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Quantifying Economic Damages

The calculation of damages is a key element in any intellectual property litigation. While the fundamentals of marketplace intellectual property valuation are also applicable to litigation, there are variances in the methodologies that are dependent upon the underlying claims and jurisdiction.

For example, damages for copyright infringement are typically calculated in accordance with the Copyright Act, while damages for trademark infringement are typically calculated in accordance with the Lanham Act. Additional approaches, such as a reasonable royalty analysis or corrective advertising measures, may also be appropriate, as well as an allocation of value analysis where the infringement works in tandem with non-infringing intellectual property in a commercial context.

The context of calculating future harm and economic damages is really quite simple: It is a calculation of the future income stream that has been gained from the damaged party, which is then discounted back to a present value. In litigation involving future economic damages, calculations of these damage amounts that are discounted back to present value can be subject to a wide range of discount rates. Because the courts have offered little guidance, and because each industry and situation reflects different discount rates, there is a wide range of possible answers. Our methodology deals with the future uncertainties of damages by carefully analyzing both the industry and marketplaces in which the damages would take place, as well as the core value of the underlying intellectual property being damaged. In other words, discount rate is a function not only of the future market, but also the quality and competitive environment in which the IP finds itself.

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