{ "key_pair_value_system": true, "answer_rating_count": "", "question_feedback_html": { "html_star": "", "html_star_feedback": "" }, "answer_average_rating_value": "", "answer_date_js": "2024-06-07T05:02:44-04:00", "answer_date": "2024-06-07 05:02:44", "is_docs_available": "", "is_excel_available": "", "is_pdf_available": "", "count_file_available": 0, "main_page": "student_question_view", "question_id": "2404963", "url": "\/study-help\/questions\/should-there-be-damages-for-lost-profits-on-convoyed-sales-2404963", "question_creation_date_js": "2024-06-07T05:02:44-04:00", "question_creation_date": "Jun 07, 2024 05:02 AM", "meta_title": "[Solved] Should there be damages for lost profits | SolutionInn", "meta_description": "Answer of - Should there be damages for lost profits on convoyed sales in this case? In your post, explain your answer clearly and | SolutionInn", "meta_keywords": "damages,lost,profits,convoyed,sales,case,post,answer,completely,reasoning,support,points", "question_title_h1": "Should there be damages for lost profits on convoyed sales in this case? In your post, explain your answer clearly and completely, with reasoning to", "question_title": "Should there be damages for lost profits on convoyed sales in this", "question_title_for_js_snippet": "Should there be damages for lost profits on convoyed sales in this case In your post, explain your answer clearly and completely, with reasoning to support your points (This is a complex legal issue, so apply critical thinking as best as possible ) TEXAHOMA HIGHWAY CONSTRUCTION CASELes Livingstone Texahoma is a fast growing state in the American Southwest The fast growth makes itnecessary for the Texahoma State Department of Highways ( DOM ) to construct new highways and widen existing highways The DOH carries out highway construction bymeans of competitive bidding by qualified highway construction companies One of the qualified highway construction companies is Salsa Inc Salsa has developedand 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 locatednear highway construction projects The Salsa patent effectively contains constructionnoise , and significantly lowers the amount of compensation paid by DOHL to the home owners and businesses disturbed by the din of highway construction The Salsa patent isfor a containing wall that is built on both sides of a highway under construction Thecontaining 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 ofmanufacture The wall is permanent , and remains to reduce traffic noise after highwayconstruction is completed The noise wall patent was issued in year Both the posts and the panels are manufactured onsite from molds into which are pouredliquid concrete , reinforced by steel rebar The posts are 24 feet long , with 8 feet insertedand concreted into post holes , and 16 feet protruding above ground The posts are on 16foot centers , and support the 16 by 16 foot panels These Salsa walls are known asnoise walls Since noise walls have proven very effective , DOH highway construction specifications since year have included sound muffling standards that noise walls can meet , but whichno competing product has been able to satisfy When Doll introduced the soundmuffling standards on January 1 of year 2, strong protests came from Salsa's highwayconstruction competitors , who feared that they could no longer compete for contractsagainst Salsa , and would be forced out of business DOH responded by pointing out that highway contractors still had several options They could develop new noninfringing noisewalls that met the standards , or they couldarrange for Salsa to be their subcontractor for the noisewall portion of highwaycontracts , or they could purchase licenses from Salsa to use the Salsa patent in exchangefor paying an agreed royalty This satisfied some contractors , but others were resentful , The author is MBA Program Director at University of Maryland University College 234 and resolved not to be pushed Into usmg