Valuation & Litigation Advisory Blog

This month's issue of Valuation & Litigation Advisory Insights includes the following articles:

• When it's time to calculate damages: How to ensure a reasonable discount rate
• Patent infringement damages: Federal Circuit gives thumbs down to "25% rule"
• Start early, end strong: Tax planning in litigation

When it's time to calculate damages: How to ensure a reasonable discount rate

Consider this scenario: A company goes to court to recover the lost profits it likely would have earned in the future had an employee not divulged the secrets to a competitor. But what's the best way to determine those lost profits? As this article explains, a skillful financial expert can discount future damages to present value, providing the ammunition businesses need to receive a just award. It discusses the impact that discounting can have on damages awards, what affects the discount rate, and two approaches to calculating lost profits damages.

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Patent infringement damages: Federal Circuit gives thumbs down to "25% rule" 

In a recent case involving infringement of an antipiracy software registration system, the Federal Circuit affirmed the district court’s grant of a new damages trial because the award was “fundamentally tainted by the use of a legally inadequate methodology.” This article explains the court’s repudiation of the oft-used “25% rule of thumb.”

Start early, end strong: Tax planning in litigation

Tax planning at the beginning of a case can have a significant impact on the eventual financial outcome. There's a substantial difference between an award or settlement that's subject to income tax and one that's not. Most cases involve a combination of taxable and nontaxable claims; the ultimate tax treatment of an award or settlement depends on how it's allocated among those claims. For example, some damages are excluded from income - and, even for those that aren't, the distinction between wage and nonwage damages is important. It pays to give some thought to tax issues early so as to secure the most tax-advantageous result for a client.

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Prior issues are available in the E-Newsletter Archive of our Valuation & Litigation Advisory Services Resource Center. If you would like to subscribe to this free, monthly, business valuation and litigation support e-newsletter, send an email to info@skodaminotti.com.

If you have any questions about any of these articles, post a comment below or please contact our Valuation & Litigation Advisory Services Group at 440-449-6800.