Trade Secrets

Lost profits are often described as the difference between a patentholder’s actual profits and the profits that would have been earned but for patent infringment. Accordingly, infringement that impacts prices, sales quantities, or costs of the patentholder may result in lost profits.

Engagement Examples

• Developed reliable econometric models of product sales to estimate the sales revenue that would have occurred but for patent infringement. The econometric models included multi-variate regressions that were calibrated during a time period without infringement and then applied during the period of infringement, thereby isolating the effects of the infringement separate and apart from other factors that impacted product sales.
• Defined the relevant market for products accused of infringement along with a quantitative determination of market shares among suppliers, which was used in a Mor-Flo market-share approach that was specifically tailored to the factual circumstances of the products, suppliers, and customers.
• In an industry characterized by few sales transactions that are each unique for the purchase of large equipment, we performed analysis of the economic factors driving the purchase of each individual transaction. Analysis of manufacturing and sales capacity, along with product differentiation, directly impacted the calculation of lost profits.
• In connection with the Panduit factors, evaluated the economic viability of non-infringing alternatives, substitution patterns across products, pricing dynamics, and the evolution of product availability across time to quantify product sales that would have occurred but for infringement.

Upon a finding of misuse of certain types of intellectual property (i.e., trade secret misappropriation, copyright infringement, and trademark infringement), a court may award unjust enrichment caused by the misuse. Unjust enrichment refers to the benefit or gain received by the defendant as a result of the misuse. Unjust enrichment can be measured in several ways depending on relevant facts and economic principles.

One measure of unjust enrichment is the defendant’s profits that were caused by the misuse of intellectual property. This may be an appropriate measure in cases where the defendant’s profits, or a portion thereof, are attributable to the misuse. Under this measure of unjust enrichment, an issue often disputed is the causal relationship, or lack thereof, between the misuse and the claimed profits.

Another measure of unjust enrichment is the defendant’s cost savings that were caused by the misuse of intellectual property. This may be an appropriate measure in cases where the misuse enabled the defendant to save or avoid costs. Cost savings or avoided costs measures often involve careful consideration of actual and counterfactual costs.

Another related measure of unjust enrichment is the defendant’s head-start advantage that was caused by the misuse of intellectual property. This may be an appropriate measure in cases where the defendant gained a temporal advantage as a result of the misuse. Identification of the timing of the advantage, and potentially when the advantage ends, can be a fundamental aspect of head-start advantage measures.

Engagement Examples

• Performed an analysis of unjust enrichment resulting from alleged misappropriation of trade secrets relating to payment transaction processing middleware, including evaluation of the economic benefit of the trade secrets, the contribution of the trade secrets to the middleware, and costs and time associated with development of economic alternatives.
• Evaluated unjust enrichment to an internet service provider resulting from alleged copyright infringement via file sharing based on an analysis of internet use, internet demand, internet service subscriptions, and costs.
• Analyzed pricing, design, and other aspects of relevant products to inform on the economic value of the trade secrets at issue in a dispute involving two large semiconductor manufacturing foundries.
• Evaluated unjust enrichment in litigation involving alleged misappropriation of trade secrets relating to mobile device testing based on consideration of supply agreements, product sales, product costs, and the contribution of the trade secrets to the defendant’s profits.

Upon a finding of patent infringement, a court shall award damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer. A reasonable royalty can be determined through an analysis of what a willing licensor and a willing licensee would have bargained for during an arm’s-length, hypothetical negotiation occurring on the eve of infringement. Several approaches, along with the Georgia-Pacific factors, can provide guidance.

The market approach often utilizes comparable license agreements or similar transactions to inform upon a reasonable royalty. Economic and technological differences between the comparable agreement and the hypothetical negotiation can often be quantified by way of economic, financial, or statistical methods. Such differences can include products, technologies, suppliers, customers, time periods, and competitive environments.

The income approach considers financial benefits derived by the infringer as a result of using the patented technology. These benefits can include higher prices, increased sales quantities, or reduced costs.

The cost approach can evaluate the costs of implementing a viable non-infringing alternative that provides that is reasonably available and provides similar benefits to the patented technology.

Engagement Examples

• Calculated reasonable royalties in litigation involving video coding technology used in personal computers and gaming devices, including investigation of standard-essential patents, reasonable and non-discriminatory licensing practices, and the impact of patent licensing pools.
• In litigation involving the alleged unauthorized use of a consumer electronic patent, quantified economic damages and analyzed the economic aspects of contracts containing a license to the patent-in-suit. Also analyzed economic substitution, marketplace competition, product differentiation, sales, profitability, and other economic considerations relating to a reasonable royalty.
• Performed an analysis of damages relating to alleged infringement of patented biotechnology by quantifying reasonable royalties based on consideration of relevant licensing agreements, accused sales and profitability, and the unique contribution of the patented technology.
• Utilized statistical methods to isolate the impact of the asserted patents to the accused product’s price due to the associated performance enhancements. In certain cases, using statistical methods improves the precision of reasonable royalty calculations based on an income approach.

Irreparable harm, public interest, and balance of the equities are factors considered by courts in evaluating whether injunctive relief is appropriate in the context of patent infringement. The issue of irreparable harm examines whether the claimant’s harms are quantifiable and evaluates the causal nexus between the alleged harm and patent infringement. The public interest is evaluated by reviewing benefits and losses realized by the public, including the availability of substitutes, the impact of an injunction on prices, and the importance of patent rights in innovation. The balance of equities weighs the harms faced by the accused party if an injunction is granted versus the harms faced by the claimant if not granted.

Engagement Examples

• Conducted analysis for a pharmaceutical supplier to help decide whether to seek injunctive relief against drug stockpiling. Defined modeling criteria for measuring the potential economic effects of generic drug stockpiling to a branded pharmaceutical supplier. Analyzed economic effects and determined that the magnitude of these economic effects varies due to multiple factors, including the amount of stockpiled generic product, unconstrained generic demand, generic production capacity, branded and generic pricing strategies, and branded price erosion, among others.
• Performed detailed economic analysis in 48 hours to assist our client in response to an application for a temporary restraining order and preliminary injunction that would prohibit the client from launching a new sporting goods product line that allegedly infringed patents held by a competitor. Evaluated marketplace dynamics, pricing, production costs, production processes, marketing strategies, market segmentation, quantification of potential damages, and potential impacts on business opportunities and reputation.
• Provided expert analysis on behalf of the defendants in a global patent litigation case involving an innovative heart valve repair treatment. Opined that harm was not irreparable, and that the balance of equities and the public interest did not favor an injunction. Analysis was instrumental in U.S. Judge’s decision to deny Plaintiffs’ motions for a TRO and a preliminary injunction.