Significant Reduction in Damage Awards Amounts in Patent Litigation Suggests Substantial Impact of Expert Testimony

Patent License Agreement

According to data provided in PWC’s 2012 Patent Litigation Study, there was a decline in median damage award amounts of more than 50% in patent infringement disputes from the period between 2001 to 2005 and the period between 2006 to 2011—from $8.7 million to $4 million, respectively. What is most intriguing about this data is that there has been neither a decline in patent litigation, nor a decline in patent applicants. In fact, both have increased at a substantially similar rate.

Calculating Reasonable Royalties in Patent Infringement Dispute

Calculating damages for royalties

Damages for reasonable royalties, in comparison to damages for lost profits, generally correspond to an assumption based upon what the parties would have agreed upon if they had negotiated a royalty amount prior to an infringement. This concept is referred to generally as ‘hypothetical negotiation.’ There are several techniques, both using the hypothetical negotiation approach, as well as other more analytical based approaches, that have been used in prior cases for the calculation of reasonable royalty damages in patent infringement matters, including the 25 percent rule of thumb, Georgia-Pacific factors, and the Nash Bargaining Solution. In recent years, however, the techniques employed by experts in the calculation of royalty damages in patent infringement disputes, have been subject to heightened judicial scrutiny.

How to Calculate Damages in Patent Infringement Disputes

Royalties in a cash bag

Compensatory damages in patent infringement cases are generally based upon reasonable royalties, lost profits, price erosion, and in some cases, a combination. Pursuant to 35 U.S.C. 284, which provides in part, “Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court.” As such, in cases where a claimant can prove, or elects to prove lost profits, this method will be applied. However, in matters where a claimant cannot prove, or elects not to prove lost profits, compensatory damages can be assessed based upon reasonable royalties.

Judicial Discretion in the Calculation of Damages in Patent Disputes

Patents and damage calculations

For more than half a century, the U.S. patent system has been the subject of very little congressional reform. However, with the rise in patent litigation over recent years, the need for system improvement, restructuring, and modification was addressed by Congress in 2011 with the enactment of the Leahy Smith America Invents Act (AIA). Notably absent from such reform, though, was the presence of directorial principles to address issues concerning damage calculations in patent infringement disputes.

Intellectual Property: Understanding the Differences Between Patents, Copyrights, Trademarks, and Trade Secrets

Intellectual property (IP) is a blanket term that describes a number of distinct types of intangible assets—creations of the mind—to which one can claim exclusive rights. Since there are several forms of intellectual property, it is easy to confuse them. However, the main forms of IP: patents, copyrights, trademarks and trade secrets have very different legal implications.

Expert Witnesses and the Fight Against Patent Trolls

Patented Stamp

Patent law and antitrust law are converging due to the alleged threats to the economy by “patent trolls”.  This could open up new avenues of patent and antitrust litigation, requiring not only the use of patent infringement expert witnesses, but also those in the antitrust field, such as antitrust and business expert witnesses.

So-called patent trolls, entities who sue businesses for violating patent rights possibly without justification, have been portrayed as antagonists using the legal system to prey upon unsuspecting businesses.  These Non Practicing Entities (NPE’s) may have huge portfolios of patents and may sue anyone and anything that may arguably be infringing on these patents.  Because of how they’re structured, NPE’s can’t be counter-sued under patent law.  It’s been estimated that more than half of the 4,000 patent infringement cases filed last year were filed by NPE’s.

Determining Proper Allocation of Expert Witness Resources in Intellectual Property Disputes: Weighing Liability Versus Damages

When litigation is necessary to resolve matters concerning alleged violations of intellectual property rights, the multitude of remedies available under both state and federal law often result in complex pleadings containing multiple counts. In addition to claims brought pursuant to state law, such as common law unfair trade competition, or similar remedial provisions contained within state regulations pertaining to Business and Professions, intellectual property claims generally involve allegations of violation(s) in federal law. Common claims brought forth pursuant to federal statute include those for False Advertising and Unfair Competition, Patent Infringement, and Trademark Infringement. This article explores solely the issue of claims brought pursuant to federal provisions, as codified by United States Code.

Developer Strikes It Rich with Award in Trade Secrets Case of Oil Drilling Software

Typing on a laptop

A software developer brought claims against a consulting firm for misappropriation of trade secrets under Texas common law and theft of trade secrets under Texas Theft Liability Act (TTLA).

A software company (“Company W”) developed software that allowed oil companies to “plan, procure, and pay for complex services”—all online. The software featured: “dynamic templates” that adjusted cost and supply estimates. Company W was, according to its CEO, the only company offering complex services software from 2000 to 2005. The software was not a stand-alone solution, but needed other companies’ software to perform core accounting functions.  To fill this technology gap, it contracted with SAP in 2005.  The agreement allowed Company W to integrate its complex services software with SAP’s accounting software. As part of the agreement, Company W provided its program code to SAP.

