Presented at the Forensic Economics Sessions of the Western Economic Association 86th Annual Conference, June 29 2011.

1. Recent Developments in Economic Damages in Intellectual Property litigation Fernando Torres, MSc Chief EconomistIPmetrics LLC

2. Rules of Thumb and other ‘Shortcuts’ struck down 25% ‘Rule’ Profit Apportionment Entire Market ‘Rule’ Hypothetical Negotiation Proximate Cause

3. Apportionment ofDefendant’s Profits Infringement  all Profit Vacated Damages of $10 Million Case: Mattel vs MGA Court: 9th Appeals Court Expert must ask for sufficient revenue detail discovery at the outset!

4. Link Between IP infringement and Lost Revenue Infringement => Sales Vacated Revenue Calculation of $512 Million Case: Interplan Architects v. Thomas Court: USDC S Tx Expert must provide non-speculative evidence of causation (eg.- multivariate)

5. The 25% Rule of Thumb isLEGALLY INADEQUATE! It may be widely used, but it is arbitrary, unreliable, and irrelevant Vacated Damages of $565Million Case: Uniloc v. Microsoft Court: CA Federal Circuit Expert must tie a reasonable royalty base to the facts of the case.

6. Apply with Care:Entire Market Rule Asserted invention must be the basis for Consumer Demand Vacated Damages of $565 Million Cases: Uniloc v Microsoft & SAP v. Versata Courts: CAFC & USDC EDTX Expert must be able to explain the connection between patent and economics of accused product

7. Hypothetical License – Reasonable Royalty Hypothetical negotiation must be realistic, FMV Copyright Damages of $1.3 Bil. Case: Oracle vs SAP TomorrowNow Court: 9th Cir. / USDC - N CA Expert must ask for consider actual use and licenses in deriving Royalty Rate / Amounts

9. A non-speculative hypothetical calculation of damages, must nevertheless be rational: