Damaged Damages: Errors in Patent and False Advertising Litigation

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