Salsa as a subcontractor or hcensor, or to spendmoney,r on R D to invent new methods to muf e construction noise Starting on June 30, yatr 3, some contractors won highWay matracts by infringing theSalsa patent Each time, Salsa sent lawyer's letters to the in 'ingers to cease and desist But none of these letters lard any effect In order to protect its patent rights, Salsa wascompelled to sue the in 'ingers Salsa sued the infringers for lost pro ts 'om lost sales ofnoisewall due to infringement Lost sales are sales made by in 'ingers, but which Salsa as the patent owner should havemade Salsa's lawsuit ling also pointed out that the in 'ingers had illegally sold noisewall at a competitive price, which was lower than the price that Salsa would havecommanded as the sole supplier of noisewall This price reduction is known by the term price erosion 'I The lawsuit was led on December Ill year 5 and the in 'ingements ceased by December31, ofyear 5 After the defendants led their response, there were the usual writteninterrogatories, depositions of fact and expert witnesses and pretrial motions The trialwas scheduled tobeginonlune l,year6andwasexpectedtoendoolune30,year6 Therefore damages awarded by the court would be payable on June 30, year 6 SoSalsa would not recover lost pro ts for years 3 through 5 until June 30 year 6 You have been asked by Salsa's lawyers to prepare its damage study to be led with thecourt For this engagement you have gathered the following inforrriatiori Salsa Income Statements All ii in '000 err texee care foot and manages Gross Cost Gross Pro t 506ml Pretax Year Revenues of Sales Pro t of Sales Brim Pro t4 $2l l93 $13 38 $2 306 13 2 $1 21 $1 589 3 $15,323 $14,536 $1,292 3 1 $1,096 $196 2 $14,421 $12,830 $1 591 11 0 $1,200 $391 1 $12,056 $10,928 $1,128 9 4 $1,031 $4 0 $9,206 $0,593 $1 1 13 1 1 5 $1 25 4133 1 $14,336 $13 13 $1 249 3 9 $1,166 $33 2 $16,220 $13 35 $2 363 14 6 $1 022 $1 34 I3 $9,091 $3,424 $66 7 3 $1,061 43944 $3 248 52 192 5456 14 0 $1,018 45625 '1 3'61 394 6' 11 2 I 123 256 Total $125 51 51 031$ $1 512 l 5 23 $2 291 seas Selling, General and Administrative Salsa Income StatementsAll figures in $10 00 except except per square foot andcontinued )Percentages NoisewallNoisewall Noisewall Noisewall NoisewallNoisewallDirectGrossGrossSquare Revenue perYearRevenue CostProfitProfit 9 0FeetSquare Foot O 5987$648GEES34 3 59$16 73$493EGES$10020 3 037$13 32 In $732$587$14519 8 0$2, 21256$13 07Total152The Salsa year 3 noise wall revenue is from a Texahoma highwayContract awarded on February 12, wear 3 Contracts With Infringing noisewalls All figures in 10 00 except percentages ContractTotalTotalTotalTotalAwardDOHContractContractGrossGrossNoisewallDateContract Revenue Direct Cost ProfitProfit 9 0Revenue 6 29 0320204$33, 965$4, 40612 30 03$38, 371)20788$107 , 063$97, 70211 5 $3, 93159 3618 7 $10 3731 02 0420877$33 398$30 001$3 39710 2 0$3, 4896 02 0421215$38, 576$34 867$3, 7099 6 01 1 5 $3 9771 03 0521321$678 690$600 560$78 130$70 982Total$896 098$797 095$99 00311 0 0$92 752ContractNoisewall NoisewallNoisewallNoisewallNoisewallAwardDOHDirectGrossGrossSquare Revenue perDateContract CostProfitProfit 0FeetSquare Foot6 29 0320204$3, 293$63816 2 301$13 0612 30 03 20788$8, 183$2, 19021 1 080121 7 $12 951 02 0420877$2, 731$758262$13 326 02 0421215$3, 281$69617 5 302$13 171 03 0521321$56 421$14 56120 5 5 214$13 61Total$73 909$18 84320 3 6 880$13 48 NOTE Any damages awarded at trial for lost profits are subject to taxation Therefore when calculating damages , you need to do so on a before tax basis Salsa cost of equitysince year 2 has been 16 , and cost of long term debt since year 2 has been 12 0 Salsa's tax rate is 35 Salsa capital structure is 60 equity and 40 debt The purpose of compensatory damages is to put the plaintiff back into the same financialposition that would have been the case if no infringement had taken place Socalculation of compensatory damages requires an estimate of what did not actually happen