Ever since Uniloc’s rejection of the 15%-of-gross-profit rule-of-thumb for determining damages, experts have been attempting to combine other theories with Georgia Pacific factors. Another attempt to use the Nash Bargaining Solution (NBS) to determine a reasonable royalty rate in a damages case has failed. In fact, it may well be that Judge Alsop’s warning in Oracle v. Google that “the Nash Bargaining Solution would invite a miscarriage of justice by clothing a fifty-percent assumption in an impenetrable façade of mathematics” is so memorable that it will determine the future of NBS in damages cases.
The latest case is Suffolk Tech v. AOL. (The order from the Daubert hearing was filed 04/12/2013.) Suffolk’s damages expert, Roy Weinstein, applied the Georgia Pacific factors to the patent in suit, and then conducted a hypothetical negotiation based on NBS, concluding there should be a 50/50 split of the incremental profits.
US District Judge T.S. Ellis, III, quoted Judge Alsop when excluding the expert’s testimony and found that the theoretical negotiation in Weinstein’s report was not tied to the facts in the case. “Weinstein does not explain why these parties would have accepted a 50/50 split,” especially in light of the fact that Weinstein’s own explanation of the theory behind NBS states that the theory does not always produce such a result, based on the parties’ respective bargain power and other factors identified in Georgia-Pacific.