A Reasonable Royalty Includes All Benefits to the Patent Holder, Not Just Cash Payments

Monsanto Company v. McFarling, [05-1570, -1598](May 24, 2007)[BRYSON, Lourie, Rader] The Federal Circuit affirmed award of damages, the rejection of McFarling's argument for vacating judgment of liability, and the refusal of Monsanto's request to modify the permanent injunction.
BRIEF: McFarling bought Monsanto patented seed, signing a technology agreement with Monsanto, and thereafter saved seed from his crops, in violation of the technology agreement and infringing Monsanto's patents. The jury returned a verdict of $40 per bag of seed, far in excess of the established $6.50 Technology Fee charged by Monsanto. An established royalty is usually the best measure of a reasonable royalty for a given use of an invention because it removes the need to guess at the terms to which parties would hypothetically agree. However, the Federal Circuit recognized that the direct payment of $6.50 was not the only compensation Monsanto received, and thus the direct payment alone was not representative of a reasonable royalty for McFarling's infringement. The Federal Circuit noted additional value to Monsanto from the Technology Agreement, and concluded that it was reasonable that a reasonable royalty from an infringer could exceed the amount paid by farmers who complied with the Agreement. The Federal Circuit said that it was also proper to consider the benefits conferred upon the infringer in evaluating reasonable royalty. In review damages awards in patent cases, we give broad deference to the conclusions reached by the finder of fact. A jury's damage award "must be upheld unless the amount is grossly excessive or monstrous, clearly not supported by the evidence or based only on speculation or guess work."