As an inventor, few situations are more frustrating than having your patented invention stolen by a competitor. Not only did you invest your heart and soul into the invention's development, but you also invested time and money into obtaining a patent from the U.S. Patent and Trademark Office. If a competitor infringes on your patented invention, you may want to initiate patent litigation.
If you sue and win, the court will then need to set a dollar amount for the award, based on the financial damage you suffered. The court doesn't just pull a figure out of the air. Thus it's worth understanding what types of damage payments you might be entitled to receive, assuming you win the litigation.
Like most patent law issues, potential damages are explained within the text of the Patent Act itself, at 35 U.S.C. § 284, which provides: "Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court. When the damages are not found by a jury, the court shall assess them. In either event the court may increase the damages up to three times the amount found or assessed.... The court may receive expert testimony as an aid to the determination of damages or of what royalty would be reasonable under the circumstances."
In plain English, this provision authorizes a court to award damages to a patent holder after a finding that a patent was infringed. This means that you must "win" the litigation, overcoming any defenses that the alleged infringer has; for example, that the infringer actually used a different twist on your patent, or that your invention should not qualify for patent protection at all.
Although the Patent Act does not enumerate types of possible damages, courts have wide discretion to award certain categories based upon the facts of a case. The two most common damage categories are "reasonable royalties" and "lost profits."
"Reasonable royalties" essentially means the fair market value of a license or "royalty" for the use of your patent by the infringer. For example, a court might determine that the reasonable royalty for a company that infringed your rubber formula on the handle of a toothbrush would be $1 per brush. It could then assess damages accordingly, based upon the number of toothbrushes that infringed.
"Lost profits" refer to the monies that you or your company could have made but for the defendant's wrongful infringement of your patent. The challenge here is that there must be a nexus of causation between the infringement and your bottom line. In other words, you must prove that your business suffered specifically because of the infringement.
For example, imagine a situation where your company uses a patented piece of special operating system software in its computers. Another company used your operating system software without permission in its own computers, and aggressively marketed its functionality to consumers. Consequently, it sold hundreds of computers to eager consumers specifically because it wrongfully used and marketed your software. Here, you would be able to establish lost profits.
For both royalty rates and lost profits, the Patent Act says that the court "may receive expert testimony as an aid." After all, the court will have little objective idea of what value your particular patent may have, either in the specific product or formula, or in the general marketplace. It will be incumbent upon you and your attorney to offer expert witnesses or reports to establish various fair market values on which the judge can rely. (Note that the infringer is permitted to offer its own expert testimony or reports to rebut yours.)
When you sue for patent infringement, be sure to consult with a patent attorney about the types of damages that you might be able to seek and prove to the court.