Patents, trademarks, copyrights, trade secrets, false designation of origin, unfair trade practices, digital millennium copyright act violations, trademark dilution, domain name disputes, cybersquatting and related insurance issues (including coverage as well as malpractice) head the list of topics encompassed by original course material for Florida Bar Intellectual Property (IP) Certification. While counsel for the parties to the dispute are knowledgeable about the substantive law as well as the computation of potential damage awards, the benefit of an IP specialist as your mediator cannot be overemphasized.
Consider patents as a starting point. The successful patent owner is entitled to damages suffered but in no event less than a reasonable royalty. The damages may be lost profits (but there is a four-part test to establish entitlement to lost profits) and price erosion may be a component of lost profits. While the reasonable royalty is the floor, or minimum, there is a thirteen part test for determination of a reasonable royalty. The historic rule of thumb, 25% of the infringer’s profits, has been rejected by the appellate court. But are the infringer’s profits still relevant to a ‘reasonable royalty’ case? There are additional damages for infringement of a design patent. There is the potential for enhanced damages for willful infringement but is an opinion of counsel necessary to avoid willful infringement? Pre-judgment interest is the norm, not the exception.
Compare patent damages to copyright damages. The successful copyright owner is entitled to its actual damages plus the infringer’s profits (without double counting). Determining actual copyright damages in the form of a royalty overlaps some, but not all, of the thirteen factors from a patent royalty consideration. Determining actual damages in the form of lost profits does not follow the four part test for lost profits in a patent case. And, in a copyright case, the burden of proving deductible expenses shifts to the infringer not the copyright owner.
Add to this the potential award of reasonable attorney fees and injunctive relief, both part of the Copyright Act. But the attorney fee award can be in favor of a successful defendant.
Then there is an exception on attorney fee awards depending on the timing of the registration of the copyright relative to the commencement of the infringement. But this exception only works against the copyright owner and not against a successful defendant.
But wait, there are at least two other considerations involving copyrights. The first is statutory damages, the copyright owner’s entitlement to elect statutory damages again depending on the timing of the registration of the copyright relative to the commencement of the infringement, and second, the Digital Millennium Copyright Act (DMCA). Under the DMCA, registration is not required prior to the infringement therefore the successful copyright owner will be entitled to elect actual or statutory damages and will also be entitled to reasonable attorney fees.
As you catch your breath from these substantially non-overlapping considerations, the ‘damages’ provisions for trademark infringement do not fully overlap either patent damages or copyright damages. Remember, trademark infringement claims may be based on a federal registration, a state registration, both, or neither. The damages concept appears to overlap patents or copyrights, because the standard is “defendant’s profits and any damages sustained by the trademark owner”. Does this allow what might appear to be a double recovery? But wait! The Court may increase the award (up to three-times the profits/damages) if willfulness appears to exist, and may increase or decrease an award that is either inadequate or excessive. Confused yet? Attorney fees are only available in exceptional cases, but they are available to the prevailing party, not just the trademark owner.
But the trademark damages analysis is far more complex – infringement by using a counterfeit mark allows the trademark owner to elect statutory damages that may be as high as $200,000 and that may be increased ten-fold for willful counterfeit infringement. And domain name infringement has different statutory damage minimums and maximums that the trademark owner may elect.
So when your clients seek to settle an IP dispute, a comprehensive understanding of the damages analysis is a must for effective mediation.