Monsanto’s award based solely on reasonable royalty

Last week’s victory by Monsanto over Dupont (Monsanto Co. v. E.I. du Pont de Nemours & Co., 09cv686, U.S. District Court, Eastern District of Missouri ) for infringing on their patented genetically altered seeds rendered harmless from the effects of the Roundup pesticide is fascinating for valuation analysts because of the damages theory used.

After rejecting a request for a $1.5B license, Dupont proceeded to use the accused product for research purposes only, a practice allowable in the pharmaceutical business but not yet established in agriculture. Dupont realized no income from the seed nor from the research, therefore there was no request for lost profits. The jury awarded $1B in damages as a reflection of what would have been a reasonable royalty from the time of the first infringement to the end of the patent’s legal life in 2014.