CAFC Vacates Damages in 4DD Holdings v. US: The Limits of the "Book of Wisdom" in Software Copyright Infringement

WISECODE Take

Many software business owners mistakenly believe that as long as unit prices are specified in a license, they can automatically multiply them to demand astronomical damages in the event of infringement. In 4DD Holdings, LLC v. United States (No. 2024-1996), where the plaintiff claimed billions based on contract rates, the court applied a "hypothetical negotiation" instead. This is akin to "asset revaluation" in financial investment, where damages must reflect the true market value at the time the infringement began. Although the government copied over 290,000 cores and the trial court awarded $12.68 million, the appeals court ruled that unforeseeable post-negotiation events, such as project cancellation, should not be used to discount the valuation. We suggest: first, draft clear audit and tiered-pricing mechanisms for excess use in licenses; second, conduct dynamic market-based licensing valuations when assessing potential damages. Sound IP management is your most secure financial investment; Chih-Dian offers trade secret management system establishment to secure your assets, and we suggest consulting and assessing your needs.