Source: https://www.scribd.com/document/112021180/My-Remedies
Timestamp: 2019-04-23 12:15:49+00:00

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doctrine is sometimes called minimization of damages or the doctrine of Avoidable Consequences. ii. In contract law the non-breaching party should mitigate damages or risk a reduction in recovery for the breach. For example, assume that a property owner and home builder contract for the construction of a home in exchange for payment of $50,000. Assume further that the builder begins constructing the home but that the owner wrongfully cancels the contract before the builder has finished construction. If the builder sues to recover the unpaid portion of the contract price, a court may reduce the amount of money that the builder recovers if the builder does not try to avoid additional loss (i.e., sell the materials already purchased for the job.) iii. In Tort Law mitigation of damages refers to conduct by the plaintiff that, although not constituting a civil wrong itself, may reduce the plaintiff's recovery. For example, if the victim of an assault used provocative words prior to the assault, the words may mitigate the plaintiff's damages. Most states limit mitigation of damages for provocative words to a possible reduction in Punitive Damages, as opposed to Compensatory Damages. A tort victim also should act to mitigate damages subsequent to the wrongful acts of another. ] b. Specific performance: rarely available to enforce a service contract or a contract for the sale of goods because in each case, money damages would be an adequate remedy. SP is only granted if item is unique, otherwise go to substitution damages. c. Expectation Damages: if there is an enforceable contract, the measure of damages would be the difference between offerors offer and what it would cost offeree to mitigate the damage; the theory is to place the non-breaching party in as good a position as if the breaching party instead performed his promise.
d. Reliance Damages: If however liability isnt based on enforceable contract, but instead based on promissory estoppel, meaning there was a promise made that induced performance, that non-breaching party reasonably relied on and suffered detriment due to reliance, the measure of damages is that sum which is necessary to relieve the injustice. e. Restitution Damages: Where Defendant was unjustly enriched (law doesnt recognize transfer in ownership in this situation). Damages are based on only what D was unjustly enriched by, plus any interest (beginning from date D had notice of unjust enrichment).
a. Injunction- personal command from a court to litigants, ordering them to do or to refrain from doing some specific thing. b. Specific performance decree: ordering defendants to perform their contract (specialized for of injunction) c. Writ of mandamus: issued by a superior to compel a lower court or government officer to perform mandatory or purely ministerial duties correctly d. Writ of prohibition: a writ directing a subordinate to stop doing something the law prohibits e. Habeas corpus: a writ, or legal action, through which a prisoner can be released from unlawful detention (one lacking sufficient cause or evidence). ii. Declaratory Remedies: authoritatively resolve disputes about the parties rights, but they do not end in a personal command to defendant. In general, declaratory remedies prevent harm to the litigants by resolving uncertainty about their rights before either side has been harmed by erroneously relying on its own view of the matter. 3. Restitutionary remedies: designed to restore to plaintiff all that defendant has gained at plaintiffs expense. Look for unjust enrichment 4. Punitive remedies: designed to punish wrongdoers; often awarded where compensatory damages are deemed an inadequate remedy. Generally a matter of state law. General rule is that punitives cant be awarded in breach of contract, but if an independent tort is committed in a contractual setting, they can be awarded for a tort- usually reserved for when the defendant has displayed actual intent to cause harm, rather than in cases of mere negligence. 5. Ancillary remedies: designed in aid of other remedies. Costs and attorneys fees. Punishment for contempt is ancillary to coercive remedies. Also receivership when its necessary for court to manage assets pending litigation. III. Paying for Harm: Compensatory Damages- basic principle- restore P to rightful position Rightful position: compensatory damages should restore the P to the position hed have been in but for the particular wrong just suffered. - Focus on the particular wrong- dont award damages for other wrongs, such as previous injuries against the Navajos (due process) - Compensatories substitute money for what plaintiff lost. Works best for fungible goods that are easily replaced. Rationales for the rightful position: a. Corrective justice: correct wrong by undoing its effects. Wont allow D to escape with benefits or P to escape with windfall. Seeks to minimize violations b. Economic Incentives: focuses on giving D the right incentives to obtain an efficient number of violations. Thus, its okay to harm others as long as you take into account the harm inflicted. Damages should equal harm inflicted as closely as possible to ensure incentives are accurate so that society experiences a net gain. - The more precision a court requires for proving rightful position, the greater likelihood that P will not be able to prove damages and will thus go under-compensated Value as the measure of the rightful position Market value of the property, where ascertainable, is used as measure of Ps rightful position. Not replacement cost, nor repair costs in excess of value/ an objective standard assuming voluntary transaction in a liquid market. Fundamental principle: P is entitled to be made whole, but D is entitled to have P made whole in the least expensive way. Options are: fair market value, cost of repair, or replacement costs, whichever is less.
