Reasonable Royalty Calculation—Expanding Beyond "Established" Royalties

The U.S. Court of Appeals for the Federal Circuit affirmed a district court’s calculation of "reasonable royalties" that accounted for intangible benefits conferred on the market by the patentee’s licensing program. Monsanto Co. v. McFarling, Case Nos. 05-1570, -1598 (Fed. Cir., May 24, 2007) (Perry, J.).

In order to purchase Monsanto’s patented, genetically modified soybean seeds, farmers were required to sign a "Technology Agreement," which granted them a license to use the seeds, subject to various obligations: payment of a "Technology Fee" directly to Monsanto; a promise to purchase seeds only from authorized Monsanto dealers; and a promise to use the seeds only for that season. McFarling violated the terms of this agreement by improperly replanting seeds containing the patented technology. Monsanto successfully sued for infringement.