Page 104 - Intellectual Property Disputes

analytical method as "calculating damages based on the infringer’s own internal profit projections for
the infringing item at the time the infringement began and then apportioning the projected profits
between the patent owner and the infringer"]."

Although the development of profit projections may include subjective elements that may be open to
criticism, an advantage of the analytical method to the patent holder is that it attempts to use the
information upon which the infringer based its decision to infringe. In some cases, pre-infringement
projections can become a real impediment to the infringer in the midst of litigation. As discussed
previously, the courts have found pre-infringement memorandums and projections to be particularly
relevant because the infringer based its decision to manufacture and market the infringing product on the
very information being used to determine the reasonable royalty amount.

An infringer’s defense to a reasonable royalty case based on the analytical method is often to attack its
own profit projections. Rather than present evidence of a lower actual profit margin or evidence dated
after the date infringement first began, the infringer attempts to undercut the reliability of its own
proprietary documents dating from the time when infringement began.

Reasonable Royalty in Copyright Disputes

In copyright disputes, if the copyright owner and the infringer compete in the same market, the courts
may use a lost sales measurement to compensate for the sales that would have been made but for the
defendant’s infringement. If the owner and infringer serve different markets, the courts may use a
reasonable royalty or market value test to determine the hypothetical reasonable royalty that the
copyright owner would have received for the defendant’s use. In a dual market context, some courts
have held that the value lost by the copyright owner should be approximated from the infringer’s acts
that prevented the copyright owner from taking advantage of that particular market.

Unlike the patent law, the Copyright Act makes no mention of treating a reasonable royalty as a
minimum damage measure. Not unlike the patent law, however, the question posed by Section 504(b) of
the Copyright Act is "what would a willing buyer have been reasonably required to pay to a willing
seller for plaintiffs’ work?" fn 166

The measurement of damages for copyright infringement is not as well-established as that for patent
infringement, in large part because appeals of copyright cases are taken to the appellate court in the
region in which the case was filed, rather than solely to the Federal Circuit. This causes judicial
precedent in copyright cases to be regional in nature, rather than national in scope. The copyright expert
is advised to seek counsel’s input and review case law from pertinent jurisdictions.

If the court selects a reasonable royalty measure of damages, it may attempt to determine the amount
that the infringer would have paid for the right to use the copyrighted work legally. Just as in patent
cases, any pre-existing licenses may offer a measure of the appropriate reasonable royalty. fn 167 For
example, in McRoberts Software, Inc. v. Media 100, Inc., the court determined that the jury had ample
evidence from which to estimate the value of the competitor’s use of the copyrighted source code and
arrive at its $1.2 million actual damage award for copyright infringement. Finding that the jury had
evidence of the copyright owner’s past agreements with the infringing competitor to develop and modify

fn 166 Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 772 F.2d 505, 512 (9th Cir. 1985).

fn 167 Rogers v. Koons, 960 F.2d 301, 313 (2d Cir. 1992).

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