Georgia Pacific Corp vs. United States Plywood Corp, May 1970

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This case is about valuation (not transfer pricing as such) and is commonly referred to in international valuation practice.

In this decisions, the following 15 factors were relied upon to determine the type of monetary payments that would compensate for a patent infringement:

1. The royalties received by the licensor for licensing the intangible, proving or tending to prove an established royalty.
2. The rates paid by the licensee for the use of other similar intangibles.
3. The nature and scope of the license, such as whether it is exclusive or nonexclusive, restricted or non-restricted in terms of territory or customers.
4. The licensor’s policy of maintaining its intangible monopoly by licensing the use of the invention only under special conditions designed to preserve the monopoly.
5. The commercial relationship between the licensor and licensees, such as whether they are competitors in the same territory in the same line of business or whether they are inventor and promoter.
6. The effect of selling the intangible in promoting sales of other licensor’s products; the existing value of the invention to the licensor as a generator of sales of other products that do not include the intangible and the extent of such derivative or “convoyed” sales.
7. The duration of the intangible (patent) and the term of the license.
8. The established profitability of the product that include the intangible, its commercial success and its current popularity.
9. The utility and advantages of the intangible over any old modes or devices that had been used.
10. The nature of the intangible, its character in the commercial embodiment owned and produced by the licensor, and the benefits to those who used it.
11. The extent to which the infringer used the invention and any evidence probative of the value of that use.
12. The portion of the profit or selling price that is customary in the particular business or in comparable businesses.
13. The portion of the realizable profit that should be credited to the intangible as distinguished from any other elements, manufacturing process, business risks or significant features or improvements added by the infringer.
14. The opinion testimony of qualified experts.
15. The amount that Georgia-Pacific and a licensee would have agreed upon at the time the infringement began if they had reasonably and voluntarily tried to reach an agreement.

Some of the above factors may not apply systematically. Also, if such reasoning were to be relied upon, it would need to be applied in light of the issues at stake (proportionality).

US vs Georgia-Pacific-Corp.-v.-United-States-Plywood-Corp.-318-F.-Supp.-1116-S.D.N.Y.-1970

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