Methodologies for Assigning Damages in Copyright Litigation Involving Value-destroying Copying

We provide detailed and explicit guidance for the calculation of damages when copyright infringements damage the reputation of the copyright holder. Several of our examples come from design and fashion, because this is an area where damage to the copyright-holder’s reputation represents a great source of economic loss from copyright infringement.

The calculation of economic loss from reputational damage is complicated by the fact that the harm does not come from substitution; harm is not related to the number of copies that were sold or the value of the copies that were sold. Rather, the harm comes from avoidance; when the copyright holder’s reputation is damaged, potential customers may avoid purchasing its products. Moreover, the harm from reputational damage is widespread; the loss is not restricted to the specific products that were copied, but may be pervasive and reputational damage may result in reduced sales across the copyright holder’s entire product portfolio. There is evidence of what we term value-destroying copying, when the direct gain to the infringer is less than the harm caused to the creator of the original IP, and evidence that the courts wrestle with properly assigning damages in these usual circumstances.

We provide explicit guidance for valuing harm in the presence of value-destroying copying, where traditional metrics may produce estimates that are orders of magnitude too low.