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Archived updates for Thursday, August 26, 2004

IP Law & Business: Goldscheider's "25% Rule" for a Reasonable Royalty

"All things being equal, a licensee will pay 25 percent of profits as a reasonable royalty. "

According to an August 4, 2004 article in IP Law & Business, Robert Goldscheider arrived at this now-famous calculation in 1959 when one of his clients, Philco Corporation, had about 18 European licensees for its radio and phonograph patents. Goldscheider calculated that Philco's licensees assumed the major risk of commercializing their products, about 75 percent. That left 25 percent of the risk to licensor Philco, reflected in a 25/75 percent split of pretax profits. Probably the best-known economic damages expert in the nation, the 75-year-old has testified in more than 100 IP cases. "I have three homes, am worth several million dollars," he says. "I don't have to work unless I want to."
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