Court says lone settlement agreement cannot support plaintiff’s damages theory

BVWireIssue #127-2
April 10, 2013

Game over? After AVM sued Intel for infringing on one of its patents on a feature in Intel’s microprocessors and its expert determined reasonable royalty damages between $150 million and $300 million “or more,” Intel filed a Daubert motion to exclude the testimony. Earlier, a federal court stated that it was inclined to rule in Intel’s favor but wanted to hear from the expert in person before issuing a final decision. (The digest of AVM Technologies, LLC v. Intel Corporation, 2013 U.S. Dist. LEXIS 1165 (Jan. 4, 2013) appeared in the March Business Valuation Update and the opinion is at BVLaw).

The court has now heard from the expert and issued a decision.

The expert initially relied on four Intel settlement agreements, but the court found three of them not comparable. This left him with only a single settlement agreement Intel reached with a third party in 2009 for a different patent to support his conclusion. In that settlement, Intel paid $110 million to end the litigation and obtain the license.

The expert admitted that he didn’t know anything about the agreement “other than [its] express terms and information from press releases.” But he believed it related to patented technology that was less important to “Intel’s commercial interests” than the technology at issue and that the royalty base for the former patent was “far less” than the royalty base for the disputed patent. The lump sum covering the patent-in-suit “should exceed” the payment under the 2009 agreement, he concluded.

His report lacked all analysis of factors that might affect the settlement amount, the court found. The conclusion did not rest on any methodology that explained why the 2009 agreement by itself could be the basis for an accurate conclusion about the value of the patent in issue. Recognizing that its decision eroded AVM’s evidentiary basis for its damages claim, the court vacated the trial date. But it also stated it could not at this time grant Intel’s summary judgment motion of no damages.

Read the complete digest of AVM Technologies, LLC v. Intel Corporation, 2013 U.S. Dist. LEXIS 23768 (Feb. 21, 2013) in the May Business Valuation Update; the court’s opinion will be posted soon at BVLaw.

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