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Damages and Valuation for Internet IP Infringement and Defamation - Nevium

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Understanding how to quantify economic damages related to Internet defamation and infringement enables attorneys to achieve better results for their clients. Whether dealing with defamatory statements appearing on first page search results, or copyright, trademark and rights of publicity infringement; understanding the tools and methodologies available for calculating damages is critical in litigating today’s Internet and social media disputes.

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Damages and Valuation for Internet IP Infringement and Defamation - Nevium

  1. 1. Damages  and  Valua-on     for  Internet  IP  Infringement     and  Defama-on   Brian  Buss  and  Doug  Bania   Internet  Law  Leadership  Summit,  May  23,  2014  
  2. 2. 2  Internet  Law  Leadership  Summit,  May  23,  2014   A  Financial  and  Economic  Perspec-ve  on  Internet  &  Social  Media  IP   Introduc-on   Internet     &  Social   Analysis   Intellectual   Property   Analysis   Bringing   Them   Together  
  3. 3. 3  Internet  Law  Leadership  Summit,  May  23,  2014   Internet  &  Social  Media  Analysis   Internet     &  Social   Analysis   Intellectual   Property   Analysis   Bringing   Them   Together  
  4. 4. Internet  Law  Leadership  Summit,  May  23,  2014   4   Old  Misuse   Tradi-onal  Media   New  Misuse   Search  &  Social   Obvious  misuse  in     television  and  Print   Internet  misuse  can  be  hidden     in  metadata  and  keywords   The  number  of  people  witnessing   the  misuse  is  geographically   constrained   Worldwide  audience  and  the   potenFal  of  misuse  going  viral   How  many  customers  actually  took   acFon  is  not  accurate   Data  regarding  how  many   customers  took  acFon     is  very  accurate   Old  World  vs.  New  World  Infringement     Internet  Misuse  Can  be  Accurately  Measured  and  Quan-fied  
  5. 5. Internet  Law  Leadership  Summit,  May  23,  2014   5   Search     Appear  on  first  page  organic   search  results  for  defined   keywords   Op-miza-on   Strategically  leverage  keywords  for   first  page  search  results  in  Search  and   Social  Media     Social  Media   Build  a  following.   Create  shareable  content.   Go  viral.   Analy-cs   Measure  and  refine  op-miza-on   tac-cs  to  create  more  website  traffic   Key  Concepts  of  Internet  Use:  Business  Owner   The  Internet  is  the  new  corner  store     and  the  foot  traffic  is  Search  &  Social    
  6. 6. Internet  Law  Leadership  Summit,  May  23,  2014   6   Search   What  is  your  organic  ranking   for  specific  keywords?   How  did  you  get  there?   Op-miza-on   Keywords,  tags,  metadata  vs.  visible  content   How,  where  &  why  IP     is  used?     Social  Media   What  is  your  handle?   What  is  your  topic  of   conversa-on?   Analy-cs   Iden-fy  &  Quan-fy     site  traffic   Impact  of  key  words   Key  Concepts  of  Internet  Analysis   Search  +  Social  +  Op-miza-on  +  Analy-cs  =  Defensible  Tes-mony    
  7. 7. Internet  Law  Leadership  Summit,  May  23,  2014   7   Educa-ng  the  Trier  of  Fact   Educate  first  in  order  to  get  set  the  stage  for  damages   Internet Damage Experts Must Educate the Judge and Jury Regarding the Basics of Search & Social Prior to Approaching Damages
  8. 8. Internet  Law  Leadership  Summit,  May  23,  2014   8   Growing  importance  of  the  Internet  for  businesses   The  Internet  is  a  huge  place  to  promote  business     Search  and  How  it  Works   Internet  as  a  huge  library  with  billions  of  books,     Search  engines  are  the  tools  to  find  informaFon     Importance  of  First  Page  Search  Results   First  page  is  worth  the  fight     Use  of  Metadata  and  Op-miza-on   First  page  search  results  are  not  an  accident     Use  and  Leverage  of  Google  Analy-cs   Google  provides  tools  and  tacFcs   Educa-ng  the  Trier  of  Fact   Any  Internet  valua-on  or  damages  calcula-on  starts  here  
