Wednesday, July 18, 2012

Hypothetical Negotiation Resulting in “Financially Catastrophic Agreement” Excluded From Evidence

The court granted defendant's motion to exclude the testimony of plaintiff's damages expert as to a reasonable royalty based on the expert's application of an unreasonable hypothetical license negotiation. "[T]he Court cannot assume. . . that [defendant], in a hypothetical negotiation with [plaintiff], would have taken a risk on the infringement question and agreed to a huge, profit-eliminating (and even revenue eliminating) royalty obligation for itself. As a matter of law, no such risk can be taken in a hypothetical negotiation in which infringement is deemed known. With knowledge of validity and infringement, such a financially catastrophic agreement would have been totally unreasonable. . . . [A]ny unreasonable negotiating approach must be rejected, since the ultimate goal is to arrive at what the statute terms a 'reasonable royalty.' [Plaintiff's expert's] methodology inherently arrives at an unreasonable result, and one to which no reasonable negotiator for [defendant] could possibly have agreed."

WesternGeco LLC v. ION Geophysical Corporation, 4-09-cv-01827 (TXSD July 16, 2012, Order) (Ellison, J.).

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