Intellectual property infringement cases turn on what a protected right was worth to the parties: what the owner lost because a patent, trademark, copyright, or trade secret was used without permission, and what the user gained by using it. Each statute supplies its own measure, from the reasonable royalty that is the floor of every patent award to the trademark owner's claim to the defendant's profits and the trade secret owner's claim to unjust enrichment, and each requires the damages to be tied to the protected right rather than to the rest of the product. The economist builds those measures from both sides' sales, cost, and license records and states every input, so the patentee and the accused infringer, or the owner and the party accused of taking the information, can test it.
In short
Depending on the right, the claim consists of a reasonable royalty for the use made of a patent, at the least, and the patentee's lost profits on sales it would have made, including price erosion, and for a design patent the infringer's total profit on the article of manufacture; the defendant's profits, the owner's actual damages, and the cost of corrective advertising for an infringed trademark; the copyright owner's actual damages and the infringer's profits not already counted in them, or, where the work was registered in time (before the infringement began, or within three months after first publication), statutory damages within the range the statute fixes, which the owner can elect instead; and the trade secret owner's actual loss and the misappropriator's unjust enrichment, or a reasonable royalty in their place. A license dispute adds the royalties owed under the contract's own terms. The drivers are the accused products' unit sales, revenue, prices, and costs, the owner's sales, margins, and capacity, the licenses to the rights in suit and to comparable technology, the marking, notice, and public disclosure records that set the damages period, the parties' forecasts and business plans from the date the infringement began, and the technical and survey experts' opinions on what the right covers and what it adds to the product.
Which measure dominates depends on the right and on how the parties compete. Where the owner and the infringer sell competing products and few substitutes exist, lost profits on the diverted sales and price erosion can exceed any royalty; where the owner licenses rather than sells, or many substitutes share the market, the reasonable royalty usually carries the claim, and the royalty base, the comparability of the licenses, and the cost of the infringer's alternatives move it most. In a trademark or copyright claim for the infringer's profits, the costs the infringer can deduct and the share of profit it can attribute to factors other than the protected right are the usual battleground, and in a trade secret case the length of the protection period and the head start, and whether the owner's loss and the misappropriator's gain overlap, often decide the size of the award. Across every right, apportionment to the protected feature is the most contested input. Enhanced patent damages are for the court, and exemplary trade secret damages are for the court under the federal statute and the uniform act, though some state enactments, such as Texas's, give them to the fact finder; either way they turn on the defendant's conduct, not on the economic measure.
The economist starts with the rights, the accused products, and the timeline: when the infringement or misappropriation began, when the owner gave notice or marked its products, when the information became public, and which part of the period is recoverable under the limitation rules each claim carries. The accused products' sales, prices, and costs are rebuilt from the accused party's records by product, period, and customer, and the owner's sales, margins, and capacity from its own. For a reasonable royalty, the economist reconstructs the hypothetical negotiation at the start of the infringement from the comparable licenses, read in full and adjusted for scope, form, and circumstances, from the profit the protected feature made possible, and from the cost of the user's next-best alternative, and settles the rate and the base within the bargaining range; for lost profits, the but-for market is rebuilt from demand, substitutes, and capacity, and the incremental profit is computed on the sales the owner would have made; for the infringer's profits, its claimed costs and the share owed to other factors are tested against its ledger. Each measure is apportioned to the protected right with the technical and survey experts' inputs stated, overlaps are removed, prejudgment interest is computed on the basis the court adopts, and the report shows the result under the opposing base, licenses, and alternatives.
Stage-by-stage guidance on working with a forensic economist in intellectual property infringement litigation.
Patent and copyright claims arise under federal law, and no court of a state, the District of Columbia, or a territory may hear them. The federal district courts hear patent and copyright infringement claims between private parties, a claim against the United States goes to the Court of Federal Claims, and a small copyright claim can also go, if both sides take part, to the Copyright Claims Board in the Copyright Office. Trademark and trade secret claims can be brought in federal court or in a state court, and claims under state law, such as a trade secret claim under a state statute, unfair competition, or a dispute over the royalties owed under a license, are heard in the state's courts unless they are joined with a federal claim or the parties' diverse citizenship brings them within federal jurisdiction. An appeal in a case with a claim or compulsory counterclaim under the patent laws goes to the United States Court of Appeals for the Federal Circuit; other appeals from the district courts go to the regional court of appeals.
No. Infringement, validity, and whether information qualifies as a trade secret are decided by the fact finder on evidence the economist does not supply, and the technical experts address what the claims cover and which features practice them. The economist measures the damages on the assumption that liability is found, as the reasonable royalty framework itself assumes, and builds the measure so it can be adjusted if the fact finder accepts only some of the asserted claims, products, or secrets.
Because a few choices carry most of the result: the royalty base and its apportionment, which licenses are treated as comparable and how lump sums are converted to rates, whether the infringer had an acceptable alternative, how the market and the owner's capacity are defined in a lost profits claim, and the length of the damages period. A report that shows the result under the other side's choices as well as its own lets the fact finder see which of those choices explains the gap.
The accused products' unit sales, revenue, prices, and costs by product and period; the owner's sales, margins, and capacity for its competing products; every license to the rights in suit and to comparable technology, with the negotiation files; the marking, notice, and public disclosure records that set the damages period; and both sides' business plans and forecasts from around the date the infringement began. Most of it is produced under a protective order, so the request is planned with the order's limits in mind.
Usually, and over a long damages period it can be a large part of the total. The patent statute provides for damages together with interest as the court fixes it, and the other intellectual property claims follow their own rules on whether and how interest runs. The court decides the rate and whether it compounds; the economist computes the interest on the basis the court adopts and shows it apart from the damages, so either can be adjusted.
Request a consultation on intellectual property infringement cases or call (201) 343-0700. Plaintiff and defense counsel.