Measure market value at the time of loss: if markets work well, assumption is that FMV will equal the replacement cost - If damage has been done presently, the fact that repairs wont be done till sometime in the future doesnt compel court to award damages at reduced to present value because an injured party isnt required to perform repairs in order to recover for diminution in market value of its property. Exception from value as rightful measure 1. Where P has a unique use of the property that isnt valued in the market, P can get replacement cost, if P can show the unique value is real and not fabricated. - Sometimes theres value to owner thats not recoverable. Subjective value isnt relevant, FMV declines through depreciation much faster than worth to owner. - Value to owner may be less than FMV: for instance, a manufacturer of goods gets FMV, not its cost to manufacturer, in these cases the owner does better than expected, rather than worse. 2. When replacement cost allowed for component parts: if lost property can be characterized as an essential part of something bigger that cant be abandoned, then P can get replacement costs instead of just FMV. 3. Rule for special purpose property: where there is no ascertainable market value, such as for special use property, use reasonable cost of repair/replacement as measure of damages. Test is one of reasonableness. 4. Property that fluctuates in value: general rule is that you get value of property at the time of loss. But for crops, it is value at time of harvest - Note: you cant recover for profits you thought youd make from speculation. 5. Securities: fluctuating values problems arise- there are three main approaches: 1) A few states value loss at the time of wrong, but these decisions are old 2) A larger number of states resolve doubts against D by awarding the highest value between the time of the wrong and the time of trial, filing suit, or some similar date. 3) Fed Cts & NY: some other states give P the highest value between time of discovering the loss and a reasonable time thereafter to replace the securities. A. Expectancy & Reliance as measures of the rightful position: compensatories can be measured in three ways: 1) expectation; 2) reliance; 3) restitution. Which measure is appropriate depends on the situation, but the general rule is to award expectation damages. - P can elect between those 3, but reliance recoveries are usually in cases where neither side could prove expectancy. Reason: if K was profitable and P could prove expectancy, P would get costs (reliance) plus expected profit. If K was a loser and D could prove Ps expected loss, P would get costs less expected loss. P with a losing K can also opt for restitution of benefit conferred on D.
Net expectancy = profit Must be provable (not too speculative) & reliance on expectancy must be reasonable (if P knows its too good to be true, he cant hold D to bargain). Exceptions to compensating expectancies General K rule: P is entitled to the benefit of the bargain, though it may result in excessive expectancies. The larger the money and the benefit, the more suspicious courts are and more pressure there is to get around it Reasons for awarding excessive expectancies: prevents D from promising far more than they can actually deliver; shouldnt have to litigate whether you deserve expectation b. Torts: damages for torts are reliance not expectancy Smith v. Bolles: P was fraudulently induced into buying a security in a worthless mine that was promised to produce gold. Damages are limited to reliance because suit was for fraud (a tort), not breach of K. Distinction between torts and contract: - Many states respond to this by allowing recovery of expectancy in both fraud and warranty - UCC 2-721 allows UCC remedies for fraud. 2nd restatement of torts allows as fraud damages reliance plus benefit of the bargain of a business transaction (if proven with reasonable certainty) - Federal Courts adhere to Smith rule in securities fraud cases but have allowed expectancy in a few cases. The distinction is said to lie in the ability to determine expectancy w/ certainty. - In Tort, lost wages and lost profits are recoverable. This is different from contract expectancy because contract expectancy is itself a product of Ds promise. In tort cases, Ps expectancy is typically not derived from D - Can distinguish tort and contract in that they identify different parts of the transaction as wrongful. Contract law identifies the breach as the wrong. Tort/fraud law I.D.s the misrepresentation as the wrong (Where would P be but for the misrepresentation?) B. Consequential Damages General Damages [direct] are often characterized as those that flow directly and necessarily from a wrong, or that are a natural result Special damages are secondary or derivative losses arising from circumstances that are particular to the parties (i.e., consequential damages) - Alt. definition: special damages are ones that are reduced to a sum certain before trial- ex: medical expenses, lost wages (while P & S are general damages) - Rule: consequentials are allowed if they were foreseeable to D at the time of contract - They are everything that happens to P as a consequence of the initial loss. j. Incidentals: a subset of consequentials used by the UCC to refer to damages that naturally and unavoidably result from general damages, that no foresight is needed. a. Limits on consequentials: courts were traditionally hostile to consequentials because they were seen as speculative, uncertain, remote and avoidable by a diligent P. so the following rules limit them: 1. Duty to mitigate- P cant recover for damage that could reasonably have been avoided 2. Offsetting benefit rules: expenses saved are deducted from damage award. 3. Proximate cause: P cant recover for consequences that werent foreseeable by D at time of K - Note: D liable for unusual consequences if he had actual notice that his breach would cause them.