  9. 9. Internet  Law  Leadership  Summit,  May  23,  2014   9   Two  compeFng   construcFon  supply   companies  had  operated  in   non-­‐overlapping   geographies     Both  businesses  evolved   into  online  retail  &   distribuFon  of  construcFon   supplies  and  design   concepts     Therefore  businesses  begin   to  overlap  and  compete  for   customers  outside  their   home  geography     Example:  Educa-ng  the  Trier  of  Fact   Situa-on:  Defendant  used  the  Plain-ff’s  TM-­‐protected  company  name  in   search  op-miza-on  and  social  media  
  10. 10. 10  Internet  Law  Leadership  Summit,  May  23,  2014   First  page     of  organic    search   results       PlainFff:  First   organic  result   Defendant:  Second   and  Third  organic   search  result   Of  the  9  organic  search   results,  over  50%  are   for  the  Defendant   Defendant:     Social  Media   sites   PlainFff’s     paid  result   PlainFff:  Ninth   organic  result   Educa-ng:  Importance  of  Search  &  Social  
  11. 11. 11  Internet  Law  Leadership  Summit,  May  23,  2014   Tac-c   Use  at  SampleCompany.com   Likely  Result   Use  key  terms  in   Title  Tag   <Ftle>The  Company,  Sales  and  Structure  Designs</ Ftle>   The  Ftle  tag  “The  Company”  alerts  both  the  search   engines  and  the  user  as  to  the  topic  of  that  parFcular   page   Use  key  terms  in   the  URL   h]p://www.sample.com/about-­‐the-­‐company   This  URL  contains  the  keywords  “The  Company”   which  provides  users  and  search  engines  more   informaFon  about  the  page   Use  key  terms  in   the  Descrip-on   meta  name="descripFon"  content=”;The  Company   has  been  selling  since  1972.  Click  here  to  find  out   more  about  sales,  structure  and  The  Company."  />   The  descripFon  meta  tag  provides  the  search  engines   a  summary  of  what  the  page  is  about   Use  key  terms  in   the  Keywords   <meta  name="keywords"  content=”sales,   structure,  the  company,  green  supplies,  The   Company,  Sample  Company,  samplecompanuy"  />   If  a  search  engine  finds  specific  key  terms  throughout   the  content  of  the  website  and  in  the  keyword  meta   tags,  that  website  will  likely  be  ranked  higher  in   search  results   Educa-ng:  Analyze  Code  to  Determine  SEO   The  site’s  code  can  be  “read”  to  inves-gate  SEO  strategies  
  12. 12. 12  Internet  Law  Leadership  Summit,  May  23,  2014   Tac-c   Use  at  SampleCompany.com   Likely  Result   Use  key  terms  in   Anchor  Text   <a  href="h]p://www.SampleCompany.com/ about-­‐the-­‐company">About  The  Company</a>   <a  href=h]p://www.SampleCompany/the-­‐ company-­‐brochure>SampleCompany   Brochures</a>   Anchor  text  are  the  clickable  hyperlinks  that  users   click  on  to  be  taken  to  a  different  page  of  a  website   Using  “the-­‐company”  in  the  anchor  text  tells  users   and  search  engines  that  the  page  is  about  “The   Company”   Label  images  &   graphics  using  key   terms   <img  src="/upload/thecompany.jpg"  alt=""   width="137"  height="200"  align="leh"   border="0"  hspace="6"  />     Including  key  terms  in  the  name  of  an  image  allows   the  Google  search  engine  to  show  the  image  in   Google  Image  search  results   Using  IMG  ALT  tag   to  label  image  with   keywords   <img  src="/upload/thecompany.jpg”><img   alt=“The  Company”width=”157"  height=”220"   align="leh"  border="0"  hspace=“4”/>   IMG  ALT  Tag  provides  a  clear  text  alternaFve  of  the   image  for  screen  reader  users   Anyone  searching  for  the  phrase  “The  Company”  may   find  the  photo  is  a  search  and  click  to  the  website   Links  to  social  media   accounts   <a  href="h]p://www.facebook.com/ the_company"  target="_blank"><span   style="font-­‐family:  Trebuchet  MS;">The   Company  on  Facebook</span></a>   <a  href="h]p://www.twi]er.com/the-­‐ company/"  target="_blank">The  Company  on   Twi]er</a>   When  a  Googlebot  crawls  a  website,  it  will  noFce   social  links  and  typically  associate  the  social  profiles   with  you  company.      Posts  and  comments  placed  on   those  social  accounts  will  likely  rank  you  for  specific   keywords  showing  up  frequently  in  your  follower’s   posts   Use  key  terms  in  the   page’s  text   The  phrase  “the  company”  has  been  also  been   placed  14  Fmes  in  the  text  of  the  page   Key  terms  throughout  the  page  should  be  used  so   that  search  engines  can  determine  the  content  of  the   page  matches  the  Ftle,  descripFon,  and  URL   The  site’s  code  can  be  “read”  to  inves-gate  SEO  strategies   Educa-ng:  Analyze  Code  to  Determine  SEO  
