The price erosion theory in patent law refers to the concept of calculating damages based on the difference between the actual costs of goods and the potential price those goods could have achieved without competition from infringers. Essentially, it seeks to determine how much profit a patent holder could have made if their product had not faced competition from unauthorized sellers.
This theory is primarily used in patent infringement cases within civil law. It helps patent holders demonstrate the financial impact of infringement on their business. To effectively utilize this theory, the patent holder must reconstruct the market to illustrate what the pricing landscape would look like without the infringing products. Users can manage certain aspects of this process using legal templates available through US Legal Forms, which can assist in preparing necessary documentation.
Here are a couple of examples of abatement:
(Hypothetical example) A company holds a patent for a unique type of smartphone case. Due to infringement by a competitor, the company is forced to lower its prices. By applying the price erosion theory, the company can argue that, without the competitor's presence, it could have sold the cases for twenty percent more, thus calculating the lost profits based on the reduced sales volume at the lower price.
| Term | Definition | Differences |
|---|---|---|
| Lost Profits | Compensation for profits that a business could have earned if not for the infringement. | Price erosion focuses specifically on price differences due to competition, while lost profits encompasses overall profit loss. |
| Market Reconstruction | The process of analyzing a market to determine potential outcomes without infringement. | Market reconstruction is a method used within the price erosion theory to establish "but for" scenarios. |
If you believe you have experienced price erosion due to patent infringement, consider the following steps:
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It is a method used to calculate damages in patent law by assessing the difference between actual costs and potential prices without infringement.
