In another case where plaintiff’s expert asserts that the reasonable royalty rate should be 50% of defendant’s profits, the defendants asked the court to exclude the opinion. In his report, Kristofer K. Swanson concludes that defendant would have been willing to pay up to 50% of its incremental profits as a royalty. But the defendant asserts that Mr. Swanson failed to provide any factual basis to connect the 50% rate to this case. The court rules that this objection should be filed as a motion in limine, but that it “will only allow Mr. Swanson to testify on this point after he establishes a proper predicate connecting the 50% rate to the facts of this case.”
This appears to be another shot at applying the Nash equilibrium (i.e. 50-50 profit split) to a reasonable royalty analysis, a growing trend after the prohibition of the 25% rule-of-thumb. Here, the court appears to be inclined against it, but doesn’t go quite as far as the California court that recently ruled in Oracle v. Google that the expert failed to tie the Nash 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.”
Alexsam, Inc. v. Shell Oil Company, et. al., 2-08-cv-00015 (E.D. TX, 10/14/11, Order) (Schneider)