Lost profits analysis applied to intellectual property infringement litigation: methodology, deliverables, and case-specific considerations.
In an intellectual property case lost profits are the owner's profits on the sales it would have made but for the infringement or misappropriation, including the higher price it would have charged without the infringer's competition. The economist reconstructs the but-for market: the demand for the protected product, the substitutes buyers could have chosen, the owner's capacity to make and sell the added units, and its incremental profit on them, using the four-factor proof patent courts commonly accept or a market share approach where several competitors share the market. Price erosion requires an estimate of how demand responds to price, unpatented items count only where they function together with the patented product, and the sales the owner cannot show it would have made are left to a reasonable royalty.
Lost profits and related commercial damages for contract, business-tort, and business-interruption matters. The analysis builds the but-for revenue and cost path from the company's own history, its market, and the terms of the disputed relationship, links each claimed loss to the conduct at issue, addresses mitigation, and reasons through the period of loss so the damages figure answers the causation question as well as the amount.
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 rebuttal of opposing damages models.
Each state page adds the courts, the expert standard, and the damages framework the report is built around in that venue.
That but for the infringement it would have made some or all of the infringer's sales, or made its own sales at a higher price, and that the loss was reasonably foreseeable. The usual proof shows demand for the patented product, the absence of acceptable noninfringing substitutes or the patentee's share of the market where substitutes exist, the capacity to make and sell the added units, and the incremental profit it would have earned on them.
By estimating the higher price the owner would have charged and the smaller number of units it would have sold at that price, from the sales history, customer evidence, or pricing studies, rather than applying the higher price to every unit actually sold. The report states the demand response it assumes and shows how the result moves with it.
Request a consultation on Lost Profits or call (201) 343-0700. Plaintiff and defense counsel.