Reasonable royalty as damages (redevance indemnitaire)

The reasonable royalty as damages (redevance indemnitaire) is the sum awarded to the victim of an infringement on the basis of the royalty the infringer would have paid had it sought authorisation to exploit the right. It is based on Article 13 of Directive 2004/48/EC and, for patents, on Article L. 615-7 of the French Intellectual Property Code, which provides for a lump sum that may not be lower than the royalties that would have been due. Within the assessment of damages, it operates as a floor rather than a ceiling.

The two uses of the royalty

The royalty serves first as an alternative to assessment by separate heads, at the request of the injured party, which is then relieved of proving its lost profits. It also serves, within assessment by separate heads, to compensate the share of the infringing mass that the victim could not have captured, for lack of capacity or exploitation, or the entire mass where the proprietor does not exploit the right itself. In that second case, it is treated as a component of the negative economic consequences.

Setting the rate

The court starts from the rates applied in the sector, the licences granted by the proprietor under the same right and, failing that, an analysis of the value the invention contributes to the product. Courts frequently increase the reference contractual rate, on the ground that the infringer neither negotiated nor bore the constraints of a licence, such as audits, guaranteed minimums or territorial restrictions. The Court of Justice of the European Union has accepted that EU law does not preclude a national rule allowing an award corresponding to twice the hypothetical royalty.

The royalty and standard essential patents

In disputes over standard essential patents, the reasonable royalty merges with the debate on the FRAND licence rate. The comparable licences and top-down approach methods are then used to compensate past acts. Setting the rate requires in-depth economic analysis, often supported by expert reports filed by both sides.

Key points

The reasonable royalty guarantees a minimum, even where lost profits are impossible to prove. Existing licences, sector studies and evidence of the invention’s value should be gathered, and the increase sought should be precisely justified. For the defendant, the debate centres on the royalty base, the share of value attributable to the invention and the relevance of the comparables.

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This glossary entry is general in scope and does not constitute legal advice.

Dhenne Avocats litigates patent disputes before the Paris Judicial Court, the Paris Court of Appeal and the Unified Patent Court. Where the question arises in a real case, the useful moment is almost always before proceedings are issued.

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