## Legal Analysis and Damage Calculation: NovaTag v. DeltaMark **Prepared for:** NovaTag, Inc. (Client) **Subject:** Recoverable Damages Window and Total Royalty Assessment **Date:** October 26, 2023 ### 1. Marking Compliance and Constructive Notice **January through June 2022 Marking Rate:** The marking rate of **60 percent** during this period does **not** provide constructive notice. * **Legal Basis:** Under Governing Law Rule 2, substantial compliance requires marking at least 95 percent of distributed units. A lower percentage is insufficient to trigger constructive notice. * **Conclusion:** During these months, NovaTag was not in substantial compliance. Without actual notice (discussed below), damages are unavailable for this period. **First Constructive-Notice Date:** Constructive notice began on **July 1, 2022**. * **Legal Basis:** Governing Law Rule 3 states constructive notice begins when substantial compliance begins. * **Factual Basis:** NovaTag’s marking records show that beginning July 1, 2022, **97 percent** of units bore the patent number. This meets the 95 percent threshold required by Rule 2. Compliance remained above this threshold through expiration. ### 2. Actual Notice Evaluation **October 15, 2022 Email:** The email sent on October 15, 2022, did **not** constitute actual notice. * **Legal Basis:** Governing Law Rule 4 requires an affirmative communication that: (1) identifies the patent, (2) identifies the accused product/conduct, and (3) charges infringement. General awareness or licensing invitations are insufficient. * **Analysis:** The email stated Model K uses "technology similar to ours" and expressed interest in a license. Crucially, it did not identify a specific patent number nor did it explicitly charge DeltaMark with infringement. * **Conclusion:** This communication fails to meet the statutory definition of actual notice. **February 1, 2023 Letter:** The letter sent on February 1, 2023, provided valid **actual notice**. * **Analysis:** The letter identified the specific patent, identified Model K as the accused product, mapped claims to the product, and explicitly stated that DeltaMark’s sales infringed. * **Impact on Damages Window:** While this letter cured any ambiguity regarding actual notice, it does not improve the damages start date for NovaTag. Because valid *constructive* notice already existed starting July 1, 2022 (via marking), the February 1 actual notice is redundant for establishing liability. The recoverable period remains anchored to the earlier constructive notice date. ### 3. Statute of Limitations (Filing Lookback) **Six-Year Filing Lookback:** * **Filing Date:** June 1, 2026. * **Lookback Period:** Six years prior = **June 1, 2020**. * **Application:** Governing Law Rule 6 states the lookback does not shorten a later notice-based start date. * **Comparison:** The Lookback allows recovery back to June 2020. However, NovaTag did not provide valid notice (constructive or actual) until July 1, 2022. * **Conclusion:** The damages window is limited by the notice requirement, not the lookback period. The start date is controlled by the later of the two dates (Notice vs. Lookback). Therefore, the recoverable period begins on **July 1, 2022**. ### 4. Recoverable Damages Window and Calculations **First Recoverable Damages Date:** **July 1, 2022**. (Derived from substantial compliance marking). **Number of Recoverable Calendar Months:** * **Start:** July 2022 * **End:** December 31, 2025 (Patent Expiration) * **Calculation:** * 2022: July – December = 6 months * 2023: Full Year = 12 months * 2024: Full Year = 12 months * 2025: Full Year = 12 months * **Total:** **42 Months** **Number of Recoverable Units:** * Sales Volume: 2,000 units/month * Calculation: $42 \text{ months} \times 2,000 \text{ units/month} = \mathbf{84,000 \text{ units}}$ **Total Royalty Damages:** * Reasonable Royalty: $18/unit * Calculation: $84,000 \text{ units} \times \$18/\text{unit}$ * **Total Recoverable Damages:** **$1,512,000** ### 5. Hypothetical Analysis: Incorrect Start Date **Damages if February 1, 2023 were used as the start date:** If we erroneously relied solely on the actual notice letter (Feb 1, 2023) rather than the marking constructive notice (July 1, 2022): * **Months:** Feb 2023 – Dec 2025 = 35 months. * **Units:** $35 \text{ months} \times 2,000 \text{ units} = 70,000 \text{ units}$. * **Damages:** $70,000 \text{ units} \times \$18/\text{unit} = \mathbf{\$1,260,000}$ **Value Lost from that Incorrect Start Date:** * This represents the damages lost between the correct start date (July 2022) and the incorrect start date (Feb 2023). * **Months Lost:** July 2022 through January 2023 = 7 months. * **Units Lost:** $7 \times 2,000 = 14,000 \text{ units}$. * **Value Lost:** $14,000 \times \$18 = \mathbf{\$252,000}$ **Unrecoverable March through June 2022 Period:** This period is unrecoverable regardless of the notice start date because marking was non-compliant (60%) and no actual notice existed. * **Months Lost:** March, April, May, June 2022 = 4 months. * **Units Lost:** $4 \times 2,000 = 8,000 \text{ units}$. * **Value of Unrecoverable Sales:** $8,000 \times \$18 = \mathbf{\$144,000}$ ### Summary Table | Metric | Correct Calculation (July 2022 Start) | Incorrect Calculation (Feb 2023 Start) | Difference | | :--- | :--- | :--- | :--- | | **Months Recoverable** | 42 | 35 | -7 Months | | **Units Recoverable** | 84,000 | 70,000 | -14,000 Units | | **Total Damages** | **$1,512,000** | $1,260,000 | **-$252,000** | **Recommendation:** NovaTag should proceed with a damages claim anchored to **July 1, 2022**, asserting substantial compliance via marking. This maximizes recovery by including the six months of compliant sales prior to the formal infringement letter. We must also acknowledge that the four-month period from March through June 2022 represents unrecoverable damages ($144,000) due to insufficient marking rates at that time.