  13. 13. 13  Internet  Law  Leadership  Summit,  May  23,  2014   IP  Valua-on  &  Damages  for  the  Internet   Internet     &  Social   Analysis   Intellectual   Property   Analysis   Bringing   Them   Together  
  14. 14. Internet  Law  Leadership  Summit,  May  23,  2014   14   Important  to  base  new  analyses  on  accepted  methodologies   Standard  Methodologies   Internet  IP  Methodologies   Cost   Approach   Cost  to  replace  or  replicate   •  Relief  from  pay  per  click   •  Value  of  impressions   Income   Approach   Present  Value  (PV)     of  future  benefits   •  Discounted  cash  flows  (DCF)     •  Relief  from  Royalty   •  Lost  Profits  /  Unjust  Enrichment   PV  of   •  AddiFonal  Site  Visits  /  Traffic   •  AddiFonal  online  transacFon  or   customer  inquiries   Market   Approach   Study  of  transacFons   •  Guideline  companies     •  Guideline  transacFons   •  Industry  benchmarks   •  Comparable  Pay  Per  Click   •  HypotheFcal  license/transacFon   Analysis  of  the  financial  /  economic  impact  of  IP  Assets  on  the  Internet  will  employ   one  or  more  of  these  methodologies   IP  Valua-on  &  Damages  Methodologies  
  15. 15. Internet  Law  Leadership  Summit,  May  23,  2014   15   IP analysis starts with identifying and understanding the IP assets being used Understanding  the  IP  Assets  
  16. 16. Internet  Law  Leadership  Summit,  May  23,  2014   16   Types  of  IP  assets  oden  misused  through  Internet-­‐based  mechanism  each  have  unique   implica-ons  for  valua-on  and  damages  analysis   Assets   Misuse  boils  down  to  infringement  or  defama8on   Analy-cal  Considera-ons   Trademark     &  Brand   •   Is  the  TM  used  in  unseen  components  of  the  website?   •   Is  the  TM  used  to  drive  search  results   •   What  was  the  exposure  to  defamatory  comments  or  posts?   Copyright   •   Did  the  protected  content  drive  traffic?   •   Was  the  image  or  content  a  contributor  to  a  sale  or  transacFon?   Name  &  Likeness   •   Did  the  use  drive  traffic?   •   Was  the  use  akin  to  an  endorsement?   Domain  Names   •   Is  there  a  website  and  how  much  direct  traffic  does  site  receive?   •   How  many  monthly  searches  occur  using  this  term?   Understanding  the  IP  Assets  
  17. 17. Internet  Law  Leadership  Summit,  May  23,  2014   17   Mechanisms   Paid  Search   Organic  Search   Social  Media   Squafng     Infringement   Defama-on   Claims   Economic  Result   Unjust  Enrichment:  Incremental   profits  achieved  by  Defendant     due  to  the  misuse   Lost  Profits:  Incremental  profits   not  achieved  by  PlainFff  due  to   the  misuse   Pay-­‐per-­‐click  relief:  Value  of  cost,  effort   avoided  due  to  misuse   Decrease  in  Value  of  an  IP  Asset:  Impact   on  value  due  to  misuse   Regardless  of  the  asset  type,  the  claims  made  in  Internet  cases  typically  occur   through  one  or  more  mechanisms  and  the  economic  results  can  typically  be   measured  in  4  ways   Internet  Damages  Matrix  
  18. 18. Internet  Law  Leadership  Summit,  May  23,  2014   18   Explain  the  mechanism,  then  quan8fy  the  impact   Unjust  Enrichment  Profits:    Traffic  at  Defendant’s  Website   Using  Google  Analy-cs     to  Support  Unjust  Enrichment   Monthly  visits  due  to  searches  using  TM   25,000   RaFo:  Visitors  who  purchased   25%   TM  search  purchases   6,250   Average  e-­‐commerce  purchase   $250   Incremental  revenue   1,562,500   RaFo:  Incremental  profit  margin   15%   Incremental  profit  per  month   234,375  
