A Nevada judge rejected a Daubert motion against a damages expert who based his royalty partly on a 50% profit split. Defendants called this a “rule of thumb” similar to the 25% Rule that the Federal Circuit rejected in Uniloc but the judge disagreed.
Defendant Pulse Electronics sought to exclude Plaintiff Halo’s damages expert, John Hansen, among other reasons because of his methodology in arriving at a 10-15% reasonable royalty. The court explains:
“Pulse next argues Hansen improperly arrived at a 10-15% royalty rate by dividing the profit margins of [Plaintiff] Halo and [Defendant] Pulse in half and using the resulting figures as the upper and lower limits for the rate. Pulse contends this is a ‘supercharged’ 50% version of the ‘25% rule of thumb’ rule rejected by the Federal Circuit in Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292 (Fed. Cir. 2011). Halo counters that Hansen did not rely on a ‘rule of thumb’ concept, and properly relied on the 15 factors in Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970) to determine his proposed royalty rate.”
After noting that Halo’s expert also analyzed each of the 15 Georgia-Pacific factors, the judge concludes: “Because Halo has demonstrated Hansen used the Georgia-Pacific factors to determine his reasonable royalty rate range of 10-15%, rather than a version of the unreliable 25% rule, the Court will not exclude Hansen’s royalty rate analysis.”
It is not clear how Halo’s expert described and supported his 50% profit split, but this seems to be a use of the Nash Equilibrium, which has gotten a mixed reception by district courts. After the Federal Circuit’s Uniloc ruling, it would not be too surprising to see them eventually weigh in on the Nash Equilibrium as well. Click on IP Value Blog’s topic tags to the right for other recent district court decisions regarding the Nash Equilibrium.
Halo Electronics, Inc. v. Bel Fuse Inc., et. al., 2-07-cv-00331 (D. NV, October 25, 2012, Order) (Pro)