Page 48 - Intellectual Property Disputes

In addition, certain types of infringement may inherently continue beyond the trial date. For example, if
the term of a contract to supply a particular service on patented goods extends beyond the trial date,
damages may be awarded for sales made after that date. The pendency of an injunction may influence
whether such damages are awarded. Damages cannot be awarded for infringement that occurred more
than six years prior to the filing of the complaint for patent disputes. fn 66

An issue that may affect damages is whether a defendant’s infringement resulted in a market entry
advantage that would not have existed but for the infringement. If the defendant, after issuance of an
injunction, can enter the market again with a competing product sooner than would have been possible
without the infringement, the plaintiff may suffer additional future lost sales and profits. This is most
likely to occur if the patent is at or near expiration.

Sales Price

Damages are often calculated based on the intellectual property owner’s pre-infringement (actual) sales
prices. The courts require documentation from the intellectual property owner to justify the method or
basis for estimating these prices. If multiple models of the same product are involved, courts may use
the average price of the number and type of model sold.

Several aspects of the infringed product’s past pricing history may be scrutinized. The product’s pricing
history may be examined to determine the historical rate of price increases or decreases. Additionally, it
may be appropriate to compare the historical rate of price increases to the historical inflation rate so that
the impact of inflation is removed. The plaintiff’s pricing models for quantity and early pay discounts
may also be relevant.

Price Erosion

A claim for price erosion may exist if (a) the patent holder fn 67 is not able to increase prices as much as
he or she would have absent the infringement, or (b) the patent holder is forced to decrease price in the
face of the competition due to the infringer’s conduct. The earliest known case involving the issue of
price erosion was Yale Lock Manufacturing Co. v. Sargent in 1886. fn 68

Price erosion was addressed by the Federal Circuit in Lam, which affirmed a damage award for products
sold by the patent holder at a depressed price. fn 69 The patent holder projected sales through the
infringement period based on the rate of pre-infringement growth for the patented product. The patent
holder then calculated the damages by subtracting the actual sales from projected sales during the
infringement period. fn 70 The projected sales excluded price reductions implemented to compete with
the infringer’s product. fn 71

fn 66 35 USC 286.

fn 67 Price erosion claims are not limited to patent suits, although they are less common in other types of intellectual property disputes.

fn 68 Yale Lock Mfg. Co. v. Sargent, 117 U.S. 536 (1886).

fn 69 Lam, Inc. v. Johns-Manville Corp., 718 F.2d 1056, 1067 (Fed. Cir. 1983).

fn 70 Id. at 1068.

fn 71 Id. at 1067.

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