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  • Expert’s Lump Sum Royalty Opinion Needs a Basis in Fact

    March 13, 2013 Daubert, Lump Sum
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    In a Daubert ruling in XpertUniverse v. Cisco, the district court excluded opinions by Plaintiff’s expert that Cisco would agree to a lump sum royalty, since little or no basis was presented and his comparable licenses consisted of two licenses with running royalties of 3-5%. 

    The court explains:

    “Significant differences exist between a running royalty license and a lump-sum license.” Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1326 (Fed. Cir. 2009). Lump sum licenses favor licensees who plan to use the technology frequently, and remove the risk of underreporting and avoid ongoing administrative burdens of monitoring usage. See id. “For a jury to use a running-royalty agreement as a basis to award lump-sum damages, however, some basis for comparison must exist in the evidence presented to the jury.” Id. at 1330.

    The court then explains that accused sales amounted to $937,000 in sales, and applying the 3% – 5% results in royalties of $39,000 to $65,000.  Yet Plaintiff’s expert, Walter Bratic, “provides no basis for comparison between these amounts and his $32 million [lump sum] amount. Nor does he provide any explanation as to how the two running royalty agreements are probative of his $32 million lump sum payment…  Bratic’ s numerous methodological flaws are thrown into sharp relief by his conclusion: $32 million in a lump sum royalty on $937,000 in sales of accused products simply makes no sense.”

    The court, however, did allow Mr. Bratic to testify on his computation of $70 million in lost business value as part of XU’s fraud claims against Cisco.  However, Mr. Bratic is precluded from testifying on causation, which XU must prove.

    XpertUniverse Inc. v. Cisco Systems Inc., 09-157-RGA (D. DE, March 11, 2013, Order) (Andrews)

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