  19. 19. Internet  Law  Leadership  Summit,  May  23,  2014   19   Using  Social  Media  Analy-cs     to  Support  Lost  Profits   Use  Accepted  Methodology   Lost  Profits  damages  =  But-­‐for  less  As-­‐is   Use  of  Social  Media  Data   •  “ReacFons”  to  defamatory  posts  and  tweets   •  Language  from  posts  seen  in  customer  emails  
  20. 20. 20  Internet  Law  Leadership  Summit,  May  23,  2014   Using  Google  Analy-cs     in  Name  &  Likeness  Claim   Monthly  Pageviews     at  Defendant’s  Website   Search  Term  Analysis   Top  50  search  terms  do  not  include   Celebrity’s  name   Top  50  search  terms  yielded  49%  of   total  site  visits  during  the  Damages   Period   Search  terms  using  Celebrity’s   name  resulted     in  a  total  of  45  visits  during  the   Damages  Period,  less  than  (0.004%)   Website  traffic  declined  during  the   Damages  Period  
  21. 21. Internet  Law  Leadership  Summit,  May  23,  2014   21   Google  AdWords  for  Celebrity’s  Name   Social  Media  Presence  for  12  Comparable  Celebri-es   CELEBRITY’s  social  media   presence  was  greater  than  comps   Price  was  less  than  Google   PPC  but  equal  to  Facebook   CPC   Using  Social  Media  Data     in  a  Market  Approach          Google                  Facebook  &  FB  Adver-sing                    Twioer       Google  Search   Results   Average   Monthly   Searches   (Google)   Average  Pay   Per  Click  Rate   ($/Click)       Likes   Size  of   Audience   Cost  Per   Click     (CPC)   CPC   Suggested   Cost  Per   Thousand   Impressions   CPI  /  000   Suggested         Tweets   Followers   Name  1    10,800,000      27,100     $0.00          2,232,238      620,000     0.51   0.30-­‐0.68   0.28   0.05-­‐1.36        1      15,434     Name  12    42,700,000      165,000     $1.73          10,410,432      2,800,000     0.49   0.29-­‐.0.69   0.09   0.3-­‐0.64        94      1,894,518     Average    133,600,000      439,157     $0.90          7,992,695      2,210,286     $0.52         $0.22              9,135      1,851,757     Median    42,700,000      165,000     $0.79          8,573,831      720,000     $0.49         $0.18              1,755      187,591     CELEBRITY    244,000,000      301,000     $1.99         34,714,592     5,400,000     0.75   0.30-­‐0.71   0.16   0.04-­‐1.11        10,611      7,394,012     Search     Terms   Avg.  monthly     searches   CompeFFon   Suggested    bid   Celebrity   673,000   Low   $0.75    
  22. 22. Internet  Law  Leadership  Summit,  May  23,  2014   22   Value  of  YouTube and Facebook Impressions   YouTube   4  videos  posted     on  the  CELEBRITY’s   channel  received  over  2   million  views     Total  viewership     (an  acFve  response),   mulFplied  by  the  Google   AdWord  rate     Using  Social  Media  Data     in  a  Relief  from  Pay  Per  Click      YouTube  Ac-vi-es   Viewers   CELEBRITY  Presents  PRODUCT  at  CES    454,134     CELEBRITY  comes  to  the  CNET  stage  (CNET)    96,462     CELEBRITY  Calls  Name    1,188,608     CELEBRITY  in  Las  Vegas  introduces  PRODUCT    372,067      Total  YouTube  Impressions    2,111,271      $Value  /  Impression   $0.75    Value  of  YouTube  Ac-vi-es    1,583,453    
  23. 23. Internet  Law  Leadership  Summit,  May  23,  2014   23   Value  of  YouTube and Facebook Impressions   Facebook   ReacFons  are  Likes,   Comments  and  Shares   A  ReacFon  is  an  “acFve”   response  to  the   Celebrity’s  post,  and  is   more  valuable  than  a   view   Using  Social  Media  Data     in  a  Relief  from  Pay  Per  Click   A  Response  is  more  valuable  than  a  view    Likes  for  CELEBRITY's  Facebook  page    Likes      Cost       Impression  Price  ($/1000  impressions)    34,714,592     $0.16         Click  Price  ($/Click)       $0.75                          Reac-ons  to  Posts  Involving  the  Products    Likes      Comments      Shares     Visit  www.product.com  make  sure  to  like!    28,921      7,432      657     CELEBRITY  Presents  PRODUCT    17,528      1,425      412     CELEBRITY  in  Vegas  Introducing  PRODUCT  .  .  .      18,256      312      514     Total    64,705      9,169      1,583                      Value  of  Ac-vity    Count      Cost      Value  ($)     Net  Page  Likes    34,649,887     $0.00016      5,544     Post  Likes    64,705     $0.75      48,529     Other  ReacFons    10,752     $0.75      8,064                     Value  of  Facebook  Impressions            62,137    
