Page 50 - Acertaining Economic Damages Calculation

I find that individualized account analysis can give an expert insight into a company's incremen-
tal costs beyond what a pure regression analysis can provide. On the other hand, I also credit
[Expert’s] criticism that account analysis methodology leaves room for subjectivity and bias, two
elements that are absent from a pure regression analysis. fn 58

After considering these factors and reviewing both expert opinions, the court concluded that a profit
margin of 35% was "a reasonable estimate of MWA’s profit margin on its alleged lost revenues." fn 59
Using this profit margin, the court ultimately awarded MWA $190,437 in damages under its counter-
claims.

The court in this matter approved of the "insight" that an account analysis methodology can provide as
compared to the regression analysis offered in this case, while also pointing to certain "shortcomings"
that the court felt may affect such an analysis. Thus, in using its own profit margin, it appears that the
court may have balanced any concerns by selecting its own "reasonable estimate" of the appropriate
profit margin, and essentially split the difference between the competing experts and alternative meth-
odologies. Unfortunately, the court did not provide additional detail regarding its reasoning about the
appropriate margin to use. This case suggests that under certain facts and situations, an account analysis
can be looked upon favorably by a court when compared to a specific regression analysis used to esti-
mate costs. However, a practitioner should be aware of any criticisms of such analysis when estimating
the appropriate costs to use in a lost profits analysis.

Polaroid Corp. v. Eastman Kodak Co., 16 U.S.P.Q.2d 1481, 1990 WL 324105 (D. Mass. October 12, 1990)

Polaroid Corporation (Polaroid) brought suit against Eastman Kodak Co. (Kodak) for infringement of 12
patents relating to integral instant cameras and film. After litigating the matter over a number of years,
Kodak was found to have infringed certain of the alleged patents, which were treated "as a group." The
litigation had been bifurcated with the damages issues "reserved for the post-liability phase," and with
damages being addressed by the court in this opinion. In beginning its analysis, the court cited the U.S.
Supreme Court’s definition of damages as contemplated by 35 USC 284, covering recovery of damages
for patent infringement:

The present statutory rule is that only "damages" may be recovered. These have been defined by
this Court as "compensation for the pecuniary loss he [the patentee] has suffered from the in-
fringement . . . ." They have been said to constitute "the difference between his pecuniary condi-
tion after the infringement, and what his condition would have been if the infringement had not
occurred." fn 60 [citations omitted]

Turning to the question regarding any lost profits Polaroid may have suffered, the court went through a
detailed analysis of the factors under Panduit Corp. v. Stahlin Bros. Fibre Works, 575 F.2d 1152 (6th
Cir. 1978), including looking at the market, consumer buying habits, and Polaroid’s capabilities to meet
increased sales in a but-for world without Kodak’s infringing cameras. Once the court had determined

fn 58 Id.

fn 59 Id.

fn 60 Polaroid Corp., 1990 WL 324105, at *3.

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