Damages Expert Precluded From Testifying as to Royalty Rate Based on “50% of Defendant’s Gross Profit Margin”

The court granted defendant's motion to exclude the testimony of plaintiff's damages expert on a reasonable royalty rate because the expert improperly assumed that the starting point for a hypothetical negotiation would be 50% of defendant's gross profit margin. "While the court does not disagree that this could be 'one' reasonable starting place, the law requires [plaintiff's expert] to tailor the royalty rate to the specific facts of this particular case, including the 'particular technology, industry, or party.' [Plaintiff] admits in its opposition brief that '[its expert's] starting point relies on nothing but the assumptions that the patent is valid and infringed, and that there is no other information. . . . [He] considered no analogous facts of the case here other than the presumed validity of the patent. He failed to cite any evidence to support his conclusion that the 50% starting place would apply to component parts such as [the accused feature] in this particular industry. [Plaintiff's expert's] methodology is indistinguishable from 25% rule rejected in [Uniloc v. USA, Inc. v. Microsoft Corp., 632 F.3d 1292 (Fed. Cir. 2011)], except that it may be even more arbitrary. . . . [The expert’s] opinions and testimony based on his present damages report cannot be allowed to lead the jury into certain error.”

Dynetix Design Solutions, Inc. v. Synopsys, Inc., 5-11-cv-05973 (CAND August 22, 2013, Order) (Grewal, M.J.).