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A comprehensive guide to calculating patent infringement damages
Revenue Recovery
6 mins

A comprehensive guide to calculating patent infringement damages

Table of Contents:

    Patent infringement – the unauthorized use or distribution of a patented invention – is an almost inevitable part of life as a patent owner. For businesses, patent infringements can range from an annoying inconvenience to potentially catastrophic. 

    Sometimes, in order to protect the integrity and value of your patent, you have to commence legal action. One of the upsides, and incentives, of succeeding in legal action is that the court can award patent infringement damages. This sum of money can help to restore you to the financial position you were in before the infringement occurred and it will punish, and hopefully deter, the wrongdoers. 

    In this blog we’ll be exploring a variety of topics concerning patent infringement damages, including: 

    • What type of damages are available for patent infringement?
    • Key considerations to patent infringement damages
    • Costs vs. benefits of patent infringement lawsuits
    • How to recover lost revenue with a patent infringement lawsuit

    What type of damages are available for patent infringement?

    A successful party can receive various kinds of patent infringement damages. These include: 

    • Lost profits

    Lost profits in patent infringement is the amount of money your business could have if not for the defendant’s infringement of your patent. In the legal sense, there must be a nexus of causation between the act of infringement and your loss of profits. To successfully recoup this type of damages the wronged party must prove that the business suffered financially because of the patent infringement. 

    • Reasonable royalties

    Reasonable royalty damages are all about the fair market value of a license for the use of your patent. Once a court determines the value of the reasonable royalty for using your patent they will assess damages accordingly, based on the number of patent infringements. 

    • Punitive damages

    Punitive damages will be awarded if, during the course of the trial, it is proved that the defense knowingly and willfully carried out patent infringement. Willful patent infringement is a higher level of liability. Such damages will not be awarded for accidental infringement. 

    • Indirect damages

    Indirect damages refers to loss that was indirectly caused by the patent infringement. This is often used to cover a patented device or invention that has multiple features. Even if the wrongdoer only infringes one feature they have indirectly affected the other features and the plaintiff can attempt to recover losses from the entire invention. 

    While the Patent Act does not explicitly state all the various kinds of possible damages, the courts do have wide discretion to award lost profits, reasonable royalties and other kinds of damages based on the nature of the infringement and the facts of the case. 

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    Factors affecting patent infringement damages

    • Market demand

    What is the market demand for the patented invention? If the market demand is high this is likely to result in a higher award of patent infringement damages. High demand is evidence that the patent is of significant value to the owner. It also indicates that the consumer is benefiting from the availability of the patented design. In both instances, patent infringement has the potential to cause substantial harm to the patent owner and the consumer. Therefore, the level of damages should reflect this market situation. 

    • Market competition

    What is the state of the market at the time? How many other inventions is this patent competing with? If there is plenty of competition, the value of a patent is even more important because it may be the only thing that gives the patent owner a competitive edge. In a crowded market, patent infringement could completely diminish the value of the patent and lead to economic ruin for the business owner. This level of risk and danger should be reflected in the award of damages. 

    • Inventor’s reputation

    What was the inventor’s reputation prior to the infringement? How has their reputation suffered as a result of the patent infringement? How might their reputation be further impacted by engaging in patent infringement lawsuits? Reputation is a key factor to consider in the world of business. Equally, when awarding damages the court should consider how the inventor’s reputation has been affected by events. 

    • Nature of the invention

    What is the nature of the invention? Does the patent cover the whole, or just part, of the invention? What element of the invention has been stolen or misused? When awarding damages the court will also consider the invention itself. The significance and characteristics of the invention will usually provide some indication as to the level of damages that should be awarded. 

    Key considerations to patent infringement damages

    • Types of risks for patent infringement

    What types of risks may emerge as a result of patent infringement? These may be very specific to your business and your circumstances. Nevertheless, as you think about potential damages, it is important to consider the overall impact that the infringement has made and how you can mitigate the ensuing risks. 

