Brattle economists Lisa Cameron and Jeremy Verlinda and Academic Advisors Greg Allenby and Peter Rossi have recently contributed the article “Calculating Reasonable Royalty Damages Using Conjoint Analysis” to the American Intellectual Property Law Association Quarterly Journal.
The use of conjoint analysis has become increasingly popular in patent disputes. Because the method involves a number of highly technical analyses and calculations, the authors seek to provide a user-friendly primer on how to use this approach in the determination of reasonable royalty damages. In the article, the authors review the economic framework behind the calculation of reasonable royalty damages and explain how to implement two key methods of computing these damages—referred to as the Market Share Method (“MSM”) and the Equilibrium Profit Method (“EPM”).
These two methods are particularly useful because a recent court decision has been seen by some observers as an obstacle to the use of conjoint surveys in patent damages calculations. In the Visteon case, the court disallowed the conjoint expert’s damages calculation because it only measured consumer valuations of infringing features, not defendants’ profits from them. Yet both methods the authors outline sidestep Visteon’s criticisms, since they use conjoint survey data to determine how much the patented features would have increased the defendant’s profits. MSM and EPM thus remain powerful methods of leveraging conjoint surveys to compute patent infringement damages.
The full article can be downloaded below.