Background
ResQNet.com held patents covering screen-scraping technology — software that allowed modern computer systems to interface with and retrieve data from older mainframe applications. Lansa, Inc. developed and sold a competing screen-scraping product called Designer and Linc for Windows, and ResQNet sued for infringement of two patents: U.S. Patent No. 5,831,608 and U.S. Patent No. 6,295,075.
After trial in the Southern District of New York, the district court found that Lansa infringed the ‘075 patent and awarded approximately $506,000 in damages based on a 12.5% royalty rate proposed by ResQNet’s damages expert. The expert arrived at this rate by analyzing seven license agreements — five of which involved re-bundling agreements under which other companies paid ResQNet for the right to bundle and resell ResQNet software products and services, rather than licenses to the specific patented technology at issue.
The Court’s Holding
The Federal Circuit affirmed the infringement finding but vacated the damages award and remanded for a new damages calculation. The court held that the five re-bundling agreements were not comparable to the hypothetical negotiation over the ‘075 patent because they covered entirely different subject matter — the right to resell software products and services — not a license to practice the patented screen-scraping inventions. None of these licenses even mentioned the patents at issue or had any discernible link to the claimed technology.
The court reinforced the principle that a reasonable royalty must be grounded in real-world market evidence that is genuinely comparable to the specific patents being valued. Speculative royalty rates derived from unrelated agreements — even between the same parties — cannot support a damages award. The only properly comparable license in the record was a direct license to the patents at issue, which carried a royalty rate far lower than the 12.5% the expert had used.
Key Takeaways
- License agreements used to support a reasonable royalty analysis must be technically and economically comparable to the specific patent claims at issue — not just agreements involving the same parties or technology field.
- Re-bundling agreements, bundled software licenses, and portfolio cross-licenses are not automatically comparable to a license for a specific patented technology and must be adjusted or excluded if they lack a discernible connection to the patent in suit.
- Where actual licenses to the patent in suit exist, those licenses carry significant weight and may override royalty rates derived from less comparable agreements.
- ResQNet, together with Lucent v. Gateway and Uniloc v. Microsoft, forms part of the Federal Circuit’s 2009-2011 overhaul of patent damages methodology.
Why It Matters
ResQNet.com v. Lansa addressed a common but problematic practice in patent damages litigation: using whatever licenses happen to be available — regardless of whether they really relate to the patented technology — to construct a favorable royalty rate. The ruling made clear that the “comparability” requirement in the reasonable royalty analysis has real teeth.
For damages experts and litigators, the case established that a license agreement is not automatically admissible or reliable just because it involves the patent holder and covers some overlapping technical space. The analysis must identify a true economic analog: a license that a reasonable licensor and licensee would have seen as setting the price for the specific inventive contribution at issue. This discipline has become central to patent damages litigation in every technology sector.