Lump-Sum Royalty Opinion Not Excluded as “Ruse to Avoid the Entire Market Value Rule“

The court denied plaintiff's motion to exclude the report of defendants' damages expert and rejected the argument that the expert's lump-sum royalty opinion was “a ruse to avoid the entire market value rule.” “The heart of [plaintiff's] complaint is that, in calculating the value the lump sum, [defendant's expert] returns to the entire revenue of its accused mobile phones for his estimate even as he acknowledges there is no evidence that any of claimed inventions is the basis of demand for the phones. . . . With little to guide its analysis beyond the single sentence in [LaserDynamics, Inc. v. Quanta, Inc., 694 F.3d 51 (Fed. Cir. 2012)], the court is not persuaded that [the expert's] analysis is so methodologically flawed that it must be kept from the jury. Here's why. Lump sums are one species of the broader genus of reasonable royalties, running royalties being another. Depending on the certainty of the market opportunity, the cash constraints of the licensee, the licensor’s appetite for risk and superior insight into the utility of the patented invention, the parties’ competitive posture, and undoubtedly other factors, a lump sum structure might better reflect what the hypothetical negotiation would produce. Especially where, as here . . . the patentee itself consistently and regularly negotiated lump sum payments with its licensees, there is even more reason to believe that the parties would have agreed to a lump sum to allow the licensee to infringe. . . . According to [defendants' expert], here [defendant] and its licensees regularly estimated the anticipated revenue of the entire licensed product in arriving at a bottom line number. Given this record, the court cannot say [his] estimate is so unreliable as to violate the norms of Fed. R. Evid. 702.”

HTC Corporation et al v. Technology Properties Limited et al, 5-08-cv-00882 (CAND September 6, 2013, Order) (Grewal, M.J.).