Expert witnesses can make or break your intellectual property litigation. This series addresses how to get the most out of an economic expert to establish plaintiff’s case for damages for infringement of its intellectual property. (Part 1 and Part 2.) Today’s article focuses on trademark infringement.
A successful trademark infringement plaintiff claim establishes that the defendant used the plaintiff’s trademark or a similar mark to convince others that the defendant’s goods and services were associated with or sourced from the plaintiff’s goods or services in a manner that harmed the plaintiff. Trademark plaintiffs often consider injunctive relief their most important remedy, but they can recover damages if they meet the burden of proof. Trademark damages are not automatically awarded and cannot be punitive; the damages must not benefit plaintiff more than is required to repair the damage.
A trademark owner can recover three types of compensatory damages for infringement: an accounting of infringer’s profits, the actual damages (diverted moneys) the owner lost to the infringer and a reasonable royalty representing the owner’s damages. Both sides can use economic experts to help prove these, and then a jury decides any award.
The infringer’s profits
Once a plaintiff has established it suffered damages, it must demonstrate a reasonable basis for calculating damages. The plaintiff can recover the infringer’s profits from using the mark (attributable to the infringement) minus expenses the plaintiff would have incurred to earn those profits. However, the plaintiff must only prove the infringer’s sales as damages; the infringer must prove any deductions that reduce the calculation (e.g., variable business operating costs including labor, raw materials, and other costs associated with producing the infringing goods). Fixed operating costs are not generally deductible. The infringer can also deduct sales it proves were not made because of the infringement.
Information from discovery helps the owner prove the infringer’s profits. An economic expert calculates profits and confirms that defendant only deducted reasonable costs from its claimed variable operating costs.
Parties awarded actual damages generally prove that customer confusion resulted in economic loss or that using the trademark unjustly enriched the infringer. The owner must establish it suffered an actual loss, which involves demonstrating sale or profit loss, goodwill loss or corrective advertising costs. Some courts require proof of actual confusion or deception.
Measuring lost profits involves calculating the revenue the owner would have earned if not for the infringer’s actions, less the variable operating costs that would have been incurred to earn those revenues. Economic experts perform this analysis by considering: