PART ONE IP Law on Economic Damages 1
CHAPTER 1 U.S.Case Law and Economic Damages in Patent Litigation&Chase Perry, Daniel Slottje, and Elizabeth Whitaker 3
Introduction 3
Lost Profits 6
Tektronix, Inc.v.United States 6
Panduit Corp.v.Stahlin Brothers Fibre Works, Inc. 6
Hanson v.Alpine Valley Ski Area, Inc. 6
Paper Converting Machine Company v.Magna-Graphics Corporation 6
Kori Corp.V. Wilco Marsh Buggies ? Draglines, Inc. 7
State Industries, Inc.v.Mor-Flo Industries, Inc. 7
BIC Leisure Products, Inc.v.Windsurfing Int’l, Inc. 7
King Instruments Corp.v.Perego 7
Grain Processing Corp.v.Am.Maize-Products Co. 7
Crystal Semiconductor Corp.v.Tritec Microelectronics, Int’l, Inc. 8
Price Erosion 8
Yale Lock Manufacturing Co.v.Sargent 8
LAM Inc.v.Johns-Manville Corp. 8
Brooktree Corp.V. Advanced Micro Devices, Inc. 8
Crystal Semiconductor Corp.v.Tritec Microelectronics, Int’l, Inc. 9
Entire Market Value Rule 9
Paper Converting Machine Company v.Magna-Graphics Corporation 9
Rite-Hite Corp.v.Kelley Co., Inc. 9
Stryker Corp.v.Intermedics Orthopedics Inc. 9
Fonar Corp.V. General Electric Co. 9
Tec Air v.Denso Manufacturing Michigan Inc. 10
Micro Chemical, Inc.v.Lextron, Inc.and Turnkey Computer Systems, Inc. 10
Reasonable Royalty 10
Columbia Wire Co.v.Kokomo Steel ? Wire Co. 10
Aro Manufacturing Co.v.Convertible Top Replacement Co. 10
Georgia-Pacific Corp.v.U.S.Plywood Corp. 10
Tektronix, Inc.v.United States 11
Ellipse Corp.v.Ford Motor Co. 11
TWM Manufacturing Co., Inc.v.Dura Corp. 11
Fromson v.Western Litho Plate ? Supply Co. 11
Slimfold Mfg.Co., Inc.v.Kinkead Industries, Inc. 11
Mahurkar v.C.R.Bard, Inc. 11
Maxwell v.J.Baker, Inc. 12
Minco, Inc.v.Combustion Engineering Inc. 12
Grain Processing Corp.v.Am.Maize-Products Co. 12
Conclusion 12
CHAPTER 2 Trends in U.S.Patent Activity&Felix Chan and Michael McAleer 15
Introduction 15
Data 17
Trends in U.S.Patent Activity 18
Trends in Patent Shares 20
Trends in U.S.Patent Growth Rate 22
Conclusion 24
CHAPTER 3 Trademark Infringement and the Legal Bases for the Recovery of Economic Damages&Marc E.Ackerman and Daren M.Orzechowski 27
Introduction 27
Origins of Trademark Law 28
Development of Federal Trademark Law 30
Different Categories ofTrademarks 31
Law of Trademark Infringement 33
Strength of the Mark 35
Similarity between Defendant’s and Plaintiff’s Marks 35
Whether the Products Compete in the Marketplace 36
Likelihood That the Trademark Owner Will “Bridge the Gap” 36
Evidence ofActual Consumer Confusion 36
Defendant’s Intent in Selecting Its Trademark 36
Quality of the Defendant’s Goods or Services 37
Sophistication of the Consumers 37
Remedies and Economic Recovery for Trademark Infringement 37
Determining the Relevant Damages Period 38
Theories of Recovery under the Lanham Act 40
Statutory Damages in Counterfeiting Cases 47
Judicial Modification of Damages Award 47
Conclusion 49
CHAPTER 4 Explaining Venue Choice and Litigant Preferences: Solving the Delaware “Mystery”&Donald F.Parsons Jr., Jack B.Blumenfeld, Mary B.Graham, and Leslie A.Polizoti 67
Introduction 67
Delaware’s Historical Prominence in Patent Litigation 68
Unmatched Judicial Experience 69
Predictable Case Management 71
Rare Transfer 71
Early Scheduling Conference and Predictable Dates 72
Flexible Approaches 72
Frequent Patent Trials 74
High Number of Trials 74
Infrequent Summary Judgment 75
High Win Rates and High Damages 76
The Mediation Bonus 78
Conclusion 78
