Page 59 - Intellectual Property Disputes

Courts will ordinarily reject projections made by copyright owners that cannot be supported by
reasonably probable evidence. fn 121 However, courts may accept estimates in the form of opinion
testimony that are set forth with reasonable certainty. If the copyrighted product is sold at a price
significantly higher than the defendant’s infringing product, the courts are likely to assume that less than
all the defendant’s sales were sales lost by the copyright owner because the lower price likely caused at
least some of the defendant’s sales.

Although many courts have limited the copyright owner to the profits of the infringer as compensation
for lost profits, other courts have found this remedy to be insufficient. In F.W. Woolworth Co. v.
Contemporary Arts, Inc., the U.S. Supreme Court determined that "a rule of liability which merely takes
away the profits from an infringement would offer little discouragement to infringers. It would fall short
of an effective sanction for enforcement of the copyright policy." fn 122

In determining the copyright owner’s lost profits, it is necessary to deduct the incremental overhead
expenses that the copyright owner would have incurred if, in fact, those extra sales had been made. fn 123
If overhead expenses would not increase as a result of additional sales, there is no need to include
overhead costs as a component of the damage measure.

Many copyright damages cases have been tried in the courts over the years, with the majority of the
cases providing little guidance for the damages expert on determining damages. However, a few,
described subsequently, are worth discussing, particularly because the decisions are from the Federal
Circuit. As with any matter, forensic practitioners should consider performing, or requesting that counsel
perform, a search of relevant case law in the federal district, state, or other court to locate any specific
precedents that may be relevant to the facts and circumstances at hand.

As noted in the "Apportionment" section of this practice aid, the Copyright Act, the Lanham Act, and
the UTSA each provide that in an unjust enrichment claim, the intellectual property owner shall recover
only the net profits of the infringer attributable to the infringement. By comparison, in a lost profits
claim, all the profits derived from lost sales are awardable as damages. As a result, in an unjust
enrichment claim, only the portion of profits from infringing sales that can be ascribed to the intellectual
property in question are to be awarded.

The issue of the apportionment of revenues and costs came to the forefront again in a 2010 copyright
case. The district court, upon remand from the Federal Circuit for damages, in William A. Graham Co. v.
Haughey fn 124 determined that it was not necessary to second-guess the jury when looking at the
allocation of profits between those attributable to the infringing use and those attributable to factors
other than the infringing use. The defendant argued that the plaintiff’s expert had miscalculated the
amount of gross revenues attributable to the infringement and that the role of the infringement in the
client’s purchase decision was "modest" compared to the role of producer and client used in determining

fn 121 Id. at 15.

fn 122 F.W. Woolworth Co. v. Contemporary Arts, Inc., 344 U.S. 228, 234 (1952).

fn 123 Taylor v. Meirick, 712 F.2d 1112, 1121 (7th Cir. 1983).
fn 124 William A. Graham Co. v. Haughey, 94 U.S.P.Q.2d 1147 (E.D. Pa. 2010). The copyrights at issue relate to certain insurance
documents called "Standard Survey and Analysis" and "Standard Proposal." A jury awarded damages of $16,561,230 against one
defendant and $2,297,397 against the other. A new trial was ordered, and the jury in the second trial awarded damages of $1.4 million
against one defendant and $268,000 against the other. The second verdict was appealed and remanded by the Federal Circuit.

© 2020, Association of International Certified Professional Accountants 55