Intellectual Property Damages

The remedy the governing statute provides, built from the record. In a patent case that is a reasonable royalty, the floor of every award, and the patentee's lost profits on sales it would have made; for an infringed trademark, the defendant's profits, the owner's actual damages, and the cost of corrective advertising; in a copyright case, the owner's actual damages and the infringer's profits not already counted in them; and for a trade secret, the owner's actual loss and the misappropriator's unjust enrichment, or a reasonable royalty in their place. The expert measures each, and the court and the fact finder decide which one applies.

Through a hypothetical negotiation: the license a willing licensor and a willing licensee would have agreed to just before the infringement began, with the patent assumed valid and infringed. The economist builds it from comparable licenses, read in full and adjusted for differences in scope, form, and circumstances, from the profit the protected feature made possible for the user, and from the cost of the user's next-best alternative, and organizes the evidence through the factors courts commonly use rather than treating them as a formula.

Apportionment separates the value of the patented feature, the protected work or mark, or the trade secret from everything else that earned the profit: unpatented features, the infringer's brand and distribution, and its other technology. A royalty that takes the whole value of a multi-feature product overstates the damages unless the patented feature drives demand for the whole, so the economist often builds the base on the smallest salable patent-practicing unit, or, where the base is the whole product, apportions through the rate, and uses the licenses, the infringer's own feature analyses, price comparisons, or survey evidence to separate the rest.

It depends on the statute. In a copyright case the owner proves the infringer's gross revenue from the infringement, and the infringer must prove its deductible expenses and the share of profit owed to factors other than the work. In a trademark case the owner proves the defendant's sales and the defendant proves the costs or deductions it claims, and only the named defendant's own profits count, not those of affiliates that are not parties. Utility patents carry no profits remedy, while a design patent allows the infringer's total profit on the article of manufacture.

The method is the same: the same records, the same measures, and the same apportionment, with the result presented under each side's view of the disputed inputs. What differs is the order of the work. The owner's expert builds the affirmative measure, and the accused infringer's expert tests it and builds the alternative the record supports, often a narrower royalty base, a different set of comparable licenses, or an acceptable design-around that bounds what a licensee would have paid.

By showing the result under the other side's royalty base, comparable licenses, apportionment, and alternatives as well as under its own, and by explaining which of those choices the record supports and why the others do not. Because courts decide many damages disputes in these cases as questions of admissibility before trial, the report ties every input to a document or to another expert's stated opinion, so a reliability challenge meets the evidence rather than a conclusion.

Before the damages discovery requests go out. The royalty and lost profits theories decide which sales, cost, license, and forecasting records must be produced, and in a patent case the expert reports usually follow the court's construction of the claims, so early involvement leaves time to obtain the data, coordinate with the technical and survey experts, and test the alternatives before the disclosure deadline. In a trade secret case, early work can also address whether the harm can be measured in money, which bears on a request for an injunction.