In 'Sloan Valve,' Changes to 'Classic' Royalty Analysis Make Expert Vulnerable

Sloan Valve Company v. Zurn Industries, Inc., 2014 U.S. Dist. LEXIS 39678 (March 26, 2014)

When an experienced damages analyst proposed significant changes to “the classic way” of doing a reasonable royalty analysis, he met with stiff opposition from the court. Normally, an expert develops a royalty base by using the revenue resulting from the infringement as the base and multiplying it by a royalty rate, which typically represents the percentage of revenue owed to the patent holder.

In this case, the plaintiff’s expert developed a per-unit royalty, claiming it more accurately represented the value of the defendants’ infringing products. His model failed Daubert’s reliability standard. The court found that many of the elements undergirding the calculated royalty were unjustifiable and the methodology as a whole “bears no resemblance to a reasonable royalty analysis.”

For more on the case, click here.