CASE STUDY 19: Texahoma Highway Construction

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Calculate compensatory damages in patent infringement cases for lost profits and lost sales.
Develop lost profit from margin erosion and lost profits from convoyed sales. Calculate interest on all lost profits.
Texahoma is a fast-growing state in the American Southwest. The fast growth makes it necessary for the Texahoma State Department of Highways (DOH) to construct new highways and widen existing highways. The DOH carries out highway construction by means of competitive bidding by qualified highway construction companies.
One of the qualified highway construction companies is Salsa Inc. Salsa has developed and registered a patent for containing noise caused by highway construction. This noise is very loud, and DOH has to pay compensation to homeowners and businesses located near highway construction projects. The Salsa patent effectively contains construction noise, and significantly lowers the amount of compensation paid by DOH to the home-owners and businesses dis- turbed by the din of highway construction. The Salsa patent is for a containing wall that is built on both sides of a highway under construction. The containing wall is 16 feet high, and consists of reinforced concrete posts that are grooved to accept concrete panels with matching tongues.
The patent covers the posts and panels as a product, and also their method of manufacture. The wall is permanent, and remains to reduce traffic noise after highway construction is completed. The noise wall patent was issued in year 1.
Both the posts and the panels are manufactured onsite from molds into which are poured liquid concrete, reinforced by steel rebar. The posts are 24 feet long, with 8 feet inserted and concreted into post holes, and 16 feet protruding above ground. The posts are on 16 foot centers, and support the 16 by 16 foot panels. These Salsa walls are known as noise walls.
Since noise walls have proven very effective, DOH highway construction specifications since year 2 have included sound muffling standards that noise walls can meet, but which no competing product has been able to satisfy. When DOH introduced the sound muffling standards on January 1 of year 2, strong protests came from Salsa’s highway construction competitors, who feared that they could no longer compete for contracts against Salsa, and would be forced out of business.
DOH responded by pointing out that highway contractors still had several options. They could develop new non-infringing noise walls that met the stan- dards, or they could arrange for Salsa to be their subcontractor for the noise wall portion of highway contracts, or they could purchase licenses from Salsa to use the Salsa patent in exchange for paying an agreed royalty.

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