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Royalty Rate Determination for Valuation of Brands/Patents in Litigation Cases
The legendary solicitor, Robert Goldscheider had coined the '25% Rule' for Royalty Rate determination in litigation cases. According to Goldscheider, the 25% Rule can be used by courts as part of the 2-stage process, wherein the defendant & plaintiff (collectively referred to as 'Parties') in the 1st stage determine Royalty as 25% of the operating proﬁt margin (the '25% Threshold'). This is followed up with step 2 of upward/downward adjustments to the 25% Threshold, depending on the bargaining power of each of the litigating Parties.
Patent disputes in India have witnessed a paradigm shift from being plain infringement suits to those involving a complex interface of patent and competition laws. These complex disputes are termed as Standard Essential Patent (SEP) suits whose jurisprudence has grown exponentially.
Determining fair Royalty Rates
India's legal position on adjudicating such disputes has been evolving over time. Courts are following in the footsteps of their counterparts in developed jurisdictions and shaping their approach with the budding international scenario. RBSA highlights effective approaches for Indian Courts to incorporate while dealing with reasonable royalty rate determination under SEP disputes.
The rule whether used in litigation or non litigation setting provides a fairly resonable tool to be augmented by a more complete royalty analysis. Georgia pacific factors are quite helpful in adjusting this simple 25% number up or down based on number of qualitative assessments as delineated previously and have also been widely acknowledged by courts across the world in IP Litigation and Patent infringement case judgements.
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