Recent Developments in IP Economic Damages

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

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Recent Developments in IP Economic Damages

  1. 1. Recent Developments in Economic Damages in Intellectual Property litigation<br />Fernando Torres, MSc<br />Chief EconomistIPmetrics LLC<br />
  2. 2. Rules of Thumb and other ‘Shortcuts’ struck down<br />25% ‘Rule’<br />Profit Apportionment<br />Entire Market ‘Rule’<br />Hypothetical Negotiation<br />Proximate Cause<br />
  3. 3. Apportionment ofDefendant’s Profits<br />Infringement  all Profit<br />Vacated Damages of $10 Million<br />Case: Mattel vs MGA<br />Court: 9th Appeals Court<br />Expert must ask for sufficient revenue detail discovery at the outset!<br />
  4. 4. Link Between IP infringement and Lost Revenue<br />Infringement => Sales<br />Vacated Revenue Calculation of $512 Million<br />Case: Interplan Architects v. Thomas<br />Court: USDC S Tx<br />Expert must provide non-speculative evidence of causation (eg.- multivariate)<br />
  5. 5. The 25% Rule of Thumb isLEGALLY INADEQUATE!<br />It may be widely used, but it is arbitrary, unreliable, and irrelevant<br />Vacated Damages of $565Million<br />Case: Uniloc v. Microsoft<br />Court: CA Federal Circuit<br />Expert must tie a reasonable royalty base to the facts of the case.<br />
  6. 6. Apply with Care:Entire Market Rule<br />Asserted invention must be the basis for Consumer Demand<br />Vacated Damages of $565 Million<br />Cases: Uniloc v Microsoft & SAP v. Versata<br />Courts: CAFC & USDC EDTX<br />Expert must be able to explain the connection between patent and economics of accused product<br />
  7. 7. Hypothetical License – Reasonable Royalty<br />Hypothetical negotiation must be realistic, FMV<br />Copyright Damages of $1.3 Bil.<br />Case: Oracle vs SAP TomorrowNow<br />Court: 9th Cir. / USDC - N CA<br />Expert must ask for consider actual use and licenses in deriving Royalty Rate / Amounts<br />
  8. 8. Conclusions<br /><ul><li>Damages experts are being held to a high standard when testifying.
  9. 9. A non-speculative hypothetical calculation of damages, must nevertheless be rational:
  10. 10. Based on actual connections between the protected intellectual property and the claimed lost opportunities, sales, profits, or markets.</li></li></ul><li>Thank You!<br />

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