Thinking Economically About Commercial Success Commercial success as a secondary consideration of obviousness is often misunderstood and misapplied.
| Author | R. DeForest McDuff - Ryan C. Andrews - Matt D. Brundage |
| Position | R. DeForest McDuff, PhD, is a partner at Insight Economics; he is an expert in applied business economics and provides expert witness testimony on intellectual property and other areas. Ryan C. Andrews is a former senior associate at Intensity; he has extensive experience evaluating lost profits, reasonable royalties, commercial success, and... |
| Pages | 39-42 |
Published in Landslide® magazine, Volume 9, Number 4, a publication of the ABA Section of Intellectual Property Law (ABA-IPL), ©2017 by the American Bar Association. Reproduced with permission. All rights reserved. This
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Thinking
Economically
about
Commercial
Success
By R. DeForest McDuff,
Ryan C. Andrews, and Matt D. Brundage
E
conomic experts frequently evaluate commercial success as a secondary consideration
of the obviousness of a patented invention.1 While other common economic inquiries
are often based on widely recognized methodologies (e.g., the Panduit factors for lost
prots, the Georgia-Pacic factors for reasonable royalties), experts often base analysis of com-
mercial success on a layperson’s notion of “success,” without appreciation of its purpose. For
example, an expert may conclude that a product is a commercial success because sales and prots
are “large” or “substantial,” appealing to preconceived notions of success in other contexts (“sales
of $100 million a year? ... sounds like a success to me!”).
We should be wary of such simplistic approaches to evaluating commercial success,
which often fail to ask a fundamental economic question: success compared to what? Just
as one individual’s success in life may differ from another’s, commercial success for one
product in a particular context may differ from commercial success for another product in
another context. Improper analysis of commercial success can be particularly problematic in
pharmaceuticals, for example, which often require billions of dollars in sales for economic
incentives to have existed for others to bring the product to market sooner. Evaluations of
commercial success without proper context (or, for some experts, without any context at all)
are unhelpful to the role of commercial success in patent litigation.
Recent case law has claried the purpose of commercial success and what it is intended to
demonstrate. For example, the Federal Circuit stated in Merck v. Teva that commercial suc-
cess is relevant “because the law presumes an idea would successfully have been brought to
market sooner, in response to market forces, had the idea been obvious to persons skilled in
the art.”2 This makes sense, from an economic perspective, because other parties would have
economic incentives to commercialize obvious inventions if there were economic incentives
to do so. However, based on our experience evaluating dozens of expert reports on com-
mercial success, all too often experts fail to provide relevant context and/or tie any alleged
success back to the fundamental purpose outlined by the courts.
This article summarizes challenges and shortcomings with common approaches to evalu-
ating commercial success, and offers guidance for providing appropriate economic analysis.
We draw upon numerous expert evaluations of commercial success, with a focus in phar-
maceuticals and electronics, to provide practical insights on commercial success for both
plaintiffs and defendants.
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