Economic Damages and the Depp-Heard Trial

Determining damages in any court case is a matter of information. Having the wrong information can result in a painful defeat. Having the right information can result in a stunning victory and even a substantial boost to your reputation. One only must look to recent events when veteran damages expert (and BVR contributor) Douglas Bania’s testified in the Depp-Heard trial to see how much of an impact having the right data could have on a damages case. Bania is no stranger to sharing his insights, having been featured in the BVWire and notably having been a contributor to the Comprehensive Guide to Economic Damages, 6th edition. Enjoy a taste of his expertise with this excerpt from Chapter 34 of the guide.

1.0 Abstract

When calculating damages in intellectual property cases, many circumstances require a profit apportionment analysis. Specifically, profit apportionment is needed in cases where the damages calculation involves determining the portion of the defendants’ ill-gotten gains due to use of the disputed intellectual property in unjust enrichment claims or the portion of the plaintiff’s losses related to use of the disputed intellectual property in lost profit claims. While profit apportionment is not appropriate for every damage’s calculation, when it is, analysts often find themselves in a quandary as to how to complete such an analysis.

2.1 An Apportionment Situation

Consider the following situation: Two companies compete for sales in the same market. Company A has copyright protection for software code used in the delivery of its business services. Company B offers similar software-based services but does not own IP related to the software. Both Company A and Company B are well known in the industry and use their own distinct trade names and proprietary solutions. Company A has proven that some of the software code Company B uses infringes its copyrights.1 Company B has provided data indicating the amount of revenue and profits it achieved from sale of the accused services. Company A demands a damages award based on recovering 100% of the profits Company B reported. Even if it has been proven that Company B infringed upon Company A’s copyrights, it does not mean that Company A deserves to recover 100% of Company B’s reported profits. To complete a damages calculation, the damages analyst will need to address questions such as:

  • Was the claimed IP infringement the sole reason for the observed change in financial performance?
  • Did either Company A or Company B rely on other IP or proprietary assets to achieve its sales and profits?
  • Was the observed financial performance due specifically to the disputed software, or were other technologies, the trademarks, or other assets and resources partially responsible for the sales and profits achieved?

There are many circumstances when an apportionment of profits is necessary to develop a reasonable calculation of economic damages. Also, there are circumstances where profit apportionment is not required. Facts, circumstances, and jurisdictional issues will dictate when a profit apportionment analysis is appropriate. This chapter offers an analytical framework that can be used for conducting a reliable profit apportionment analysis.

Make sure you have all the information you need to back up your assessments and ensure you don’t miss a single factor. With timely and impactful insights from Douglas Bania and the rest of the authors, the Comprehensive Guide to Economic Damages, 6th edition, is your go-to resource for economic damage calculations.

Available in print and PDF formats here.

Coming soon in 2023: The Comprehensive Guide to Economic Damages, 7th edition.

1 For this chapter, the discussion assumes the plaintiff has been able to prove liability and that the defendant is liable for economic damages. The analyst tasked with quantifying economic damages is not considering whether the plaintiff is liable, only the amount of damages. This chapter addresses only the calculation of economic damages, and the process presented does not address the issue of liability.