The reasonable royalty is the backstop of U.S. patent damages. The governing statute, 35 U.S.C. § 284, sets a floor below which a damages award for infringement cannot fall. Its first sentence directs that a 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." The phrase "in no event less than" is what makes the reasonable royalty a guaranteed minimum, not merely one option among several.

The statute identifies two tiers of compensation. The general standard is damages "adequate to compensate" — which can include the patentee's lost profits where the patentee can prove it would have made the infringer's sales. When lost profits cannot be shown, the reasonable royalty serves as the floor, ensuring a patent owner recovers something for the unauthorized use even if it does not compete in the market or cannot trace lost sales to the infringement.

"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."— 35 U.S.C. § 284, source

How courts compute a reasonable royalty

The statute does not prescribe a formula; it authorizes the court to "receive expert testimony as an aid to the determination of damages or of what royalty would be reasonable under the circumstances." In practice, courts and damages experts frame the reasonable royalty as the outcome of a hypothetical negotiation between a willing licensor and a willing licensee at the time infringement began, assuming the patent is valid and infringed. The multi-factor analysis most often cited derives from Georgia-Pacific Corp. v. United States Plywood Corp., a 1970 district-court decision that catalogued fifteen factors relevant to a reasonable royalty, including established royalties, the parties' relationship, and the portion of profit attributable to the invention.

The Federal Circuit has tightened the evidentiary discipline around royalty testimony. Its decisions require that a royalty be tied to the footprint of the claimed invention rather than the entire value of a multi-component product, an idea captured by the entire-market-value and apportionment rules. A reasonable royalty applied to a patented "mesh routing module" in a networking product, for example — the kind of component-level claim seen in U.S. Patent No. 9,479,428 — must reflect the value of the patented feature, not the value of the whole device, unless the patented feature drives consumer demand for the entire product.

Enhancement, interest, and the jury's role

Section 284 also authorizes enhanced damages: "the court may increase the damages up to three times the amount found or assessed." The Supreme Court in Halo Electronics, Inc. v. Pulse Electronics, Inc. (2016) held that this enhancement is discretionary and is reserved for egregious cases of misconduct — typically associated with willful infringement — rejecting the rigid two-part test that had previously governed. Enhancement is not automatic on a willfulness finding; it remains within the district court's discretion.

The statute allocates the computation between judge and jury. It provides that "when the damages are not found by a jury, the court shall assess them," confirming that the damages amount is a fact question a jury may decide, while the decision whether to enhance the award rests with the court. Section 284 further commands an award of interest and costs as fixed by the court, and the related marking statute, § 287, can limit the period for which damages accrue. The reasonable-royalty floor, however, is the constant: prove infringement, and the statute guarantees compensation no smaller than a reasonable royalty for the use the infringer made of the invention.

Apportionment and the smallest salable unit

The Federal Circuit's apportionment doctrine is where most reasonable-royalty disputes are won or lost. The court has repeatedly held that damages must be apportioned to the value attributable to the patented feature rather than the value of an entire multi-component product. The entire-market-value rule permits using the full product's revenue as the royalty base only where the patented feature drives consumer demand for the whole product; absent that showing, an expert must isolate the value of the claimed invention, often by reference to the smallest salable patent-practicing unit.

This discipline is enforced through the gatekeeping function of the trial court. Under Daubert v. Merrell Dow Pharmaceuticals, Inc. (1993) and Federal Rule of Evidence 702, a district court can exclude a damages expert whose royalty opinion is not tied to the facts of the case or rests on an unreliable methodology. An excluded damages theory can collapse a large verdict, which is why the apportionment analysis and the choice of royalty base receive intense scrutiny before trial.

Section 286 places an outer limit on recovery: no damages may be recovered for infringement committed more than six years before the filing of the complaint or counterclaim. Combined with the marking requirement of § 287 — which can bar pre-notice damages where a patentee or its licensees sell patented articles without marking them — these provisions define the temporal window over which the reasonable royalty accrues. The royalty floor of § 284 thus operates within boundaries set by the limitations and marking statutes, and a damages presentation that ignores them risks both exclusion and reduction.