I read it and included the Royalty Rate section below. Maybe I am missing something, which is very possible, but the way I read it, they are comparing royalty rates awarded in litigation vs. royalty rates negotiated in the real world. I don't see anything that pertains to royalty rates negotiated in the mediation process prior to litigation? IMO, I have to believe that royalty rates negotiated pre-trial would be less than post trial award, or why would they ever settle once they get to this point if no incentive exists. I am not saying that we won't receive a huge settlement, because I honestly don't know, but IMO I doubt the #'s will meet the expectations of most on this board. I hope I am wrong. I also read that patent injunction denials have increased by 50% in the post E-Bay era, which helps shape some perceptions on our chances of obtaining an injunction.

Good luck to you, me, us, and all longs.

Royalty Rates:

Available data from a number of sources reflect that royalty rates both in real world licenses and in litigation are increasing and that royalty rates awarded in litigation are higher than those negotiated in the real world. Based on periodic royalty studies published in les Nouvelles and Licensing Economics Review, average royalty rates for real world licenses across all industries increased from 5% in the 1980’s to 6.2% (median of 4.5%) in the 1990’s. Since then, rates have continued to increase with an average rate for 2006 licenses of 6.8% and a median rate of 5%. Similarly, average royalty rates awarded at trial have remained higher than their real world counter-parts. For example, a study by the Analysis Group that was reported in 1997 reflected a doubling in the average amount of royalty awards after the creation of the Federal Circuit. While an average royalty award rate was not given, about one third of the awards involved rates ranging from 6-10%, around one-quarter involved rates of 11-15%, roughly one-quarter involved rates of 5% or less and the remainder involved rates greater than 15%. By 2002, a KPMG study reflected that over half of royalty awards were at rates between 5% and 20%, with the remainder (just under half) evenly distributed between transactions with rates of 5% or less, or 20% State Bar of Texas Intellectual Property Law Section, Summer 2007 – 11 ...for the post-eBay period... a 50%+ increase in the rate of historical injunction denials must be considered significant, should affect litigation strategy and may affect litigation cost. ...royalty rates awarded in litigation are higher than those negotiated in the real world or more. A 2006 empirical analysis conducted by Professor Mark Lemley reflected awards with an average rate of 13% and a median rate of 10%, fairly consistent with the Analysis Group and KPMG distributions reflecting that most awards were in the 5-15% and 5-20% ranges, respectively. The higher litigation rates may be explained by a variety of factors, including the difference between the settings of a real world negotiation and a hypothetical negotiation. In particular, the hypothetical negotiation assumes validity and infringement, considerations often compromised in the real world. Further, real world licenses often include other considerations such as cross-licenses, covenants not to sue, other IP, technical and developmental assistance which may suppress the actual royalty rate. And, of course, the prospect of a design around hangs over a real world negotiation and, while considered in the hypothetical negotiation, is often no more than a side note addressed after the fact when the infringer has made significant actual use of the patents, infringed for a number of years and never actually designed around.

Conclusion:

In sum, (1) IP litigation filings are on the rise, though the case-type mix has changed, (2)

litigation costs continue to rise at a rather alarming rate of 20% per year and may increase further depending on the injunction trends, (3) patent injunction denial rates have initially increased in the post-eBay era though the observations are limited in number, (4) total and average damage awards are increasing decade-to-date over the 1990’s (at least most people think so), (5) average real world royalty rates are increasing and (6) average reasonable royalty rates remain higher than their real world counter-parts.