clause). One reason for this is that the enforcement of the term would in effect require an equitable order of specific performance. However, courts sitting in equity will seek to achieve a fair result and will not enforce a term that will lead to unjust enrichment of the enforcing party. In order for an LD clause to be upheld, two conditions must be met: 1. First, the amount of the damages identified must roughly approximate the damages likely to fall upon the party seeking the benefit of the term. 2. Second, the damages must be sufficiently uncertain at the time the K is made that such a clause will likely save both parties the future difficulty of estimating damages - LD clauses are invalid where over liquidated (unreasonably large) unenforceable on public policy grounds as a penalty. Where its provable that breach caused NO damages, you cant collect anything because actuals would be easy to prove - LD clauses are invalid where inapplicable: damage incurred is not type of damage contemplated by the LD clause (i.e., failure to deliver goods [not governed by the LD] vs. failure of goods to work correctly once installed [governed by LD]. - Bottom line: where courts see bad faith by D, LD clauses are honored. Where courts see good faith by D, the LD clauses are struck down for one reason or another. - Reality: although LD clauses are supposed to limit litigation, courts often require P to prove actuals anyway to police the LD clause, which is exactly what the LD clause is supposed to prevent. When you write in an LD clause you want to insert the language in there that this is the exclusive remedy In over-liquidated damages clauses cases, we ask if the clause is void as a penalty. In the under-liquidated (too low) damage clause cases, DONT ask if the clause is void; presumably P could ask for 13 million even if thats unconscionably low. The question instead is whether the liquidated damage clause is EXCLUSIVE. However, even a remedy expressly agreed to be exclusive is not exclusive if its unconscionable. However, if parties agreed to what compensation should be then the court will likely say lesser amount (actual damages or LDC) is right answer. Avoidable Consequences, Offsetting Benefits & Collateral Sources Rule: the test of proper cover under the UCC is whether at the time and place of breach buyer acted with good faith and in a reasonable manner. Its immaterial if in hindsight it later proves that P didnt pick the cheapest or most effective cover. Summary: D is not liable for the avoidable consequences of his wrongdoing, but D cant scrutinize Ps action at trial as long as they were reasonable even if they turn out not to have been cheapest for D. Damages where value cannot be measured in Dollars 1. Personal injury & death a. Per-diem damages- says how much damage P suffered is worth if you were to calculate it based on how much each day of P&S=$ - Ps prefer per diem arguments because it takes focus away from large theoretical numbers to small real numbers juror can understand - Ds say it detracts from big pic: jury focuses on little numbers rather than big numbers that matter. It allows jurors to rationalize large damages by making the big number seem small - Some JDs allow it with cautionary instructions to jury. Fed. Cir is split on issue and treats it as procedural and applies federal law in diversity cases. A rule of thumb is that P&S is 3 times out of pocket (special damages). b. Golden rule arguments: What would you want if you suffered Ps injuries?
