25 Percent Rule

Widely cited basis for royalty rate calculation in patent licensing that is variously described as meaning “taking 25 percent of the profits as a running royalty” or seeking 25 percent of the cost avoided by the use of the invention. The origin of the ‘rule’ is unclear, as is the underlying economic justification, some of its alleged authors having denied responsibility. The rule was rejected by the United States Federal Circuit in Uniloc v. Microsoft as fundamentally flawed, not admissible under Daubert or the Federal Rules of Evidence and thus should not be applied in US Courts.