The Value of Litigation Support in Intellectual Property Disputes

Richard Warner

Editor’s note: Ryan Nguyen, CPA, Senior Forensic Manager, and Gina Lara, MBA, CFP ®, Tax and Forensic Accounting Manager, recently wrote an article for the Orange County Business Journal in the “Intellectual Property” special supplement.  The article is reprinted below, which we think will be of use to our clients and business contacts.  Please let us know of your feedback!

In litigation support, win or lose isn’t as important as by how much. This point is becoming especially significant in intellectual property disputes, where the median damages award in patent litigation increased more than 65% over prior year to $10.2 million in 2017.  Here are some examples of what we have seen.

Trademark Infringement

Recently, we were engaged by Defendant’s counsel to provide calculations related to a company that imported and sold purportedly “knock-off” designer apparel.  Plaintiff sued the company in Federal Court alleging copyright, trademark, and trade dress infringement.  Defendant was found liable for damages arising from three years of sales activity.  Since the company maintained poor accounting records, Smith Dickson’s work involved reconstructing records from handwritten notes, testing the accuracy of the information, identifying sales data and deductible incremental costs, and determining the unjust enrichment of Defendant.  Our testifying expert’s opinion of the economic damages ultimately reduced the company’s damage payments by over $14 million.

On another matter, we were hired to provide forensic analysis for a client who sold and repaired electronic equipment for the quick-service restaurant industry.  Our client was sued in Federal Court by the largest industry manufacturer alleging trademark infringement, trade dress infringement, and unfair competition for falsely representing themselves as being affiliated with Plaintiff.  Defendant was found guilty, but our work was critical in rebutting Plaintiff’s expert and minimizing, by several million dollars, the net profits identified by Plaintiff as disgorged by Defendant.

In an automotive industry lawsuit, we were asked to handle a case where a client registered a domain name similar to Plaintiff’s.  The domain name allegedly redirected traffic to our client’s website for several months.  Plaintiff sued for cybersquatting, trademark infringement, and unfair competition.  Through analysis of the client’s web traffic and related revenues, we proved there was no discernible increase in page visits and revenues; thus, showing our client was not unjustly enriched.

Trade Secret Violations

In a theft of trade secrets case, we were retained by Plaintiff, the nation’s second largest real estate industry conglomerate, to assess economic damages arising from a former employee who took a customer list and other confidential information with him to his new employer. Our computations of Plaintiff’s profits from these customers before and after the incident revealed that our client suffered over $1 million in lost profits.

Licensing Disputes

In a recent licensing dispute, we were engaged by Plaintiff who is one of the world’s largest providers of semiconductor and systems solutions for the aerospace and defense industry. The client sued for unpaid royalties from a patented photodiode they licensed to the Defendant.  Smith Dickson’s expert testified that Defendant’s financial records exposed they were unjustly enriched by $5.4 million. The jury awarded our client this damages amount plus interest.

Building the Best Team

Win or lose, choosing the right CPAs for litigation support can be a multi-million-dollar decision. Smith Dickson, an Accountancy Corporation, has decades of litigation support experience in matters involving intellectual property, including trademark, trade secrets, licensing, patent and copyright disputes. Our work includes analyzing financial information, evaluating claims, calculating damages, preparing expert reports, and rendering expert testimony.

Ryan Nguyen, CPA, and Gina Lara, MBA, CFP ® are part of the litigation support services team at Smith Dickson, An Accountancy Corporation, based in Irvine. Ph. 949.553.1020, www.smithdickson.com.