A well-established approach to estimating patent damages is a reasonable royalty based on a hypothetical negotiation between the patent owner and the infringer. The hypothetical negotiation date can be critical because it dictates the specific negotiating parties — i.e. who owned the patent and who was infringing when infringement began — and can frame their bargaining position at that time. While many factors can have a meaningful impact on the reasonable royalty outcome, properly identifying the date of the hypothetical negotiation and the specific parties who would have negotiated is often vital to this process.
Depending on the circumstances, even a small change in the hypothetical negotiation date could meaningfully impact the parties’ bargaining positions. In this Law360 article, the authors use case examples to illustrate key aspects of a hypothetical negotiation and its critical role in estimating patent damages.