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Reasonable Royalty Damages in Trademark Cases

A Modified Georgia-Pacific Framework for Setting Royalty Rates

By David Drews of IPmetrics LLC

An important element in many trademark infringement actions is the determination of any damages that have been suffered by the plaintiff. At the federal level, the calculation of damages is dictated by the Lanham Act.1 Once liability has been proven, the Lanham Act provides for the recovery of defendant's profits, actual damages sustained by the plaintiff and the costs of the action, subject to principles of equity.2

Although the Lanham Act does not explicitly list a reasonable royalty as a valid remedy in trademark infringement matters, the award of a reasonable royalty as compensation for trademark infringement damages has been recognized as an appropriate alternative for decades.3 This makes sense from an economic perspective since royalty rates have long been utilized as pricing and value indicators for intellectual property of all kinds, including trademarks. However, a reasonable royalty is not appropriate in every trademark infringement situation.

Also, it should be noted that the recovery of a reasonable royalty in a trademark infringement action is limited by some jurisdictions...

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