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