Business valuation applied to intellectual property infringement litigation: methodology, deliverables, and case-specific considerations.
Valuation enters an intellectual property case when the measure of the harm is a value rather than a stream of lost sales: a trade secret that disclosure destroyed, where the governing law allows its value at the date of the disclosure as the measure of the loss; a business whose products or brand the infringement impaired, measured by the change in the value of the business; or a patent, mark, copyright, or body of know-how whose value is itself at issue in a license dispute or a transaction. The economist values the asset or the business under the income, market, and cost approaches as the facts support, states the projections, royalty rates, useful lives, and discount rate the value rests on, and coordinates the valuation with any lost profits or royalty claim, so the same earnings are not counted twice.
Valuation of closely held businesses and ownership interests for shareholder and partnership disputes, divorce, estate and gift matters, and buy-sell disagreements. The work applies the income, market, and asset approaches under the standard of value that governs the matter, addresses discounts for lack of control and marketability where they apply, and documents every input so the conclusion can be tested on cross-examination.
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.
We issue the final report and provide deposition and trial testimony and critique of opposing valuation reports.
Each state page adds the courts, the expert standard, and the damages framework the report is built around in that venue.
As an intangible asset at the date it lost protection, most often with an income approach that measures the earnings the secret produced or would have produced over its expected life, or the royalty an owner could have charged for it, and with a cost approach as a check on what recreating it would take. Whether the value of the secret is the measure of the loss is a question of the governing law, which counsel confirms.
When the infringement or misappropriation permanently impaired the business, its brand, or its product line, so that the harm continues beyond any period of lost sales the record can measure directly. The report uses lost profits for the period they can be measured and the change in value for the lasting harm, and explains the boundary between them so the same earnings are not counted in both.
Request a consultation on Business Valuation or call (201) 343-0700. Plaintiff and defense counsel.