The owner of several medical technology companies developed a patented drug to treat sepsis. He assigned all manufacture and marketing rights to another company, which failed to run clinical trials and perform other conditions of the agreement. In a suit for damages, the patent owner was ready to testify that but for the defendant’s breach, he would have found a corporate partner—a “major pharmaceutical company”—to oversee the details and costs of conducting the necessary trials and “walking the product through the FDA clearance process.” The drug would have immediately captured 50% of the market and the owner would have realized “great profits,” including a 5% royalty on all future sales totaling $42 million.
The defendants moved to preclude the owner, a lay witness, from presenting what amounted to expert damages testimony, and in Von Der Ruhr v. Immtech International Inc.
, 2009 WL 1888986 (June 30, 2009), the federal district court agreed, as did the U.S. Court of Appeals for the Seventh Circuit. ”In the realm of lost profits, lay opinion testimony is allowed in limited circumstances,” the court explained: when the witness has particularized and personalized knowledge (for example, the owner of an established firm with a documented history of profits may testify as to his/her expectations of continued profitability).
Here, the patent owner had no personal experience with obtaining a corporate licensing agreement for a pharmaceutical. He had never brought a drug to market or made a profit from a drug; and he’d never used licensing agreements to commercialize his prior medical products. Most important, he lacked any expertise or data to support his claims that the new drug would have captured 50% of the existing market and commanded a 5% royalty fee. The plaintiff should have offered ”qualifying experts [and] true market analysis,” the court concluded, in a case that will be available at BVLaw™
, the abstract in the September 2009 Business Valuation Update™
Perhaps the plaintiff could have used
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