In this order on post-trial JMOL motions, a California court declined to exclude expert testimony presented as a single reasonable royalty rate for a group of 3 patents. The Court then finds one patent invalid and then uses its own methodology to adjust the expert’s royalty rate down by apportioning the rate amongst the remaining patents. It breaks down like this:
- • Defendant Staples argued that testimony of Plaintiff’s expert (Newman) should be excluded because he did not attempt to tie demand to any individual patent, but analyzed the 3 patents collectively to determine the reasonable royalty.
- • The judge rejects that motion, citing (a) that Plaintiffs took a similar approach in licensing negotiations of negotiating royalties by product, regardless of number of patents involved, and (b) a lack of specific legal guidance on this issue.
- • The Court then finds that the jury awarded royalties at a rate of 13%, which exceeded the highest rate in evidence (10% per Newman). Thus, royalties should be reduced.
- • The Court finds that one of the three patents-in-suit is invalid, and so a royalty rate of 10% would be too high. Additionally, the way that the jury split up the royalty rate amongst patents is not supported by any evidence.
- • Plaintiff’s expert provided no allocation methodology, but Defendants’ expert did. Although Defendant’s expert came to a much lower royalty rate conclusion, the Court adopts his apportionment of the rate amongst the three patents. The Court settles on a royalty rate of 4% for one patent and 2% for the other remaining patent, for a total of 6% royalty on each of the four different products at issue.
It is a bit curious to see the Court accept the idea that Plaintiff negotiates royalties by product regardless of how many patents are at issue, but then after invalidating one of the three patents, the Court sees the need to reduce the royalty rate. Since we were not in the courtroom, we don’t know whether or not Plaintiffs elicited testimony from its expert about how his royalty rate opinion would change if one or two patents were invalid or not infringed. Perhaps it was on the record but the judge doesn’t accept it?
Also curious is the fact that the jury was asked to split up the royalty rate by product and by patent, requiring more detail than the Plaintiff’s expert testimony provided (i.e. simply 10%). It’s not clear from our point of view if this jury instruction was an oversight or if the expert’s presentation was an intentional gamble. Regardless, it’s another reminder for litigation counsel to be careful about asking the jury to present damages in a different way from how your expert presented them!
Accentra, Inc., et. al. v. Staples, Inc., 2-07-cv-05862 (C.D. CA, December 19, 2011, Order) (Collins)