Intellectual Property Disputes: Knowing Available Remedies

Elements that make up Intellectual Property

Proper damage or liability assessment considerations, in terms of suitability of expert witness services which are engaged for testimonial purposes in intellectual property disputes, require litigators to possess sufficient knowledge of all available remedies. However, this must also include a full understanding as to applicable standards and criteria for assessing damage awards, as well as any limiting factors associated with remedial provisions. This notion is particularly exemplified given that intellectual property disputes often involve overlapping requests for relief, wherein, the singular actions of the alleged violator, allow for recovery pursuant to separate and distinct statutes. For example, with regard to patent infringement, 35 U.S.C. 289 provides an additional remedy for infringement of design patent, as follows:

Whoever during the term of a patent for a design, without license of the owner,

(1) applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale, or
(2) sells or exposes for sale any article of manufacture to which such design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit, but not less than $250, recoverable in any United States district court having jurisdiction of the parties.

Expert’s Vision Cloudy on Testing Standards in Contact Lens Infringement Case

Recently, a personal health care product company (“Company R”) appealed from the district court’s judgment that a multinational health care company (JJVC) and its Advance® and Oasis® contact lenses didn’t infringe Company R’s U.S. Patent No. 5,712,327 (‘327 patent) for soft gas permeable contact lens. Company R challenged the trial court’s grant of judgment as a matter of law and its denial of Company R’s motion for a new trial.

Appellate Court Reveals Expert OK to Testify in Trade Secrets Case

An Indiana software company brought an action against its former employees and new employer alleging violations of non-compete covenants and interference with their business by divulging confidential information and trade secrets.

The plaintiff company, in an interlocutory appeal, asked the Indiana Court of Appeals to review the trial court’s ruling to exclude the testimony of its expert witness on economics and business valuation.

Case Study: Anti-Shoplifting Device Patent Stolen by Competitor, Expert Says

Patent infringement

Two competitors in the “resonance tags” manufacturing business are involved in a recent patent infringement litigation.  Resonance tags are electronic anti-shoplifting devices that are attached to merchandise so if the tag is not deactivated by a cashier at check-out, the tag triggers an alarm when those goods move past detectors at the store’s exit.

In litigation over the design of these electronic anti-shoplifting devices, a jury found the defendant company did not infringe on the plaintiff’s patent.  The U.S. District Court for the Eastern District of Pennsylvania also found case “exceptional” as to 35 U.S.C. § 285 and awarded the defendant roughly $6.6 million in attorney fees, costs, and interest.  The plaintiff company appealed that award.

Trade Secret Experts Not So Top Secret

Trade secrets

The White House recently announced its “Administration Strategy on Mitigating the Theft of U.S. Trade Secrets” (February 2013).  At 131-pages, it’s packed full of information from a lesser-known agency, the Defense Security Service, which builds on industry reports to develop analytical assessments of threats to U.S. information and technology.

Trademark Infringement Experts: The Benefit of Due Diligence in Consultation and Litigation

The interpretive nature of trademark related litigation as it correlates to issues such as public perception, confusion, dilution, and deception, can be highly problematic when attempting to prove or disprove the existence of a trademark infringement. Pursuant to 15 U.S.C 1127, commonly known as the Lanham Act, the term “trademark” is defined to include “any word, name, symbol, or device, or any combination thereof—

(1) used by a person, or

(2) which a person has a bona fide intention to use in commerce and applies to register on the principal register established by this chapter,

to identify and distinguish his or her goods including a unique product, from those manufactured or sold by others and to indicate the source of the goods, even if the source is unknown.”

Patent Litigation Trends in California: Patent Infringement Expert Witnesses, Damages & the Nash Bargaining Theory

Patent litigation is on the rise, and the number of patent infringement suits before the courts is at an all-time high.   See “2012 Patent Litigation Study,” PriceWaterhouseCoopers (PWC), 2012.  However, many attorneys and litigants are unaware of what the current trends are with respect to damages, if a party prevails in patent litigation.  Patent infringement experts are critical to this process, so it is important to understand recent changes in judicial findings, regarding expert testimony and measuring damages.

Patent Infringement: Expert Witnesses and the High Stakes Technology Space

Major companies are involved in various important technological patent litigation cases requiring highly specialized experts working along top Patent Prosecution and Patent Litigation attorneys. These cases often arise when brands are competing in the technology space. Since many technical products are built on the shoulders of previous technology and designs, the line between innovation and infringement can, at times, blur.

Should Web Hosts Protect the Intellectual Property on Their IPs?

In early March, Yahoo! filed a patent infringement lawsuit against Facebook. It’s spurring questions over whether or not patent law is too broad and if patent law needs to be reexamined. Patent law suits are becoming a standard part of the technology business these days. As more large websites go public, shareholders in IPOs have an interest in trying to make certain that they can be compensated for any unlawful uses of their intellectual property.