Is the ‘25% rule of thumb’ still alive and well?

BVWireIssue #109-2
October 11, 2011

The Federal Circuit’s decision in Uniloc v. Microsoft to “abolish” the 25% rule of thumb in patent litigation appears to be final and fatal, according to most authorities (including the BVWire). But were reports of the rule’s “death by Daubert” premature?

“Despite this holding,” says attorney Andrew S. Dallmann (Jeffer Mangels Butler & Mitchell), in a recent post on Patent Lawyer, “courts appear to continue to use this rule of thumb as a guide in determining a reasonable royalty for patent infringement.” In particular, Dallmann cites a recent decision in which a federal district court rejected the royalty rates proposed by both parties. Instead, it began with the 25% rule of thumb as provided for in Paice LLC v. Toyota Motor Corp., a 2007 Federal Circuit decision that was frequently cited as a framework for establishing prospective royalties—at least, prior to Uniloc.

“The court did not rely on the 25% rule as its sole basis for determining an ongoing royalty,” Dallmann comments. Indeed, had it done so, it would have contravened Uniloc—which clearly cites Paice as a prior decision that “passively tolerated” the rule. Nevertheless, Dallmann says, the court’s use of the rule, even as a benchmark, begs the question whether federal jurisdictions will continue to use the 25% rule—post-Uniloc—as a “quick and dirty, royalty rate reality check.”

Look for a complete digest of Douglas Dynamics LLC v. Buyers Products Co., 3-09-cv-00261 (W.D. Wis.)(Sept. 22, 2011) in the next Business Valuation Update (November); the district court opinion will be posted soon at BVLaw. Reminder: the full text of the court’s opinion in Uniloc is also available as a free download from

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