Monsanto Co. v. McFarling 488 F.3d 973 (Fed. Cir. 2007)

A reasonable royalty is not limited to merely recovering unpaid licensing fees, but also “includes the scope of benefits gained” by an infringer, the Federal Circuit held. After a soybean farmer, Defendant McFarling, replanted seeds generated from herbicide-resistant seeds patented by Monsanto in violation of a licensing agreement, Monsanto sued for breach of contract and consequent patent infringement. After a jury awarded $375,000 in damages to Monsanto, McFarling appealed.

The Federal Circuit upheld the jury award, concluding that the technology fee of $6.50 per 50-pound bag of seed that was included in the purchase price was not the established royalty for a license, as the Defendant argued. Rather, because farmers were obligated to pay an additional $19 to $22 per bag to the third-party seller, this amount was also part of the royalty—a part that Monsanto had allocated to seed companies for promoting Monsanto’s products. In addition, the court determined that it was proper for a jury to consider not only the benefits to Monsanto, but also the benefits conferred on farmers who used the patented seeds. Based on expert testimony, the court concluded that the savings to farmers who purchased the patented seeds, due to the increased yield and reduced costs of weed control, was $31 to $61 per acre of farmland. The court determined that, based on those advantages alone, it was reasonable for a jury to suppose that in a hypothetical negotiation, a purchaser would pay a royalty of $40 per bag of the herbicide-resistant seed. Accordingly, the court affirmed the award.