How Trademark Surveys Measure Patent Infringement and Damages

This post explores the use of surveys to assess damages in patent litigation, describing the reasons for their use, the issues they measure, and some of the ways in which surveys can assess damages in patent litigation.

Why Surveys Are Used To Assess Damages in Patent Litigation

Surveys are increasingly referenced by courts as a means to support damage assessment in patent infringement matters. Historically, there have been three ways to assess damages. Using definitions from Compensatory Damages In Patent Infringement Cases: A Handbook for Federal District Court Judges, the three methods are based on:

1. Lost profits: The profits that would have been made by the patentee if the infringement had not occurred.
2. Established Royalty: Royalties based on the patentee’ established or regular royalty rates.
3. Reasonable Royalty: Although there are a variety of approaches to reasonable royalties, one approach is what a willing licensee would have paid, and what a willing licensor would have accepted, if the license was negotiated just before the infringement started. The negotiation, although hypothetical, considers factors known as the Georgia-Pacific factors.

Surveys may be helpful in patent infringement matters in those cases where there is no history upon which to calculate established or regular royalty rates. In such cases, surveys can measure customer attitude and behaviors in areas such as the following:

1. Consumer buying behavior, including the criteria that are considered in the buying process.
2. Commercial success and sales.
3. The ways that products or specific features are used, as well as the manner of their use.
4. The communications that customers receive in the marketplace.
5. Customer attitudes and impressions in the marketplace.

Surveys can also be helpful in patent infringement matters because they can directly measure issues relevant to the Georgia-Pacific factors. As described in an article by Christopher Larus and Bryan Mechell, “Using Consumer Surveys to Prove Patent Infringement Damages at Trial”, surveys may help measure factors such as the following:

• The Sixth Factor: The effect of selling the patented item on sales of the licensee’s other products, and the value of the invention to the licensor on sales of other non-patented items.
• The Eighth Factor: The profitability, popularity, and/or commercial success of products made under the patent.
• The Tenth Factor: The character of the invention in the marketplace, and benefits of the invention to those who use it.
• The Eleventh Factor: The extent to which the accused infringer used the invention and the value of the use.
• The Thirteenth Factor: The portion of profits attributable to the invention as opposed to other non-patented elements.

Surveys in patent infringement matters allow parties to measure the above items directly, by simply asking customers. They are particularly helpful because patents often involve business-to-business markets, where there may be very little data otherwise available on customer behaviors, marketplace sales, and other relevant issues.

Where Have Surveys Helped Assess Damages in Patent Infringement Matters?

Recent matters that have used surveys to measure customer actions, impressions, and attitudes include the following:

• Apple v. Samsung: As I’ve described in another post, surveys were presented in this matter to measure likelihood of confusion and secondary meaning. In addition, a conjoint study was presented to measure the value that customers attribute to certain product features.
• Applera v. MJ Research: A survey was used in this patent infringement matter to measure how customers used certain machines, both in terms of the techniques they used and the frequency of performing those techniques.
• i4i Limited Partnership v. Microsoft Corp: A survey of customers in this patent infringement matter showed that only about 2% of customers who own the software at the heart of the case used the patented feature under dispute. The survey results had a significant impact on damages calculations.

While the cases above show the ways that surveys can be used in patent infringement matters, other cases, such as Fractus v. Samsung, show that surveys in patent infringement matters (as other litigation surveys) are held to strict standards. Among other criteria, they must focus on the technology involved in the matter.

What Types of Survey Questions Can Be Used to Assess Damages in Patent Infringement Matters?

The surveys used in patent infringement matters can employ a variety of formats to gather data from respondents. To demonstrate the various formats, let’s assume that a hypothetical and fictional patent infringement matter focuses on a patented component used in a laptop computer. Let’s further assume that the survey is intended to measure marketplace practices for damages assessment.

The types of survey questions used in this kind of matter might include the following:

1. Ratings: Ratings questions ask respondents to use a numerical scale to indicate their response to a particular question. In our hypothetical case, the question might ask respondents to rate the items important to them in their decision to purchase the laptop computer, using a 1 to 5 scale from “not at all important” to “very important”. Although ratings are easy for respondents to provide, respondents often prefer more of most features rather than less. A ratings scale, if not properly constructed, can end up with many different attributes with high ratings.
2. Rankings: Rankings questions solve one of the problems with ratings by asking respondents to rank the attributes, perhaps from greatest interest to lowest interest, or perhaps picking the top attributes from a larger list. The rankings force some attributes to rise to the top, and others to the bottom.
3. Choice-Based Methods: Choice-based methods present a series of choices to consumers, and ask them to indicate which features or which combinations of features are preferred, and which are less preferred. In other words, choice-based methods force consumers to make choices. Two of the better known methods are Conjoint and MaxDiff. These methods can provide more sophisticated measurements of preference for certain features, and can indicate how much consumers would be willing to pay for certain features. They are, however, complex and must be designed and explained properly.

What Does the Future Hold for Surveys in Patent Infringement Matters?

In my opinion, we are likely to see more surveys in patent infringement matters for a few reasons. First, courts seem to be moving away from the “Entire Market Value Rule”, which assesses damages based on the value of the entire product rather than the specific patents involved in the matter. Surveys provide evidence that, used appropriately, may help match awards and infringement.

A second and closely related reason is that surveys can help validate some of the assumptions behind damage assessments conducted by economists. In recent cases, such as Lucent Technologies v Gateway, Cornell University v. Hewlett-Packard, or LaserDynamics v. Quanta Computer, courts have asked experts to link damage calculations to consumer demand; surveys provide a way to create this linkage.

A third reason is the comparison with trademark cases, particularly those involving issues such as false advertising, likelihood of confusion, or secondary meaning. In recent decades, courts have increasingly turned to surveys as a (relatively) efficient way to develop quantitative evidence gathered scientifically from consumers. Given the high stakes in damage assessment in many patent litigation cases, it is natural to expect that the demand for surveys will grow over time in a similar manner.