1) The injunction against future violations of law seeks to maintain P in his rightful position - Seeks to prevent harm rather than compensate for harm already suffered. - An injunction is a court order, enforceable by sanctions for contempt of court, directing D to do or refrain from doing something - P must first make a threshold showing that a preventative order is necessary - This is the ripeness rule: before an injunction will issue, the threat of injury must be ripe. (Real danger present that the acts to be enjoined will occur). Marshall court holds that the scope of the past violation determines the scope of the remedy against future violations. Logic of the rule is to tailor injunction to the particular facts, confined to show prospective relief. What must be included in drafting order: if youre a P and you draft too vague, argument on appellate level will be order is too broad and vague. Describe acts in detail so when D does violate acts, you go into court and can argue exactly what they did against which acts. Moreover, you can show they were definitely on notice before they made the violation - Rule 65(d)(1) & obey the law injunctions (1) Contents. Every order granting an injunction and every restraining order must: (A) State reasons why its issued; (B) State its terms specifically; and (C) Describe in reasonable detail and not by referring to the complaint or other document- the act or acts restrained or required - This rule generally precludes injunctions that merely tell D to obey the law or that are written in terms as broad as the underlying legal standard. The larger injunctions do not individuate and so very often, they fail to effectively tell the D what he is supposed to do. Therefore, they typically arent permitted. Mootness: Jurisdictional concept- if theres no remaining case or controversy, the court must dismiss as there is no issue. Cessation: cessation of illegal conduct may make an injunction unnecessary because even though the case isnt jurisdictionally moot, the propensity is gone. In practice, theres no clear difference between these two (mootness=no propensity). Voluntary Cessation of wrongful acts Burden of proof- P has burden of proving propensity at beginning of a case, but D has the burden of proving that an injunction is no longer needed. Voluntary cessation is generally not enough on its own. D must show that subsequent events make it absolutely clear that the allegedly wrongful behavior couldnt reasonably be expect to recur. What happens when the injunction is withheld? In W.T. Grant, the case was dismissed without resolving merits- same effect as if case has been held moot, or unripe. Nothing has been decided and any renewed litigation will get a fresh start A claim for damages is NEVER moot, neither is a claim for restitution of Ds unjust gains. Its always possible to grant monetary relief for past events. 2. Preventing Lawful acts that might have Wrongful Consequences Nicholson v. Connecticut Half-way house, Inc: trial court enjoined as a nuisance before half way house on Ps block went into operation. However, test for nuisance is that the evidence must show that Ds proposed use of property is unreasonable. The present fear cant be based on pure supposition, as it was in this case. Thus it wouldnt be ripe Prophylactic rule: judicially crafted rule that overprotects a constitutional right, and gives more protection than such a right might abstractly seem to require on its fact. An example is the prophylactic rule of Miranda warnings to protect the fifth amendment right against selfincrimination. The exclusionary rule which restricts admissibility of evidence in court is also sometimes considered as one.
Non-compete clauses: when you sign a non-compete clause it may be enforced against you if its reasonable and in geographic location and in time because of argument that everyone has right to be employed. These are enforceable by means of injunction, generally through writ of prohibition or mandamus that orders D to do something - Pepsi-Cos inevitable disclosure theory (what past employee learned of trade secrets during tenure at company would enable his new company to achieve a substantial advantage by knowing how first company will price, distribute, etc.) Prevents employee from disclosing trade secrets/confidential information - Courts that recognize this generally construe it narrowly and require strong evidence. Some courts reject it altogether. - The source of law that authorizes prophylactic: substantive law creates these rules and thus the court will merely be enforcing the substantive rule the remedies controversy is squarely presented when the substantive e law doesnt create a prophylactic rule but the court issues a prophylactic injunction at the remedial stage, invoking remedial power to prohibit conduct that will not violate any substantive law. When the court enforces a common law rule, its often unclear whether it is enforcing a prophylactic substantive rule or entering a prophylactic remedy. The controversy is greatest when the relevant substantive law was enacted by a legislature or constitutional convention and the courts prophylactic remedy clearly goes beyond whats required by the substantive law. 3. Repairing Consequences of Past Wrongful Conduct In Forster v. Boss, it was possible to undue the consequences of the fraud and breach of K through a reparative injunction: an order to undo or repair the harm of a past violation of law. Prevents some or all of the harmful consequence. The difference between these and preventive is these are still preventive in that they seek to prevent some or all of the harmful consequences of the wrongful act; as opposed to seeking to prevent the act itself - For each element of harm the rightful position requires that court do one or the other but not both - Where it is possible to prevent harm by injunction the court can prevent it or let it happen and compensate for it. Can be no double recovery - For harm thats already happened and for future harm that cant be prevented, damages are only option Temporary and permanent damages: the law of nuisance distinguishes between permanent damages- awarded when the nuisance appears to be permanent and often measured by the value of Ps property before and after the creation of the nuisance from Temporary damages, where the future course of the nuisance is unpredictable and damages are measured by the harm the nuisance has inflicted up until the time of trial (i.e., damages for the delay- for three years without a permit wouldnt have been a double recovery in Forster.) a. Private Nuisance: The court reasons that imposing an injunction would have a disproportionate effect on the local industry and national economy. The public is best served by monetary damages to compensate those affected by the pollution. b. Public Nuisance: Industries in Tennessee are releasing particulate as a byproduct that is carried across state boarders.The court holds that because of the wide spread effect, and in light of state sovereignty, an injunction is warranted. Winston Research Corporation: appropriate injunctive relief period is that which competitors would require after public disclosure to develop a competitive machine (if trade secret was basis of comparable machine), damages wont be awarded if they didnt sell any of its machines because no profit to be disgorged, and if evidence as to future profits deemed highly speculative; two-year injunction here deprived D of any benefit it mightve gained from advantages and shielded P from any potential harm from Ds competition. (court couldve denied injunction and awarded damages instead).
