A more thorough explanation:

Definition: Hypothetical negotiation is a legal method used to determine the amount of damages in a patent infringement case. It involves calculating a reasonable royalty that both parties would have agreed upon if they had negotiated before the infringement occurred.

Example: Let's say that Company A has a patent for a new type of smartphone screen. Company B starts producing and selling smartphones with a similar screen without permission from Company A. Company A sues Company B for patent infringement. In court, the judge may use hypothetical negotiation to determine the amount of damages that Company B owes to Company A. The judge will consider what a reasonable royalty would have been if Company B had negotiated with Company A before using their patented technology.

Another Example: Company C has a patent for a new type of battery. Company D starts producing and selling electronic devices with the same type of battery without permission from Company C. Company C sues Company D for patent infringement. In court, the judge may use hypothetical negotiation to determine the amount of damages that Company D owes to Company C. The judge will consider what a reasonable royalty would have been if Company D had negotiated with Company C before using their patented technology.

The examples illustrate how hypothetical negotiation is used to determine a reasonable royalty that both parties would have agreed upon if they had negotiated before the infringement occurred. This method helps to ensure that the patent owner is compensated fairly for the use of their patented technology.