  24. 24. 24  Internet  Law  Leadership  Summit,  May  23,  2014   Bringing  Them  Together   Internet     &  Social   Analysis   Intellectual   Property   Analysis   Bringing   Them   Together  
  25. 25. Internet  Law  Leadership  Summit,  May  23,  2014   25   What’s  known  about  Search  &  Op-miza-on     •  “It’s  Google’s  algorithm”    there  are  mulFple  versions  of  best  pracFces  and  no  pracFFoner   knows  exactly  how  search  engines  actually  select  and  place  websites   Understand  the  Context  of  the  Calcula-on   •  Just  because  a  number  was  calculated,  doesn’t  mean  the  number  is  relevant       •  Replacement  cost  based  on  pay  per  click  can  indicate  the  value  of  Fme  and  effort  replaced,   but  not  necessarily  the  value  of  brand  or  TM   •  The  IP  Asset  may  not  be  the  most  important  asset  for  apporFonment     •  Don’t  fall  for:    using  a  10%  industry  royalty  the  TM  is  worth  more  than  the  enFre  business   •  Visits  due  to  a  TM-­‐based  search  indicates  number  of  visits,  not  necessarily  profits   The  Data  is  available,  but  it  may  not     always  support  the  claims   Challenges  for  the  Expert   Concluding  Comments  
  26. 26. Internet  Law  Leadership  Summit,  May  23,  2014   26   •  The  Internet  and  Social  Media  markeFng  world  requires  educaFng  the  trier  of  fact   before  proceeding  to  the  quanFtaFve  analysis;     •  The  Internet  MarkeFng  World  is  less  understood,  but  offers  many  advantages  for   financial  and  economic  analysis  (there  is  defensible  evidence  if  you  know  where  to   look,  and  how  to  explain  it)   •  Using  the  analyFcal  advantages  available  from  Internet  &  Social  Media  markeFng   allows  compelling  Expert  Analysis  (The  Proof  is  available)   •  Be  aware  of  the  limits  of  your  calculaFons   Internet  and  social  media  data  analysis  provides  addi8onal   tools  for  the  Art  &  Science  of  Valua8on   Our  Top  Take-­‐Aways   Concluding  Comments  
  27. 27. 27  Internet  Law  Leadership  Summit,  May  23,  2014   Addi-onal  Slides   A Deeper Look at the Toolkit
  28. 28. Internet  Law  Leadership  Summit,  May  23,  2014   28   Drivers  of  Value   Business  Value  >  Value  of  IP  Assets  owned  by  the  Business   Appor-onment:  IdenFfy  the  porFon  of  future  benefits     derived  from  use  of  the  IP  Assets   Present     Value  of   Expected   Future   Benefits   Value  of   Business   Intangible   Assets   Tangible   Assets   Copyrights   Patents   Intangible   Assets   Tangible   Assets   Trademark   IP  depends  on  other  assets  and  resources     in  order  to  generate  economic  benefits  
  29. 29. 29  Internet  Law  Leadership  Summit,  May  23,  2014   • Website  Analy-cs   • Social  Media  Analysis   • Scoring  Analyses   • Company  Language  Analysis   • Comparable  licensing  transacFons  (“CUT”)     • Excess  profits  (“CPM”)   • Feature  count  and  comparison   • MarkeFng  Mix  Analysis   • PromoFonal  Use  Analysis   • Surveys  /  Interviews  /Focus  Groups   Tools  to  Appor-on   Economic  Benefits   Appor-onment  Framework   How  big  is  this  box?     Always  best  to  use  mul8ple  tools   Internet  Analy-cs  as  an  Appor-onment  Tool   Present     Value  of   Expected   Future   Benefits   Value  of   Business   Intangible   Assets   Tangible   Assets   Copyrights   Patents   Intangible   Assets   Tangible   Assets   Trademark  
  30. 30. Internet  Law  Leadership  Summit,  May  23,  2014   30   It  boils  down  to  appor8onment   Key  Concept:  Appor-onment  

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