-
ARTICLES
Court Allows Testimony on 50-50 Profit Split to Determine a Royalty
On the heels of a California district court rejecting a 50% profit split to determine a reasonable royalty, this Delaware district court accepts the methodology. Coinciding perhaps (just guess here!) with the death of the so-called 25% Rule (which takes 25% of the infringing product’s profits as a reasonable royalty) we’ve seen a few experts use a 50% split, since it at least has some basis in economic theory – namely the Nash equilibrium. The California court rejected this concept, stating that the expert failed to tie the theory to the facts of the case and that “[t]he Nash bargaining solution would invite a miscarriage of justice by clothing a fifty-percent assumption in an impenetrable facade of mathematics.” But here, this court accepts a 2011 supplemental report by Julie Davis that “contains a 50% profit sharing rule” because “Davis based her opinion regarding the general expectation for a company during a negotiation upon her ‘review of thousands of agreements over the 33 years of [her] career.’ The court concludes that Davis’s experience in reviewing comparable agreements is sufficient to establish the reliability of her methodology.” This ruling seems rather generous in light of the increased level of precision that courts are currently ... Read MoreCan You Daubert an Expert For Offering Too Much Information? Tough Sell.
I’ve been involved in cases where counsel tried to exclude an expert opinion for having too few opinions, thus acting as a human calculator, but this is the first time I have seen an attempt to Daubert an expert for being too thorough. It wasn’t successful. Here the court denied plaintiff’s motion to exclude the defendant’s expert opinion on invalidity. DataQuill contended that the report “fails to state the testimony the witness is expected to present during direct examination at trial” because it identifies an ‘unwieldy’ number of invalidity theories.” But the court concludes that “DataQuill has not provided the Court with any authority to support its argument” and that a “thorough reading of the report will allow DataQuill to adequately prepare to rebut and cross-examine Mr. Lanning about his opinions.” This Daubert motion may well have been a hail-mary, as plaintiffs apparently struggled to meet the deadlines in rebutting the large number of opinions. Throwing them a bone, the court extended their rebuttal report deadline by a few weeks. DataQuill Limited v. High Tech Computer Corp., 3-08-cv-00543 (S.D. CA, August 26, 2011, Order) (Skomal)Texas Court Cracks the Whip, Applies the Entire Market Value Rule to Profit Margins
This is the first time we have seen a court disallow discussion of the profit margins of an accused product on the grounds that the patented feature was not shown to be the basis of customer demand for the product. In This Daubert ruling from June 2011, a Texas court considered a motion against opinions of plaintiff’s expert Michael Gallagher regarding (1) a comparable license, and (2) the entire market value rule. First, the plaintiff was relying upon (probably heavily) a past license with GE where the patent-in-suit, along with one other patent, was licensed for 7.5%, a rate far higher than any other license. But the expert simply dismissed the value of the second patent, saying that it was his “understanding” that the patent added no value to the license, “without any explanation whatsoever of where that understanding came from.” The court rejects this, which is probably not surprising in light of the federal circuit’s higher bar now on the use of comparable licenses (see ResQNet: comparable agreements must be “commensurate with what the defendant has appropriated”). Second, the court makes two interesting interpretations of the recent federal circuit demands on the use of the entire market value rule. First, both ... Read MoreSome Retrospective on the Patent Reform Act and the CAFC
With the recent rulings by the CAFC regarding the “entire market value rule” in mind, it’s interesting to take a look back at the early drafts of the Patent Reform Act. What we see, interestingly, is that the CAFC seemingly adopted the controversial damages revisions of the 2007 draft legislation. Here is the wording from the Patent Reform Act of 2007 (emphasis added): (1) IN GENERAL- An award pursuant to subsection (a) that is based upon a reasonable royalty shall be determined in accordance with this subsection. Based on the facts of the case, the court shall determine whether paragraph (2), (3), or (4) will be used by the court or the jury in calculating a reasonable royalty. The court shall identify the factors that are relevant to the determination of a reasonable royalty under the applicable paragraph, and the court or jury, as the case may be, shall consider only those factors in making the determination. (2) RELATIONSHIP OF DAMAGES TO CONTRIBUTIONS OVER PRIOR ART- Upon a showing to the satisfaction of the court that a reasonable royalty should be based on a portion of the value of the infringing product or process, the court shall conduct an analysis to ensure ... Read More
VLF Consulting, Inc.
