royalty evidence). 2) Rates paid by the licensee for the use of other comparable patents. 3) The nature and scope of the license (exclusive/nonexclusive; territorial; field-of-use restrictions). 4) The licensor's established policy and marketing program to maintain its patent monopoly by not licensing others or granting restricted licenses. 5) The commercial relationship between the parties (competitors or not; relationship effects). 6) The effect of selling the patented specialty in promoting sales of other products and the value of that derivative or convoyed sales. 7) The duration of the patent and the term of the license. 8) The established profitability, commercial success, and current popularity of the product made under the patent. 9) The utility and advantages of the patented property over old modes or devices. 10) The nature of the patented invention and the benefits to those who use it; the extent to which it is a key driver of demand. 11) The extent of the infringer's use of the invention and the value of that use. 12) The portion of profit or selling price customarily allowed for the use of the invention in the relevant business. 13) The portion of realizable profit attributable to the invention as distinguished from non-patented elements, manufacturing processes, business risks, or added value by the infringer (apportionment). 14) The opinions and testimony of qualified experts. 15) The amount a prudent licensee would have been willing to pay and a prudent patentee would have been willing to accept, while allowing the licensee a reasonable profit (the hypothetical negotiation end point).
The court awarded damages based on a reasonable running royalty derived from a hypothetical negotiation occurring at the time infringement began, guided by the fifteen Georgia-Pacific factors and with careful apportionment to the value contributed by the patented features. The Second Circuit affirmed the district court's approach and overall award.
Georgia-Pacific supplies the canonical fifteen-factor framework for reasonable royalty damages and formalizes the hypothetical-negotiation methodology still used under § 284. It underscores that damages must be tied to the value of the patented contribution through apportionment and that comparable licenses and industry practice matter only insofar as they are truly comparable and economically relevant. The case is indispensable for law students studying patent remedies because it bridges legal principles with practical valuation, informs expert testimony structure, and provides enduring guidance for judges and juries in quantifying patent value while avoiding overcompensation or undercompensation.