Intellectual property damages analysis applied to commercial contract dispute litigation: methodology, deliverables, and case-specific considerations.
A commercial contract dispute becomes an intellectual property damages question when the contract is a license: a patent, trademark, software, or technology license whose royalties were underpaid, a licensee that kept selling after the license ended, or a dispute over the royalty base, the products covered, or the audit rights. The economist reads the license and its royalty provisions, rebuilds the royalty base from the licensee's sales records and any audit findings, and computes the shortfall by period under the contract's own terms. Where a licensee kept using the technology after termination, or an infringement claim is joined with the contract claim, the economist also measures the infringement damages, often a reasonable royalty informed by the license itself, and keeps the contract and infringement measures separate.
Economic analysis and expert testimony on damages in patent, trademark, copyright, and trade secret cases and in license and royalty disputes, for the patentee or the accused infringer and for either side of every other claim. The work measures each remedy the governing statute allows: a reasonable royalty and the patentee's lost profits, including price erosion, apportioned to the patented feature; the defendant's profits, the owner's actual damages, and corrective advertising in a trademark case; actual damages and the infringer's profits in a copyright case, where the infringer carries the burden of its deductible expenses and of the profit owed to other factors; and actual loss, unjust enrichment, or a reasonable royalty for a misappropriated trade secret.
The claim typically consists of lost profits on the contract itself, measured as the revenue that would have been earned less the costs that would have been incurred to earn it; lost profits on related business that depended on the contract, where the record supports the connection; reliance costs incurred in preparation for performance; and in some matters the diminished value of the business when the breach reduced its ongoing earnings capacity. The drivers are the contract and its performance history, historical financial statements and tax returns, budgets and projections prepared before the dispute, customer and pricing records, and the cost structure that determines what portion of lost revenue would have been profit.
We issue the final report on the disclosure schedule and provide deposition and trial testimony, critique of the opposing damages analysis, and updated calculations as the court construes any patent claims and the record develops.
Each state page adds the courts, the expert standard, and the damages framework the report is built around in that venue.
By applying the license's own rate and base definitions to the licensee's sales, product by product and period by period, and comparing the result with the royalties reported and paid. The economist reconciles the royalty reports to the licensee's sales records and financial statements, states each reading of a disputed term, such as which products or revenues the base includes, and shows the shortfall under each reading counsel identifies.
The sales after termination are no longer priced by the contract, so the claim for them usually becomes one for infringement, measured by a reasonable royalty or by lost profits. The expired license is strong evidence of what a royalty would be, but the hypothetical negotiation can differ from it, since the license's terms reflected the circumstances when it was signed, and the report shows the post-termination damages under the license rate and under the measure the infringement claim supports.
Request a consultation on IP Damages or call (201) 343-0700. Plaintiff and defense counsel.