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ARTICLES
Court Excludes Entire Plaintiff’s Damages Claim of $300+ Million Against Intel
After precluding certain testimony by Plaintiff’s damages expert in January, the court now rules against the remainder of his damages opinion of $150 to $300 million “or more.” The court found that the expert’s reasonable royalty opinion was unreliable, being based upon a single litigation settlement that (a) occurred 5 years after the hypothetical negotiation, (b) pertained to a different patent, and (c) accompanied no analysis of comparability. The court notes that "AVM does not cite to a single case where any court permitted a damages claim to be based on a single settlement agreement for a comparable technology.” The court also suggests some pertinent questions that Plaintiff’s expert could have addressed in an analysis of comparability: • What was the amount of damages ultimately sought in the litigation? • Would the issue of willfulness have been tried, with the possibility of treble damages? • Had sanctions been imposed, as in LaserDynamics v. Quanta? • Did the agreement have provisions that would differ from the present case? (Here, the later settlement included a provision requiring dispute resolution before filing further patent suits.) The court concludes: “Even assuming that a single settlement agreement on a comparable technology could be the basis for a reliable conclusion, which the Court doubts, Evans' analysis falls ... Read MoreDamages Expert Asks for 100% Royalty, Judge Nixes
It’s not every day that a patent damages expert opines that Defendants should pay a 100% royalty. It sure didn’t work here. In this E.D. Wisconsin case of Nordock v. Systems, Plaintiff’s expert opined that “my opinion of a reasonable royalty on sales of dock levelers would be 100% of Nordock’s lost sales as calculated above.” Judge Randa notes that “a reasonable royalty requires willing parties and a balancing of their interests. Smith’s reliance on the 100% royalty figure does not reflect Nordock being a willing party or that he engaged in any balancing of the parties’ interests. His opinion as to the ‘reasonable royalty’ is unreliable and excluded under Daubert and Rule 702.” To be sure, it’s not clear if Smith’s 100% royalty rate applied to sales revenue, or simply amounted to 100% of his lost profits calculation. If the former, well, a 100% royalty rate on sales would raise some eyebrows, so it had better be extremely well supported. If the latter, then such an opinion would look like he is merely bootstrapping a lost profits opinion into his royalty opinion, which would raise red flags as well. Nordock Inc. v. Systems Inc., 2-11-cv-00118 (E.D. WI, March 13, 2013, Order) (Randa)Expert May Not Arrive at Reasonable Royalty by Merely Multiplying a Settlement by 3
In this Western District of Washington patent case, the court ruled that Plaintiff’s damages expert could not present a royalty rate calculated as 3x the rate found in a settlement, as an attempt to account for litigation uncertainty that could depress the royalty rate agreed upon in the settlement. The expert tried to argue that litigation succeeds on average one-third of the time, hence the 3x multiple. Courts in the past have recognized that the litigation uncertainty involved in settlement agreements might depress the agreed-upon royalty rates as compared to the hypothetical negotiation where infringement and validity are assumed. See Mondis Technology, Ltd. v. LG Electronics, Inc., 2:07-CV-565-TJW-CE (Order, June 14, 2011). In Mondis, the damages expert was permitted to present a larger royalty rate that was supported by pre-litigation documents. In this case, Plaintiff’s expert, William Kerr, multiplied the settlement agreement rate by 3, citing data showing that patent holders lose infringement suits in federal courts two-thirds of the time. The court soundly rejects this, stating that the adjustment is no “more than an arbitrary multiplier based on factors and statistics having nothing to do with the patents or parties in this case.” Further, “Dr. Kerr’s one-size-fits-all multiplier would treat all ... Read MoreExpert’s Lump Sum Royalty Opinion Needs a Basis in Fact
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 ... Read More
VLF Consulting, Inc.
