Overview of Patent Infringement Damages

Patents grant their owners exclusive rights to make, use, and sell the protected invention. When a competitor unlawfully appropriates those rights, the patent holder may seek monetary relief through litigation or settlement negotiations. Calculating a reasonable value for a patent infringement claim is notoriously complex. Courts weigh different theories of recovery including lost profits, disgorgement of the infringer's gains, and royalties that the parties might have agreed upon in a hypothetical negotiation. This calculator distills those theories into a simple formula that compares each measure and selects the most advantageous before applying any willfulness enhancement. It is not a substitute for rigorous economic analysis, but it provides a conceptual framework for understanding how various inputs drive the final number.

The starting point for many plaintiffs is lost profits—money the patent owner would have earned but for the infringement. Establishing lost profits usually requires showing demand for the patented product, absence of non-infringing alternatives, capability to supply the demand, and the amount of profit that would have been made. These factors stem from the well‑known Panduit test. In practice, this analysis often involves detailed sales records, expert testimony, and market modeling. For purposes of our calculator, you may input a total dollar amount representing the profits you believe were lost due to the infringer's sales.

Another measure of damages is the infringer's profit. Some jurisdictions permit disgorgement of the profit the infringer earned from the unauthorized use, particularly when lost profits are difficult to prove. This approach focuses on the wrongdoer's gains rather than the patent owner's losses. Entering the infringer's profit into the form allows the calculator to weigh this figure against lost profits and royalties to determine which yields the highest compensation.

Even when lost profits and disgorgement are unavailable, patent law guarantees at least a reasonable royalty. Courts attempt to recreate the amount that a willing licensor and willing licensee would have agreed upon just before the infringement began. The hypothetical negotiation is informed by factors from Georgia‑Pacific Corp. v. U.S. Plywood Corp., such as established royalty rates, licensing policies, and the value of the patented technology. Our tool approximates a reasonable royalty by multiplying the infringer's revenue by the royalty rate you input, expressed as a percentage. Choosing an appropriate rate requires industry knowledge or guidance from licensing benchmarks, which the table below helps illustrate.

Occasionally the infringer's conduct is particularly egregious, making the case eligible for enhanced damages. Under U.S. law, courts may increase damages up to three times in response to willful infringement—conduct that was intentionally or recklessly unlawful. The Willfulness Multiplier field in our calculator allows you to model the effect of these enhancements. A value of 1 represents no enhancement, 2 represents doubling, and 3 represents treble damages. Keep in mind that judges have discretion to award lesser amounts or none at all, depending on the evidence.

Mathematical Model

To transform the above concepts into a single estimate, the calculator compares three figures: lost profits (L), infringer profit (I), and reasonable royalty (R). The reasonable royalty is calculated by multiplying infringer revenue (V) by the royalty rate (X) as a decimal. The base damages equal the maximum of these three amounts. That base is then multiplied by the willfulness factor (W). Expressed in MathML:

Because the formula selects the highest of the three base measures, it aligns with the patent owner's strategy of pursuing the most favorable recovery. If lost profits exceed both the infringer's profit and the calculated royalty, the lost profits figure becomes the base. Conversely, if a high royalty rate applied to substantial revenue surpasses the other measures, the royalty drives the outcome. The willfulness multiplier can dramatically increase the final number, underscoring why evidence of deliberate copying or disregard for patent rights is so influential in settlement negotiations.

Typical Royalty Rates

Royalty rates vary widely across industries and technologies. The table below offers rough illustrative ranges to help you select a starting point:

Industry	Typical Royalty Range
Consumer electronics	3% – 8%
Pharmaceuticals	5% – 15%
Industrial manufacturing	1% – 5%
Software	5% – 10%

These ranges are not prescriptive; actual negotiations consider the unique value of the invention, available alternatives, and the parties' bargaining power. Some high‑value patents command rates well outside these bands. Historical licenses involving similar technology provide the most persuasive benchmarks, so treat the table as a general orientation rather than a definitive guide.

Example Calculation

Imagine a company that holds a patent on a specialized sensor. The patent owner believes it lost $1.2 million in profits because an infringer sold competing products. The infringer's accounting records show $900,000 in profit on $5 million in revenue from the infringing sales. Industry data suggests a 6 percent reasonable royalty. Plugging these numbers into the calculator: lost profits equal $1.2 million; infringer profit is $900,000; the reasonable royalty is $300,000 (6% of $5 million). The base damages are therefore $1.2 million, the maximum of the three. If the infringement appears willful and the court applies a multiplier of 2, the estimated damages rise to $2.4 million. This example highlights how the method isolates the dominant theory of recovery before considering enhancements.

Limitations and Practical Considerations

Real patent litigation involves layers of complexity beyond this simple model. Calculating lost profits requires analyzing market elasticity, capacity constraints, and cost structures. Disgorging an infringer's profit may necessitate apportioning profits attributable solely to the patented feature rather than the entire product. Royalty assessments hinge on expert testimony, comparable licenses, and sometimes the entire market value rule. Courts may also award prejudgment interest, attorney fees in exceptional cases, or ongoing royalties for future infringement. Furthermore, defenses like patent invalidity or non‑infringement can eliminate damages altogether. Our calculator ignores these variables to focus on the core theories and is intended for educational exploration only.

How to Use This Calculator

Begin by collecting data that supports each damages theory: financial statements to document lost profits, accounting records to reveal the infringer's gains, and revenue figures for calculating reasonable royalties. Choose a royalty rate grounded in industry practice or previous licenses and consider whether the infringer's conduct may justify a willfulness enhancement. After entering the numbers and clicking the calculate button, review the result and test how changes in each input affect the outcome. This experimentation can help you prioritize evidence gathering and inform discussions with counsel. Remember, the final damages award in a real case will depend on the strength of your proof and the court's assessment of the facts.