because infringement prevented it from occurring But how can we know whatshould have happened , but was prevented from happening We can use information from periods before infringement occurred , because those periods were unaffected byinfringement This is known as the before and after method The law on patent infringement allow recovery of damages for lost profits on convoyed sales Convoyed sales are items that are usually sold along with the infringed product For example , sales of desktop computers are usually accompanied by sales of computer monitors and printers That makes sales of computer monitors and printers convoyed sales of desktop computers By the same token , conveyed sales for cellphones are salesof car chargers , home chargers , earpieces and belt clips for cell phones This approachis known as the entire market value rule The Panduit test for lost profit by reason of patent infringement requires the plaintiff toshow that the following conditions apply 1 ) There is demand for the patented product 2 ) Acceptable non infringing substitutes for the patented product are available 3 ) There is sufficient manufacturing and marketing capability to satisfy the demand 4 ) There are reasonable computations of the profits that would have been earned but for the infringement of the patented product ' Panduit Corp VS Stahlin Bros Fibre Works , Inc 575 F 20 1 152 ( Sixth Circuit 1978 ) You may safely assume that all Panduit tests are fully satisfied The Georgia Pacificfactors do not apply because lost profits are being sought , rather than a reasonable royalty ", "question_description": "
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<\/p> TEXAHOMA HIGHWAY CONSTRUCTION CASELes Livingstone*Texahoma is a fast- growing state in the American Southwest . The fast growth makes itnecessary for the Texahoma State Department of Highways ( DOM ) to construct new*highways and widen existing highways . The DOH carries out highway construction bymeans of competitive bidding by qualified highway construction companies .One of the qualified highway construction companies is Salsa Inc . Salsa has developedand 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 locatednear highway construction projects . The Salsa patent effectively contains constructionnoise , and significantly lowers the amount of compensation paid by DOHL to the home -owners and businesses disturbed by the din of highway construction . The Salsa patent isfor a containing wall that is built on both sides of a highway under construction . Thecontaining 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 ofmanufacture . The wall is permanent , and remains to reduce traffic noise after highwayconstruction is completed . The noise wall patent was issued in year ! !Both the posts and the panels are manufactured onsite from molds into which are pouredliquid concrete , reinforced by steel rebar . The posts are 24 feet long , with 8 feet insertedand concreted into post holes , and 16 feet protruding above ground . The posts are on 16foot centers , and support the 16 by 16 foot panels . These Salsa walls are known asnoise walls .Since noise walls have proven very effective , DOH highway construction specifications*since year ? have included sound muffling standards that noise walls can meet , but whichno competing product has been able to satisfy . When Doll introduced the soundmuffling standards on January 1 of year 2, strong protests came from Salsa's highwayconstruction competitors , who feared that they could no longer compete for contractsagainst Salsa , and would be forced out of business .DOH responded by pointing out that highway contractors still had several options . They*could develop new noninfringing noisewalls that met the standards , or they couldarrange for Salsa to be their subcontractor for the noisewall portion of highwaycontracts , or they could purchase licenses from Salsa to use the Salsa patent in exchangefor paying an agreed royalty . This