KrAFt AnALYtIcS
defendant’s profits
• Incremental costs: As discussed in the actual
damages section, variable costs are incremental,
Under the premise that a defendant was
but certain semi-variable or ‘step’ costs may also
“ In determInInG A
unjustly enriched due to infringement or
be incremental, depending on volume levels.
reASOnAbLe rOYALtY,
misappropriation, a plaintiff may seek the
defendant’s wrongfully gained profits as a remedy
• Direct assistance costs: This view of costs
cOnSIderAtIOnS
in trademark, copyright and trade secret matters.
generally considers variable costs and overhead
mAY IncLUde:
This method of recovery is also available in two
costs related directly to the product, product
eStAbLISHed rOYALtY
narrow patent-related settings: infringement
group or business unit relevant to the analysis.
cases involving design patents and inventorship
rAteS; mArKet
Direct overhead costs are typically deducted
cases where a plaintiff was wrongfully excluded
using an allocation method. With software,
rOYALtY rAteS; tHe as an inventor.
direct assistance costs might include variable
prOFItAbILItY OF tHe
costs plus an allocation of costs for sales,
When the defendant’s profits are being
bUSIneSS; tHe nAtUre
marketing, application development and
sought as damages, the plaintiff ’s expert may
support functions related to the software in
OF tHe prOdUct Or
have responsibility for identifying relevant
question
prOtected FeAtUre;
revenues, while the defendant’s expert may
have responsibility for identifying related costs
• Fully allocated costs: This approach considers
And tHe LIKeLY nAtUre
and apportionment methods. Of course, the costs on a fully allocated or ‘fully absorbed’
OF A HYpOtHetIcAL analysis of each expert is subject to scrutiny and basis. Therefore, in addition to the variable
LIcence, tO nAme
disagreement by the opposing expert. and direct overhead expenses considered
A FeW.”
under direct assistance costs, this approach
As discussed in the previous section, lost
may also consider indirect overheads,
‘incremental’ operating profits are a broadly
such as corporate office expenses, on an
accepted measure of lost profits. However, when
allocated basis.
calculating the defendant’s gained profits, there is
often greater latitude in determining deductible To summarise, variable costs, semi-variable costs,
costs, which may be based upon: direct overheads and indirect overheads may all
28 World Intellectual property review September/October 2009 www.worldipreview.com
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