CHAPTER 5 Commonly Debated Issues in Performing Economic Damages Analyses in Intellectual Property Matters&Chase Perry, Clarke B.Nelson, and Elizabeth Whitaker 83
Introduction 83
Damages under U.S.Patent Law 84
Commonly Debated Issues in Intellectual Property Damage Calculations 84
Definition of the Relevant Market 84
Reliance on the “Book of Wisdom” 85
Where to Begin a Georgia-Pacific Analysis 86
Application of the “Entire Market Value” Rule 86
Interpretation and Application of the “25 Percent” Rule 87
Incremental versus Gross or Operating Profits to the Patent Holder 87
Calculating Marginal Costs 88
Exclusivity and Duration of the Hypothetical Licenses: Factors 3 and 7 under Georgia-Pacific 88
Acceptability of Noninfringing Substitutes 88
Analytical Approach to a Royalty 89
Conclusion 90
PART TwO Economics of Patent Damages 93
CHAPTER 6 Loss of Profits as a Measurement of Damages in Patent Infringement Matters 95
VincentA.Thomas, Christopher Gerardi, and Dawn Hall Introduction 95
Lost Sales of Patent Owner’s Patented Products 96
Methodology （Panduit Test） 96
Case Example 102
Lost Sales of “Nonpatented” Products That Compete with Infringing Products 107
Methodology 107
Case Example 107
Lost Sales of Convoyed （“Add-on”） Products 107
Methodology 107
Case Example 108
Price Erosion 108
Methodology 108
Case Example 109
Increased Costs/Accelerated Market Entry 109
Methodology 109
Case Example 110
Conclusion 110
CHAPTER 7 The Law of Demand and Lost Profits Analysis&Robert Basmann, Michael Buchanan, Esfandiar Maasoumi, and Daniel Slottje 113
Introduction 113
The Law of Demand and Its Evolution 115
Supply and Demand Models 115
Assumptions and Definitions 117
Demand 117
Supply 117
Simple Supply and Demand Curves 118
Change from the Equilibrium Point 119
Supply Curve Shifts 121
Elasticity 123
Vertical Supply Curve 124
Market Structure 125
Example: Supply and Demand in a Six-Person Economy 126
Case Studies 128
Conclusion 131
CHAPTER 8 A Holistic Approach to Patent Damages Analysis&Ryan Sullivan 133
Introduction 133
Ice Cream Industry 135
Market Overview 135
Data Description 136
Infringement Illustration 137
Market-Share Rule 139
Methodology 139
Application to Ice Cream Industry 140
Discussion 140
Price Erosion 142
Methodology 142
Application to Ice Cream Industry 143
Discussion 143
Market Simulation 145
Methodology 145
Application to Ice Cream Industry 148
Discussion 150
Conclusion 150
Appendixes 152
A.Epstein Method for Price Adjustment 152
B.Antitrust Logit Model （ALM） 152
CHAPTER 9 Commercial Success: Economic Principles Applied to Patent Litigation&Jesse David and Marion B.Stewart 159
Introduction 159
Summary of the Case Law 160
Economic Criteria 162
Two Case Studies 165
Conclusion 167
CHAPTER 10 Reasonable Royalty as a Measure of Damages in Patent Infringement Matters&Vincent A.Thomas, Christopher Gerardi, and Dawn Hall 171
Introduction 171
What Is a “Reasonable” Royalty? 172
License Agreement 172
Royalty 172
“Reasonable” Royalty 172
Methods for Determining a Reasonable Royalty Rate 173
Established Royalty 173
Hypothetical Negotiation （Georgia.Pacific Factors） 173
Analytical Approach 175
Cost Savings 175
Alternative Design /Noninfringing Alternatives 175
Case Example 176
Background Information 176
Barbara Witness Calculation 177
John Expert Calculation 178
Conclusion 178
CHAPTER 11 The “Analytical Approach” as a Technique to Determine a Reasonable Royalty&Lance E.Gunderson, Stephen E.Dell, and Scott W.Cragun 181
