Entire Market Value Rule/Argument

The argument often made that a reasonable royalty should be based on the Entire Market Value of a product using a patent. The rule has recently been curtailed by a decision of the United States Court of Appeal for the Federal Circuit in Lucent v. Microsoft, in reversing an award of $358 million based on infringement by a single feature of Microsoft Outlook. As the Federal Circuit put it

“The evidence can support only a finding that the infringing feature contained in Microsoft Outlook is but a tiny feature of one part of a much larger software program…Outlook is an enormously complex software program comprising hundreds, if not thousands or even more, features. We find it inconceivable to conclude, based on the present record, that the use of one small feature, the date-picker, constitutes a substantial portion of the value of Outlook.”

Later in the 2012 decision LaserDynamics v. Quanta Computer, the Federal Circuit further clarified the rule

“patentees may not calculate damages based on sales of the entire product, as opposed to the smallest salable patent-practicing unit, without showing that the demand for the entire product is attributable to the patented feature.”