Judge Posner differentiates ‘disabling’ defects from mere ‘weaknesses’ in patent damages

BVWireIssue #119-1
August 1, 2012

Several recent and celebrated cases have raised the bar for measuring damages in patent litigation. Courts have tightened the application of the entire market value rule, all but barred the use of the 25% rule of thumb, insisted on apportionment of damages between patented and unpatented technologies, and rejected allegedly comparable licenses used in reasonable royalty calculations.

Now comes renowned Judge Richard Posner, from the 7th Circuit U.S. Court of Appeals and sitting by designation over Apple’s suit against Motorola in federal district court, whose recent dual rulings—first on Daubert motions and then on motions for summary judgment—may have raised the bar even higher for financial experts in all cases. As he explains:

The biggest challenge to the judge at a Daubert hearing … is to distinguish between disabling problems with the proposed testimony, which are a ground for excluding it, and weaknesses in the testimony, which are properly resolved at the trial itself on the basis of evidence and cross-examination.

Among the more “disabling” problems Posner found in this case—primarily with the plaintiff’s expert—was his failure to apply rigorous, objective standards to his reliance on benchmark comparables, consumer survey data, and insider information. Despite recent precedent, the expert also failed to disaggregate damages between patented and unpatented technologies in the suit. Finally, the disparity between the parties’ respective experts was a “warning sign,” Posner said, for this and future cases. “Either one of the experts is way off base, or the estimation of a reasonable royalty is guesswork remote from the application of expert knowledge.” Read the digest of both decisions in Apple, Inc. v. Motorola, Inc., No. 1:11-cv-08540 (May 22, 2012, and June 22, 2012) in the September Business Valuation Update. Judge Posner’s opinions will be posted soon at BVLaw.

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