Expert’s Use of “Excess Profits” to Calculate Reasonable Royalty Requires Additional Briefing to Establish Reliability

The court ordered defendants to provide additional briefing or it would exclude the testimony of their damages expert regarding a reasonable royalty because of his unconventional analytical/income approach analysis. "[The expert] appears to base his calculation on a hypothetical negotiation between the parties wherein the defendants are willing to spend only their 'excess profit.' . . . [The expert's] profit calculations differ substantially from those of the experts discussed in the case law. In those cases, the experts compared the infringer’s profits without infringement to the infringer’s profits with infringement. . . . [Defendants' expert] considers only a subset of infringement profits because he considers only defendants’ 'excess profits' over and above their 'base' profits from infringement, while other experts conducting this analysis have considered the total profits resulting from infringement. This method is problematic, but that is not even where [defendants' expert] lands. Rather, his proposed royalty rate is much lower than the rates he found comparing best and base case profits. . . . [W]ithout further information and explanation from defendants as to why [their expert's] profitability method is reliable, I will not permit him to testify because he will have nothing helpful to offer the jury."

Ultratec, Inc. et al v. Sorenson Communications, Inc. et al, 3-13-cv-00346 (WIWD October 9, 2014, Order) (Crabb, J.)