satisfied some contractors , but others were resentful ,* The author is MBA Program Director at University of Maryland University College .234 and resolved not to be pushed Into usmg Salsa as a subcontractor or hcensor, or to spendmoney,r on R&D to invent new methods to muf?e construction noise. Starting on June 30, yatr 3, some contractors won highWay matracts by infringing theSalsa patent. Each time, Salsa sent lawyer's letters to the in?'ingers to cease and desist. But none of these letters lard any effect. In order to protect its patent rights, Salsa wascompelled to sue the in?'ingers. Salsa sued the infringers for lost pro?ts ?'om lost sales ofnoisewall due to infringement. Lost sales are sales made by in?'ingers, but which Salsa as the patent owner should havemade. Salsa's lawsuit ?ling also pointed out that the in?'ingers had illegally sold noisewall at a competitive price, which was lower than the price that Salsa would havecommanded as the sole supplier of noisewall. This price reduction is known by the term \"price erosion.'I The lawsuit was ?led on December Ill year 5 and the in?'ingements ceased by December31, ofyear 5. After the defendants ?led their response, there were the usual writteninterrogatories, depositions of fact and expert witnesses and pretrial motions. The trialwas scheduled tobeginonlune l,year6andwasexpectedtoendoolune30,year6. Therefore damages awarded by the court would be payable on June 30, year 6. SoSalsa would not recover lost pro?ts for years 3 through 5 until June 30.. year 6. You have been asked by Salsa's lawyers to prepare its damage study to be ?led with thecourt. For this engagement you have gathered the following inforrriatiori. Salsa Income Statements All ii in '000 err texee care foot and manages.Gross Cost Gross Pro?t % 506ml\" Pretax Year Revenues of Sales Pro?t of Sales Brim Pro?t\u20144 $2l.l93 $13.38? $2.306 13.2% $1.21? $1.589 -3 $15,323 $14,536 $1,292 3.1% $1,096 $196-2 $14,421 $12,830 $1.591 11.0% $1,200 $391-1 $12,056 $10,928 $1,128 9.4% $1,031 $4? 0 $9,206 $0,593 $1.1 13 1 1.5% $1.25! 4133 1 $14,336 $13.13? $1.249 3.9% $1,166 $33 2 $16,220 $13.35? $2.363 14.6% $1.022 $1.34 I3 $9,091 $3,424 $66? 7.3% $1,061 43944 $3.248 52.192 5456 14.0% $1,018 45625 '1 3'61 394 6'? 11.2% I 123 - 256 Total $125.51!!! 51 [031$ $1.512 l?? 5| |.23\u00a7 $2.291 * seas = Selling, General and Administrative Salsa Income StatementsAll figures in $10.00 . except except per square foot andcontinued )Percentages .NoisewallNoisewall Noisewall Noisewall NoisewallNoisewallDirectGrossGrossSquare*Revenue perYearRevenue*CostProfitProfit 9\/0FeetSquare Foot. O.5987$648GEES34. 3%59$16.73$493EGES$10020.3%\/037$13.32\" In !$732$587$14519.8%\/0$2, 21256$13.07Total152The Salsa year 3 noise wall revenue is from a Texahoma highwayContract awarded on February 12, wear 3 .Contracts With Infringing noisewalls*All figures in 10.00. except percentages .ContractTotalTotalTotalTotalAwardDOHContractContractGrossGrossNoisewallDateContract\\Revenue*Direct Cost ProfitProfit 9\/0Revenue*6 \/29\/0320204$33, 965$4, 40612\/30 \/03$38, 371)20788$107 , 063$97, 70211.5%$3, 93159. 3618. 7%$10. 3731\/02\/0420877$33. 398$30. 001$3. 39710. 2%\/0$3, 4896\/02\/0421215$38, 576$34. 867$3, 7099. 6%\/01 1 . 5%$3. 9771 \/ 03 \/ 0521321$678. 690$600. 560$78. 130$70. 982Total$896.098$797. 095$99.00311. 0%\/0$92. 752ContractNoisewall\\\\NoisewallNoisewallNoisewallNoisewallAwardDOHDirectGrossGrossSquare*Revenue perDateContract CostProfitProfit %\/0FeetSquare Foot6\/29\/ 0320204$3, 293$63816. 2%301$13.0612\/30 \/03\\20788$8, 183$2, 19021 . 1%\/080121. 7%\/$12.951\/02\/0420877$2, 731$758262$13.326 \/02\/0421215$3, 281$69617.5%302$13.171 \/03\/0521321$56. 421$14.56120.5%5. 214$13. 61Total$73. 909$18.84320.3%6. 