    • Importance of conducting a risk assessment

    A risk assessment on the topic of patent infringement damages will allow you to understand the true market value of your patents, their potential level of exposure to wrongdoers, and the possible amount of damages you are likely to receive if you pursue litigation. 

    • Legal remedies for patent infringement

    What is your desired outcome? For patent infringement there are a variety of legal remedies including damages, an account of profits, an injunction, and the delivery or destruction of the infringing goods. The court will consider the most appropriate remedy in the circumstances. This may impact the level and type of damages you receive in the end. If an injunction is the more equitable solution that that will be taken into account 

    • Calculating patent infringement damages

    The calculation of damages will depend on the kind of damages awarded.  For standard reasonable royalties, the court will calculate the value of the damages with regard to the fair market value of a license for one of the infringed items. They may then multiply that value by the number of items that have been sold, misused or wrongly distributed. 

    Costs vs. benefits of patent infringement lawsuits

    Before beginning a patent infringement lawsuit you need to balance the costs and benefits of continuing down this path. Here are a few elements to consider: 

    Costs

    • Legal fees 

    Any lawsuit involves legal fees. This is particularly true for patent infringement lawsuits due to the fact that they are often lengthy and complex. The common direct costs of such a lawsuit include counsel’s fees, expert witnesses, discovery expenses. Patent litigation costs in the US are on average between $2.3 million and $4 million

    • Reputation

    Your business’s reputation could suffer if you are shown to be overly litigious. Not many consumers, competitors or industry commentators would begrudge you for pursuing a legitimate grievance. However, if you are seen to be constantly filing patent infringement lawsuits for very minor or extremely contentious incidents this may reflect poorly on your reputation. 

    This risk of reputation loss increases if you lose the lawsuit and your allegations are proven to be without merit. Therefore, it is vital to consider the evidence, as well as the circumstances of the potential infringement, carefully before beginning the litigation process. 

    Benefits

    • Damages 

    The main benefit of patent infringement lawsuits is that you will usually receive significant damages if you win.  Depending on the nature and the extent of the infringement, these patent litigation damages could restore you to the position you were in before the infringement or they could provide you with even further compensation. 

    • Reputation

    For many, patent litigation is a way to protect the integrity of the patent and the business. If you run a successful patent infringement lawsuit, you will be protecting your reputation. You will have validated your suspicions, brought the wrongdoer to justice and deterred future infringers. You will also have prevented unauthorized versions of your patent from proliferating in the market thereby maintaining the patent’s value and your business’s reputation. 

    How to recover lost revenue with a patent infringement lawsuit

    Red Points’ Revenue Recovery Program is the perfect solution to help you protect your patents against counterfeiters and run a successful patent infringement lawsuit. Our program works via three simple and effective steps: 

    1. Target infringers

    Our automated bots, empowered by machine learning, will crawl the web identifying high-profile sellers infringing on your patent. 

    2. Build a case

    We will then start collecting all the data and evidence you will need to start, and succeed, in your legal action. Our experience in the sector means that we waste no time in collecting all the information you need so that you can act fast. 

    3. Get compensated

    Our partners will then undertake legal action on your behalf. They will act towards freezing the accounts of patent infringers and recovering funds from them. This will ensure that your patents are protected and that you are well compensated. 

    Our success rate is 100% and on average we recover a compensation fee of $120,000 for our customers. Through top-notch technology and experienced partnerships with leading legal minds our program is the most cost-effective solution to help you recover lost revenue via patent infringement lawsuits. 

    What’s next

    On the surface patent infringement damages can seem like a complex topic. However, at Red Points we’ve found a way to simplify the process to allow you to understand the damages process and win your patent litigation cases. 

    Before engaging in any litigation it is vital for you to consider the types of damages available for patent infringement as well as the costs of pursuing this kind of remedy. Once you’ve made your decision to pursue litigation you can then rely on Red Points to guide you through the process. To learn more about our Revenue Recovery Program feel free to contact us here.

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