Financial Compensation – Damages or Account of Profits?
March 15, 2011
Intellectual property (“IP”) assets provide protection from the effect of competition.
Depending on the type of asset it can provide either the ability to differentiate the IP owner’s products from its competitors, cost savings that are not available to competitors, or both.
Ultimately they are seeking an incremental improvement in profitability.
When companies invest in IP assets they are seeking to benefit from these advantages. Ultimately they are seeking an incremental improvement in profitability. This is shown by the fact that the project appraisal methods that companies use to assess their investments are incremental. For example, net present value calculations focus on the future incremental cash flows of a project (such as an investment in new technology) rather than accounting measures of profits.
When a company’s IP asset is infringed, the infringer deprives the IP owner of those incremental benefits and/or takes the incremental benefits for themselves. The infringer may also diminish the size of the total incremental benefit available from the IP (for example, by increasing competition in the provision of the IP‐protected product).