Page 52 - Economic Damage Calculations

trivial matters. De minimus, in a more formal legal sense, means something which is unworthy of
the law’s attention. In risk assessment, de minimus refers to a level of risk which is too small to
be concerned with. Some refer to this as a "virtually safe" level. fn 7

defendant’s profits. A financial remedy that calls for proof by the plaintiff of defendant’s revenues
that flowed from the events in question, followed by the defendant proving nay offsets to that
revenue to costs and apportionment (the effect on sales and profits of the use of the intellectual
property, for example, as compared to non-infringing factors not a part of the dispute). Generally
defendant’s profits cannot double-count the same sales that are part of an actual damages calcu-
lation.

discount factor. The factor that translates expected benefits or costs in any given future year into
present value terms.

discount rate. A rate of return used to convert a future monetary sum into present value. fn 8

discounting. The process of converting a future monetary sum into a present value. fn 9

equity risk premium. A rate of return added to a risk-free rate to reflect the additional risk of equity
instruments over risk free instruments (a component of the cost of equity capital or equity dis-
count rate). fn 10

ex ante approach. A method of calculating damages by discounting lost profits based on a but for
scenario or projection using only information known as of the date of the damages event, and
discounting that lost profits stream back to the date of the damages event, and then using the pre-
judgment interest rate to bring the value to the date of judgment. The ex ante approach is based
on the idea that the plaintiff has been relieved of risk from the date of the damages event into the
future and the risky income stream from the date of the damages event forward is replaced with a
sum certain, so the risk avoided should be considered in the model.

ex post approach. A method of calculating damages by discounting lost profits based on a but for
scenario that uses information known as of the date of the damages event and information that
has become known since that time as well. The ex post approach is based on the idea that the
plaintiff has lost out on an opportunity that is better estimated by considering all of the infor-
mation available, including information that has become known since the date of the damages
date. In an ex post approach model, future losses are discounted back to the judgment date, while
past losses are brought forward via a prejudgment interest calculation.

expected cash flow approach. Favors adjustments for risk directly in the cash flows, with the dis-
count rate used generally being risk-free (or close to risk-free). fn 11

fn 7 The Free Dictionary, s.v. "de minimus," www.thefreedictionary.com/de+minimus.

fn 8 SSVS No. 1.

fn 9 Ibid.

fn 10 Ibid.

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