Recall that the Federal Circuit remanded this case for a recalculation of a reasonable royalty, finding that the plaintiff’s expert and the lower court impermissibly relied upon broader re-branding and re-bundling licenses that furnished finished software products, source code, and other services. Upon remand, the court rejects revised opinions by both plaintiff’s and defendant’s experts and assesses a 3% royalty rate.
After excluding the re-branding/re-bundling agreements that called for 25% to 40% royalties, both experts (Dr. Jesse David for ResQNet and Brian Blonder for Lansa) focused on two remaining agreements, one being a settlement. Note, too, that the Federal Circuit had hinted that one of the “straight” licenses called for royalties of roughly 1.5 to 2%; see ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 868 (Fed. Cir. 2010). The court endorses Dr. David’s scaling up of the royalty to account for a difference in the royalty base, but the court finds that he did not adequately apportion the rate to account for the multiple patents covered. It thus rejects his royalty opinion of 8% to 10% (down from his prior opinion of 12.5%).
Meanwhile, Mr. Blonder divided the royalty rate by the number of patents covered, to arrive at a royalty of 1.5%. But the court concludes that “[b]oth approaches must be rejected: David’s because it is counter to the holding of Lucent, which requires a downward and not speculative adjustment, and Blonder’s because it is supported by nothing other than its simplicity. Blonder provides no reasoning as to why a straight up division method accurately captures the proper royalty here.”
The court then arrives at a royalty rate of 3% without explanation.
ResQNet.com, Inc. v. Lansa, Inc., 1-01-cv-03578 (S.D. NY, December 6, 2011, Order) (Sweet)