January 9, 2019
Intellectual property (IP) litigation and IP damages calculation approaches have changed significantly in recent years. Courts have raised their expectations, demanding ever-increasing rigor in analysis and methodology in such areas as assessing product demand and valuing IP. At the same time, technology and data analytics tools have enhanced experts’ abilities to make sense of the IP-related issues at hand. Together, these trends have raised the bar on litigating IP matters.
How can your company ensure that it is approaching IP matters with a sufficiently robust, comprehensive outlook to meet the new expectations? For starters, ask your IP team these three questions:
(1) Are you using progressive economic modeling techniques when calculating damages?
Gone are the days of the 25% rule as a starting point for determining lost royalties. Under that long-accepted but now-obsolete rule, 25% of profits from the invention would go to the inventor.
Rules of thumb in IP matters really no longer exist, notes Renee Wong, managing director at Ankura with expertise in intellectual property disputes. “Courts are requiring more and more rigor from experts to tie their analysis to the facts of the actual case.”
The good news is that economic methodology and tools are well-suited to intensive, fact-based and discipline-based analysis of markets, market prices, market value and substitutability, as well as in determining reasonable royalties and lost profits, notes Debra Aron, senior managing director at Ankura with expertise in disputes, economics, and statistics.
Aron explains: “Economic modeling of the market, econometrics, and statistical analyses provide rigorous tools that we combine with our industry knowledge and expertise to quantify reasonable royalties or lost profits associated with intellectual property infringements of all kinds.”
For example, in a patent infringement litigation, determining reasonable royalties often requires assessing what the outcome of a negotiation would have been had the parties sought to agree on license fees at the time of infringement. “Economics teaches that the outcome of a negotiation will be sensitive to the value of using the patented technology in the marketplace, and the relevant substitutes,” explains Aron.
(2) Are you using the best available databases and analytical software platforms in your valuation?
To understand how valuable your patent is, experts increasingly look to databases and platforms that use data analytics software to measure value. For example, PatentSight, an IP analytics software platform, looks at how many times a patent has been cited, and comes up with a number, which it then compares to other patents as a means of measuring value.
“These database tools assign a value to a patent. We then use that to compare patents and develop valuations,” says Wong. “These tools are also an additional way to corroborate results, since the data analytics add another level of confidence in the findings.”
(3) Are you using forensic analysis and big data techniques to assess liability?
Is your patent being infringed? Determining whether it is or isn’t often requires looking at the source code and metadata and assessing whether your information is being stolen or misappropriated, and whether your copyright is being violated.
“Complex data analytics techniques help companies establish liability in these determinations,” explains Sonya Kwon, senior managing director at Ankura with expertise in complex data and statistical analysis. “We develop programming to look at metadata to understand how much information, if any, is being stolen, using forensic data analysis,” she says.
For example, when the allegation is that someone is stealing someone else’s information by copying their process, “we look at the metadata. We scrape it and recreate what we think happened,” says Kwon. “Doing this enables us to answer the question: ‘Were they following same proprietary process?’” In other scenarios, Kwon notes that they use data analysis techniques to assess similarities and differences, in order to determine whether someone’s IP has been stolen.
Protecting your IP demands a comprehensive approach to litigation, valuation, and damages calculation that includes a range of tools and methodologies. Economics and econometrics, database tools, and forensic analysis are important tools in effective IP valuation and damages calculations.