It’s written in stone that experts developing a reasonable royalty for a multicomponent product must be careful to apportion damages to the product’s protected features. However, there is flexibility in how experts perform the apportionment, the Federal Circuit recently confirmed.
The United States Supreme Court has agreed to review a patent infringement case on the scope of damages. The issue is whether a patent holder may obtain lost profits for actions that occurred outside the United States, where the patentee has proven a domestic act of infringement.
Every month, BVLaw analyzes and digests federal and state court decisions (including opinions from the United States Tax Court) that focus on valuation and damages issues and feature expert testimony. A BVLaw subscription is an efficient way for financial experts to keep up with developments in their areas of expertise and with the various courts’ takes on valuation methodology, Daubert and the art of presentation, and policy concerns.
Twice, in 2017, the Delaware Supreme Court struck down statutory appraisal rulings by the Delaware Court of Chancery that dismissed the importance of the market price.
Causation presents one of the most vexing problems for damages experts. But ignoring causation and simply working off the assumption that it exists may end up being the biggest problem for an expert.
A recent case shows just how difficult it is to value a startup. Here, there was an extra challenge because the subject was a pharmaceutical venture that required years of funding for the development of two drugs working toward FDA approval. The trial court needed to determine the fair value of the plaintiff’s interest prior to the company’s ultimate success.
The 8th Circuit recently upheld a sizable damages award in an unusual business tort case litigated under Nebraska law. One noteworthy aspect in terms of determining economic damages was that the court allowed expert testimony regarding the loss of value to the plaintiff even though the plaintiff did not fail completely upon the wrongdoing.
The Federal Circuit recently examined a paramount damages issue that comes up in patent cases: whether, in terms of calculating lost profits, the patent holder’s ability to meet the Panduit factors makes a separate apportionment analysis unnecessary.
In assessing the soundness of valuations, courts in a variety of cases have been paying close attention to the management projections appraisers have used or decided not to use in performing their value analyses. If courts are scrutinizing projections for reliability and plausibility, experts hoping to prevail in the litigation context must do so as well.
In a complex bankruptcy case involving players in the petrochemical industry, the court trained its eyes on the management projections underlying a merger that led to the formation of a company that went bankrupt only a year after the close of the transaction.
The Delaware Supreme Court recently overturned a 2016 ruling by the Delaware Court of Chancery that arrived at fair value by weighting the results of three valuation techniques equally. The high court's Chief Justice Strine, who once headed the Chancery, found this approach was problematic and used the decision to provide valuation advice to his successor, Chancellor Bouchard, who had overseen the appraisal proceeding.
The flashpoint in a protracted New Jersey divorce proceeding was the valuation of the owner spouse's equity partner interest in a large law firm. A critical issue was whether the value of the interest should include an additional amount stemming from the firm's enterprise goodwill. The trial court's decision elicited stinging criticism from the appellate court.
A recent Washington state divorce case included a noteworthy discussion of goodwill where the owner spouse’s business arguably was separate property. Divorce experts will notice that the court’s goodwill analysis has much in common with an appreciation analysis.
Management projections are the sine qua non of a discounted cash flow analysis, and, in a recent statutory appraisal action involving the pet product giant PetSmart, the Delaware Court of Chancery found they did not cut the mustard. The court called the projections, “at best, fanciful,” and concluded the most accurate measure of fair value was the merger consideration.
When, in a Mississippi accounting malpractice case, the trial court used an outside "technical advisor" to determine the admissibility of the parties’ proposed expert testimony, the Daubert hearing assumed a whole other dimension. It was no longer simply a battle between the opposing experts, but an occasion for outside experts to judge the work of the parties’ experts.
In a controversial ESOP case that turned on the trustee’s oversight of the pretransaction valuation work, the defendant trustee recently filed a motion for reconsideration. It argued the court had committed errors related to its liability and damages findings. Although the court owned up to some mistakes, including a misunderstanding of the concept of beta, it ultimately stuck to its earlier decision.
When and whether to apply a discount for marketability in divorce valuations has been an open question in Tennessee, owing to some confusing court rulings. However, a recent amendment to the Tennessee Code seeks to provide clarity to valuators handling divorce cases in this jurisdiction.
The plaintiff is the “prevailing party,” a Minnesota district court recently decided, allowing the minority owner of a well-known family business to sell her share for over $40 million. The valuation trial featured high-caliber experts who disagreed about every input and assumption underlying their discounted cash flow analyses.
We recently reported on a case in which annotated expert draft reports were subject to discovery notwithstanding Federal Rule of Civil Procedure 26(b)(4). Valuation professionals who frequently work on federal cases also need to know that Rule 26 does not protect expert notes and nonattorney communication, as an important 11th Circuit ruling explains.
In an estate and gift tax case, the U.S. Tax Court recently sided with the Internal Revenue Service when the court found the value of assets transferred from the decedent to a family limited partnership was includible in the value of the decedent’s gross estate. The real surprise lay in the court's decision to propose a new way of calculating the includible amount.
The 11th Circuit recently affirmed a four-year-old Tax Court valuation of a revocable trust’s interest in a limited partnership. The linchpin in the valuation was the marketability discount.
Valuators may think they know all there’s to know about quantifying the appreciation of nonmarital property by using the active versus passive framework. Think again. A recent Florida divorce case illustrates that the premature categorization of assets may lead to an improper valuation.
Federal discovery rule 26 expressly protects draft expert reports from discovery. But experts testifying in federal court know that this protection is by no means absolute. Questions as to the scope of protection persist, and a recent discovery ruling in a patent infringement case makes clear that concern over the strength of protection is warranted.
For the second time in March 2017, a court found an ESOP trustee liable for causing the plan to overpay. The most recent decision chronicles in exhaustive detail how the trustee failed the plan in terms of ensuring that no more than fair market value would be paid for the seller’s shares.
Inadequate trustee performance was at the center of a recent case, featuring a nontraditional ESOP structure. The court found that, if the trustee had engaged with the underlying valuation, it would have discovered numerous weaknesses and prevented the ESOP from overpaying for the company stock.