c. In most cases, either replevin or injunction will restore the goods; in some cases, the goods are gone forever and neither remedy will restore them. Scope: replevin is of narrower scope than injunctions. Most important for present purposes, replevin lies only to recover goods; it does not lie to prevent a threatened destruction or dispossession Content of IIR: Pardee says damages are inadequate because P cant use money to replace trees. - In civil rights cases injunctions are the standard remedy, despite the IIR - Courts have not accepted the economic view that injunctions should be withheld when transaction costs are high. The rule that damages are inadequate unless P can go to the market and replace the very thing he has lost turns the economic advice upside down. If he cannot replace it, either he has the one only and its about to be destroyed, or defendant will be the only source of supply. Thus, monopoly is the laws most common reason for granting injunctions. b. Specific Performance of Contracts: a specific performance of injunction, an order to D to perform his contract. It typically requires affirmative conduct, but that doesnt make it unusual. Its availability is historically conditioned on a showing that legal remedies would be inadequate In Campbell, carrots are gone, fight is over money. Usually this makes issue moot because the money value of a right to specific performance is expectancy damages. Choice between two ways of giving expectancy (damages or SP) court granted SP and courts often do in Contracts for ordinary goods if SCARCITY, time constraints, or sheer size of K make cover difficult or impossible. Efficient Breach of Contract A voluntary breach of contract and payment of damages by a party who concludes that they would incur greater economic loss by performing under the K This non-tortious breach of K likely should be remedies by punitive damages because thatd discourage efficient breach and therefore efficient behavior which would be undesirable for society as whole. However, proponents of this economic view of law often speak of the need to encourage efficient breach and this suggests hostility to specific performance. Specific Performance where cover is possible: i.e., if replacement is possible but difficult; or if possible with similar goods but different in some way that matters to P. - A majority of cases grant specific relief, but a substantial minority do not. If equitable relief would impose a disproportionate burden on the D, thats a separate issue from whether Money damages are adequate- added consideration - Ds undue hardship must be great- every D will face some hardship- so it MUST be disproportionate to Ps gain in order to defeat SP claim. Essentially a reality check ruledont stop real estate development for a billboard. Van Wagner. Court says in Van Wagner, that physical uniqueness is not enough; measure of damages must be unreliable - Why: physical uniqueness means irreplaceability; usually it also means hard-to-measure damages. Here, damages may be measured by a formula keyed to traffic volume - Where Ps benefit from SP is modest compared to money cost of injunction to D, no injunction issued. Irreparable injury rule & Undue Hardship: the usual rule is that money is never an adequate remedy for loss of real estates or damage to real estate and is also routinely applied to sales and leases and assorted claims about real estate including encroachments to interference with easements to violations of condo restrictions. - Undue hardship to D is an independent reason for denying specific relief In Van Wagner, Ct applies both doctrines: (1) Ps legal remedy is adequate (2) SP would impose undue hardship on D.
2 Points: (1) A quasi-Ks (a.k.a. Ks implied in law) are not Ks & have nothing to do w/ enforcing agreements; - Quantum Meruit is a measure of contract damages when there is an enforceable K without a specific price term; it is a measure of restitution when there is no enforceable contract. (2) P is not really waiving tort; if so, would have nothing left to sue for. - Quasi-K includes a group of actions of which the most important were money had & rec'd (recovery of $$ paid), quantum meruit (value of services performed), & quantum valebant (value of goods delivered). Some cases are where D would have agreed to pay if he could (like doctor who treats unconscious patient), but in others the law implies a promise (cases like Neri, cases of benefit conferred by mistake, & cases where benefit conferred pursuant to non-binding K). Farash v. Sykes Datatronics, Inc.: A party may recover for the expenditures made in reliance on the promise of another, even though the promisor received no benefit from such expenditures (similar to the case where a party to an unprofitable contract waits for the other party to breach and then sues in quantum meruit for the benefit to the other party).
