Technology companies are a prime target of nonpracticing entities (NPEs), also known as patent trolls. Because NPEs have no products or services in the marketplace, they do not qualify for lost profits under the patent statute and often cannot obtain injunctions against infringement. The statute does provide NPEs with one remedy—the “reasonable royalty.”
The “reasonable royalty” acts as a floor for damages. Typically, based on expert testimony from both sides, the jury determines a royalty and then applies this rate to the royalty base (i.e., the number of infringing units). Many tech companies have been hit hard by jury awards in the past decade and have called into question the “reasonableness” of experts’ damages theories, permitted by the courts and awarded by juries.