Expert’s market approach withstands Daubert challenge in IP case

BVWireIssue #164-4
May 25, 2016

Of note, particularly to users of ktMine and similar royalty rate databases, is a Daubert decision in a patent infringement dispute in which the plaintiff’s expert based his reasonable royalty rate on a market-based analysis instead of the customary Georgia-Pacific framework.

Georgia-Pacific is ‘outmoded’: The plaintiff alleged the defendants violated two of its patents covering a healthcare provider reimbursement system. In calculating a reasonable royalty, the plaintiff’s expert declined to apply the Georgia-Pacific factors, saying they were “outmoded” and not appropriate in this case. The defendants’ rebuttal expert criticized the expert’s decision not to use the factors.

In challenging the royalty calculation, the defendants argued the plaintiff’s expert should be precluded from offering opinions or conclusions regarding Georgia-Pacific. The plaintiff countered that precluding the expert on this basis would leave him “unfairly attacked without giving the jury an opportunity to hear his response to the criticism of the Defendants’ expert.”

The court sided with the plaintiff. The expert’s opinions “were based on sound and reliable methodology,” the court said. The expert “should be able to explain why he chose not to use the Georgia-Pacific factors in his analysis.”

Takeaway: The Georgia-Pacific framework is not the only way to calculate a reasonable royalty. At least for Daubert purposes, courts may accept a market-based analysis if it is based on sound reasoning and data.

The case is StoneEagle Servs., Inc. v. Pay-Plus Solutions, Inc., 2015 U.S. Dist. LEXIS 79971 (June 19, 2015). The court’s opinion is available at BVLaw.

Extra: Weston Anson (Consor), who was the plaintiff’s damages expert in the case, will be the presenter of a June 28 webinar, Litigation Dynamics and Daubert Challenges. Stay tuned.

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