Introduction 181
Summary of the Case Law 182
Economic Considerations 184
Case Example 185
Background 185
Plaintiff’s Use of the Analytical Approach 185
Defendant’s Use of the Analytical Approach 187
Damages Summary 187
Conclusion 188
CHAPTER 12 A Quasi-Comparable Approach to Reasonable Royalty Determination&JeffreyA.Dubin 191
Introduction 191
Scope, Duration, and Noninfringing Substitutes 193
Variety of Computer Upgrade Technologies 193
Duration Limitations 195
Value of a Consumer Upgrade Option 196
Determining a Reasonable Royalty 197
Conclusion 198
CHAPTER 13 Using Statistics in Patent Cases: A Case Study&Esfandiar Maosoumi and Matthew G.Mercurio 201
Introduction 201
Dr.M’s Methodology 202
General Similarity among Mallets 205
Statistical Tests 206
Nonindependence of Mallet Characteristics 208
Presentation of Statistical Evidence 210
PART THREE Economics of Copyright, Trademark, and Trade Secret Damages 213
CHAPTER 14 Using Statistics in Copyright Cases&Daniel Millimet, Michael Nieswiadomy, and Daniel Slottje 215
Introduction 215
Economic Models 215
Deterministic versus Stochastic Models 216
Line of Best Fit: Regression Analysis 218
Fundamentals of Hypothesis Testing 219
Hypothesis Testing in a Regression Model 222
Hypothesis Testing in a Copyright Damages Case 224
Case Study: Peter Plaintiff v.the Yazoo Yeti 224
Conclusion 228
CHAPTER 15 Quantification of Damages in Trademark Cases&Blake Inglish 231
Introduction 231
General Trademark Information 231
General Definition 231
Inclusive Definitions 232
Distinctiveness 232
Registration 233
Trademark Infringement Litigation 234
Concepts Unique to Trademark Infringement 234
False Advertising 235
Nonmonetary Remedies 236
Calculating Trademark Damages 236
Types of Damages 236
Other Damages Issues 239
Case Study: Calculating Damages for Trademark Infringement 240
Summary of CaseAssumptions 241
Damages Calculation 241
Conclusion 245
CHAPTER 16 Economic Damage Quantification in Trademark Matters&Jeffrey A.Dubin 249
Introduction 249
Basis for the Demand Approach 251
Demand Analysis and Brand Profitability 252
Data Description 254
Nielsen Reports 254
SAMI Reports 255
Socioeconomic Data 255
Leading National Advertisers Data 255
CPI Data 255
Analysis 256
Estimated Trademark Fractions and Conclusions 259
CHAPTER 17 Evaluation of Damages Claims in a Trade Secrets Case&Robin C.Sickles and AshokAyyar 265
Introduction 265
Case Background: AAA Technologies v.BBB, Inc 266
Damages Calculations 267
Summary of Opinions 269
Reliance on Interview Questions 270
Spurious and Unreliable Interview Results 271
Flawed Survey Design 271
Flawed Survey Implementation 272
Flawed Interpretation and Use of Survey Results 273
Uncertainty in the Model 274
Royalty Rates 276
Conclusion 278
CHAPTER 18 A Primer on Trademarks and Trademark Valuation&Michealyn Corbett, Mohan Rao, and David Teece 281
What Is a Trademark? 281
What Constitutes an Acceptable Trademark? 282
Different Types of Trademarks 283
A Trademark Is Not the Same as a Trade Name or Brand 283
A Trademark Is Not the Same as Goodwill 284
Why Do We Care about Trademarks and Why Are They Needed? 285
How Does One Obtain a Trademark? 286
How Are Trademarks Protected and How Can They Be Damaged? 287
Trademarks and the Internet 288
How Are Trademarks Valued? 289
Principles of Licensing 289
Cost Approach 291
Market Approach 291
Income Approach 293
Conclusion 294
INDEX 297