Rule: if you start performing and no contract materializes, you get your performance back. Contract No Contract Sue on K or sue in restitution Sue in restitution Benefit to D Sue on K Farash - split - court may imply No benefit to D benefit - In the Restatements view, a coherent account of restitution requires that restitution be based on unjust enrichment, and that account necessarily requires that there actually be enrichment. On that view, Farash can only be understood as a recovery of reliance based on promissory estoppel or on the otherwise unenforceable contract. - There has long been a doctrine in equity, applied mostly t oreal estate cases, that part performance takes the case out of the statute of frauds and makes the contract specifically enforceable. - Part performance shows detrimental reliance, but it also serves an evidentiary function: The performance must be unambiguously referable to the contract. To be convincing as evidence, the part performance must fenerally have been accepted by the party invoking the S.o.f. B. Recovering More than Plaintiff Lost 1. Disgorging the Profits of Conscious Wrongdoers o Olwell: Conflicts w/ rightful pos'n in that but for wrong, P would have gained nothing b/c egg washer would have remained gathering dust. o Economic theory would limit recovery in Olwell to compensatory dams. o Where transaction costs are high (as w/ bilateral monopoly), it is harder to explain rest'n. Where they are low, theories of corrective justice & economic efficiency may both be able to explain a wide range of rest'n cases. o Vincent v. Lake Erie Trans. Co.: D left ship tied to P's dock during storm, doing $500 damage. Using Olwell measure, P would recover the value of the ship. Avoiding greater harm is a common ground for creating privileges to do otherwise unlawful harm. o In Olwell, if we assume D would have rented a machine for $10/month ($360) if it hadn't had P's machine, then idea of how much D was unjustly enriched is much less. o One theme is that the measure of rest'n depends on D's culpability. Conscious wrongdoer is likely to be liab. for all profits, including those from D's more profitable use of P's property. A D acting negligently or illegally but in good faith or w/some justification not sufficient to completely exonerate him is likely to be liable only for P's losses.
Rstmt ban on recovery of profits has 2 limitations: (1) Does not apply to profits earned before date used for valuation; (2) Does not apply to claims other than conversion (e.g., where D had poss'n pursuant to a K later rescinded or held ineffective, or D is a dishonest fiduciary). Maier Brewing Co. v. Fleischmann Distilling Corp: Issue: is accounting of profits the appropriate remedy? Under statute, P only has to prove Ds sales, D must prove all elements of cost/deduction claimed. In assessing damages, court has discretion according to circumstances of the case - Two views as to basis for awarding accounting of profits: Majority: accounting of profits by Ds as method of shifting BOP as to damages Minority: more recent trend basis accounting on equitable concepts of restitution and UE These courts have required competition between the parties Court: does not necessarily follow that just because there is no direct competition, an accounting of profits can serve no reasonable end * Legislative intent: making infringement and piracy unprofitable What is loss to P? Reputation Restitution measure as an accounting of ill-gotten gains *Why not just injunction? Not enough of a deterrent, leads to serial infringer Where there is competition: accounting based on rationale of returning diverted profits No competition: accounting based on UE rationale 2. Measuring the Profits Hamil America, Inc v. GFI: This case well articulates the general approach established in Sheldon v. Metro-Goldwyn Pictures Corp, with respect to deducting overhead expenses. The principle established in Sheldon is that [o]verhead which does not assist in the production of the infringement should not be credited to the infringer; that which does, should be; it is a question of fact in all cases. In other words, while overhead items may support both illegitimate and infringing activities, it would be improper to deduct those overhead expenses from the infringers gross revenue if the activity did not contribute to the infringement as that would overstate expense and allow an infringer to retain ill-gotten revenue. The defendant must first establish a reasonable nexus between the category of overhead and the production or sale of the infringing product. The second step is for the defendant to offer a fair and acceptable formula for allocating a given portion of overhead to the particular infringing items in issue. While the reasonableness of the proffered allocation formula is a question of fact in each case, the consequences to the damage award are often such that the trial becomes a battle of experts on the issue of the allocation formula. As outlined in Hamil, some methods of allocating overhead to the infringement proffered have included the production cost of the infringing product as a percentage of the total production costs; the number of infringing products as a percentage of total products; and, although rejected before, some courts have accepted an allocation based upon the dollar sales from the infringing product as a percentage of total dollar sales. In cases where infringement has been found to be willful, courts give extra scrutiny to the categories of overhead expenses claimed by the infringer to ensure that each category is directly and validly connected to the sale and production of the infringing product.
Philippine Airlines Inc. vs. Hon. Adriano Savillo, Et. Al.
Bhagwandas Goverdhandas Kedia v Girdharilal Par Shot Tam Das and Co. and Ors.

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