Patents

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 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.

To obtain available relief from the International Trade Commission (ITC) on a patent infringement claim, a complainant must prove an economic domestic industry exists. Referred to as the economic prong of the domestic industry requirement, the analysis requires showing certain domestic investments have been made or are in the process of being made that are reasonably attributable to articles protected by the asserted patent(s). The ITC focuses on three types of domestic investments:

• (A) Significant investment in plant and equipment;
• (B) Significant employment of labor or capital; or
• (C) Substantial investment in exploitation, including engineering, research and development, or licensing.

A complainant may demonstrate the existence of an economic domestic industry by satisfying any one of the criteria above. When investments and costs are not tracked on a product-by-product basis, a complainant may perform allocations and estimates to attribute quantifiable domestic investments to the products claimed to practice the asserted technology using available financial data that may provide a reasonable basis for doing so.

Additionally, the ITC has not historically used a bright-line rule or rigid formula in the determination of whether quantified domestic investments are significant or substantial. While there may be a reliance on qualitative indicators of the significance or substantiality of investments, complainants may also quantitatively demonstrate why its investments are significant or substantial.

Engagement Examples

• Developed strategic plan for economic domestic industry analysis prior to ITC complaint filing relating to claimed patent infringement of interactive program guides and menus. Obtained summary determination of the existence of an economic domestic industry based on analysis.
• Performed economic domestic industry analysis relating to electronic nicotine delivery systems. Quantified domestic investments under subparagraphs (A), (B), and (C). Obtained summary determination of the existence of an economic domestic industry based on analysis.
• Evaluated the economic prong of the domestic industry requirement for biotechnology products used in the measure of biomolecular interactions in a label-free manner. Quantified domestic investments under subparagraphs (A) and (B) relating to domestic manufacturing, procurement, shipping, and product development activities.

The default remedy for a complainant succeeding on patent infringement claims at the International Trade Commission (ITC) is an exclusion order, which precludes the infringing products from being imported into the United States. However, the ITC may decide not to issue an exclusion order after considering the impact such an order would have on the following public interest factors:

1. The public health and welfare,
2. Competitive conditions in the U.S. economy,
3. The production of like or directly competitive articles in the U.S., and
4. U.S. consumers.

An analysis of the public interest factors often considers whether reasonable substitutes to the infringing products exist (e.g., such as those provided by a complainant), and whether those products can adequately meet the demand in the U.S. marketplace. It may also consider the extent to which the infringing products are used in any medical or health-related contexts, such that their removal could negatively impact the well-being of U.S. consumers of the products.

Regarding the impact to competitive conditions, the analysis often considers how the removal of the infringing product may shift market power among suppliers of substitute products, and whether such shifts would give rise to a dominant supplier within the marketplace. Such an analysis may be accompanied by a definition of the relevant marketplace to be considered to determine the products that are reasonably considered substitutable with the infringing products from a consumer perspective.

The analysis can also evaluate how manufacturing conditions may change domestically from an exclusion order. Such an evaluation may consider the extent to which substitute products are manufactured domestically, or if certain critical supplies or components used in the infringing products are manufactured domestically.

Engagement Examples

• Performed public interest analysis relating to possible exclusion of certain categories of mobile devices alleged to utilize certain 3G and 4G/LTE technology. Analysis included a determination of the availability of substitute products that would mitigate harm to U.S. consumers.
• Evaluated the public interest factors relating to possible exclusion of recently launched electronic nicotine delivery system. Analysis included an evaluation of the importance of innovation as a means of competition within the marketplace, a quantification of the number of U.S. consumers likely impacted by an exclusion order, and the determination of a negligible impact on competitive conditions in the United States.

Commercial success is a secondary consideration of nonobviousness of an invention that reflects that the law presupposes that an idea for a claimed invention would successfully have been brought to market sooner — in response to market forces — had the idea been obvious to persons skilled in the art. A commercial success evaluation also considers nexus, or the economic link, between the patented technology and any commercial success.

Engagement Examples

• Performed an evaluation of the commercial success of a branded drug and the patents involved in a matter of patent infringement claims against a a generic drug company seeking ANDA approval to sell a generic version of the branded drug. Evaluated sales and economic profits in an appropriate economic context by defining a relevant market and comparing sales of the branded drug to relevant benchmarks.
• Conducted economic analysis and provided trial testimony relating to the evaluation of commercial success of multiple encryption technology patents allegedly embodied in a software product. Evaluated the profitability of the licensing entity, relevant third-party products using the patented technology, and the nexus of the patented technology to product sales and profits.
• In a case involving an antibiotic used to treat infections, analyzed the antibiotic’s sales performance relative to peers, its commercial opportunity in the marketplace, its price and formulary status, and whether the patented formulation had any nexus, or causal relationship, to sales. In addition to evaluating commercial success, also evaluated the secondary considerations of long felt need and industry acceptance.