880$13.48 NOTE : Any damages awarded at trial for lost profits are subject to taxation . Therefore*when calculating damages , you need to do so on a before- tax basis . Salsa cost of equitysince year 2 has been 16% , and cost of long-term debt since year 2 has been 12%\/0 .Salsa's tax rate is 35% . Salsa capital structure is 60%\/ equity and 40%\/ debt .The purpose of compensatory damages is to put the plaintiff back into the same financialposition that would have been the case if no infringement had taken place . Socalculation of compensatory damages requires an estimate of what did not actually*happen because infringement prevented it from occurring . But how can we know whatshould have happened , but was prevented from happening ?\" We can use information*from periods before infringement occurred , because those periods were unaffected byinfringement . This is known as the \" before and after method . \"The law on patent infringement allow recovery of damages for lost profits on convoyed \"sales . Convoyed sales are items that are usually sold along with the infringed product .For example , sales of desktop computers are usually accompanied by sales of computer*monitors and printers . That makes sales of computer monitors and printers \" convoyed \"sales of desktop computers . By the same token , conveyed sales for cellphones are salesof car chargers , home chargers , earpieces and belt clips for cell phones . This approachis known as the \" entire market value \" rule .The Panduit* test for lost profit by reason of patent infringement requires the plaintiff toshow that the following conditions apply .\"1 ) There is demand for the patented product .2 ) Acceptable non - infringing substitutes for the patented product are available .3 ) There is sufficient manufacturing and marketing capability to satisfy the demand .4 ) There are reasonable computations of the profits that would have been earned .but for the infringement of the patented product .' Panduit Corp . VS . Stahlin Bros . Fibre Works , Inc . 575 F 20 1 152 ( Sixth Circuit 1978 ).You may safely assume that all Panduit tests are fully satisfied . The Georgia - Pacificfactors do not apply because lost profits are being sought , rather than a reasonable*royalty .", "transcribed_text": "", "related_book": { "title": "Survey of Accounting", "isbn": "77862376, 978-0077862374", "edition": "4th edition", "authors": "Thomas Edmonds, Christopher, Philip Olds, Frances McNair, Bor", "cover_image": "https:\/\/dsd5zvtm8ll6.cloudfront.net\/si.question.images\/book_images\/305.jpg", "uri": "\/textbooks\/survey-of-accounting-4th-edition-305", "see_more_uri": "" }, "free_related_book": { "isbn": "1485130190", "uri": "\/textbooks\/entrepreneurship-an-african-perspective-1st-edition-9781485130192-385442", "name": "Entrepreneurship An African Perspective", "edition": "1st Edition" }, "question_posted": "2024-06-07 05:02:44", "see_more_questions_link": "\/study-help\/questions\/business-marketing-2022-June-08", "step_by_step_answer": "The Answer is in the image, click to view ...", "students_also_viewed": [ { "url": "\/the-following-unemployment-tax-rate-schedule-is-in-effect-for", "description": "The following unemployment tax rate schedule is in effect for the calendar year 2013 in State A, which uses the reserve-ratio formula in determining employer contributions: Reserve Ratio Contribution...", "stars": 3 }, { "url": "\/study-help\/managerial-accounting-decision-making\/what-role-does-human-relations-play-in-budgeting-1791635", "description": "What role does human relations play in budgeting?", "stars": 3 }, { "url": "\/study-help\/introduction-to-probability-statistics\/if-x-has-a-binomial-distribution-with-parameters-n-and-1983351", "description": "If X has a binomial distribution with parameters n and p, then the random variable Y = n X also has a binomial distribution with parameters n and p.", "stars": 3 }, { "url": "\/as-ceo-of-riverside-marine-rachel-moore-knows-it-is", "description": "As CEO of Riverside Marine, Rachel Moore knows it is important to control costs and to respond quickly to changes in the highly competitive boat-building industry. 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