IRS Determination That License Agreements Were Not Arms Length Not Relevant to Determination of Reasonable Royalty

The court denied defendant's motion to compel the production of documents regarding the IRS's determination that plaintiff's licensing agreements with its Puerto Rican subsidiary were not arms-length transactions because the documents were not relevant to the remanded damages trial. "Defendant asserts that Plaintiff has relied in the past and will rely again on licensing and royalty agreements with its related companies to inform a reasonable royalty determination in this case. . . . