Damaged Damages: Errors in Patent and False Advertising Litigation

57 Pages Posted: 24 Aug 2019 Last revised: 16 Feb 2020

See all articles by Suneal Bedi

Suneal Bedi

Indiana University - Kelley School of Business

David Reibstein

University of Pennsylvania - Marketing Department

Date Written: August 21, 2019

Abstract

Patent and false advertising damage awards are in disarray. Courts are imposing astronomically inflated awards that overcompensate companies for the infringement or deceptive practices. The culprit is the Choice Based Conjoint method—a survey based statistical method which seeks to estimate how much consumers value individual features of a product. Originally coming from marketing scholarship, this methodology has become the prevailing method federal courts use to calculate damages in these cases. And it is being consistently misused.

This article is the first to highlight this misapplication and use empirical methodology to explain why the method leads to exaggerated damage awards. The problem is that courts—when deploying this methodology—mistakenly only include patented (false advertised) features in the survey design and neglect to add other key non-patented features. This creates the impression that products are only made up of their patented elements, which naturally overestimates the value of these elements. Doctrinally, patent damages seek to compensate parties only for the value of the patented feature as opposed to the full product. This article realigns this statistical method so that all relevant features are included within the survey model and courts are better equipped to impose more precise awards that actually compensate for the infringement and false advertisement.

Keywords: patent, class action, consumer protection, marketing, empirical, law, false advertising, damages

Suggested Citation

Bedi, Suneal and Reibstein, David, Damaged Damages: Errors in Patent and False Advertising Litigation (August 21, 2019). Kelley School of Business Research Paper No. 19-40, Available at SSRN: https://ssrn.com/abstract=3440817 or http://dx.doi.org/10.2139/ssrn.3440817

Suneal Bedi (Contact Author)

Indiana University - Kelley School of Business ( email )

1309 East Tenth Street
Indianapolis, IN 47405-1701
United States

David Reibstein

University of Pennsylvania - Marketing Department

700 Jon M. Huntsman Hall
3730 Walnut Street
Philadelphia, PA 19104-6340
United States

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