CD: What are the primary features of the current IP disputes landscape that have an impact on awards of damages?

Blackburn: In the US, several trends in IP litigation will have an impact on how owners of IP will be compensated for the infringement of their patents, trade secrets, copyrights and trademarks. These include rulings of appeals courts and the US Supreme Court, the possible change in the rules for venue selection and the creation of a new option to pursue trade secret claims in federal court. The last point may be particularly important since protection of IP as trade secrets may become an increasingly popular alternative to patents if trade secrets are perceived as a more effective way of protecting IP.

Meyer: From a patent damages point of view, a key feature of the current IP dispute landscape is the wide range of possible awards that a successful plaintiff may obtain. This is due, in part, to the lack of direction as to what methods courts find acceptable in determining the appropriate reasonable royalty and lost profits. This has led to the acceptance of some calculations that are economically unreasonable and to the exclusion of some approaches that have a sound economic basis.

CD: What are the key economic factors that need to be considered when calculating damages in a patent infringement case?

Blackburn: Most experts, commentators, and the Court of Appeals for the Federal Circuit (CAFC) appear to agree that a reasonable royalty must be based upon the incremental benefit from incorporating a patent into a product or service. These benefits must be measured over and above the benefits that would be achieved by using the next best, non-infringing alternative. This highlights how complex it can be to calculate damages in a patent infringement case. Damages can obviously vary a great deal depending on how important the patented technology is to the product and the extent to which technical alternatives are, or were, economically available.

Jul-Sep 2016 issue

NERA Economic Consulting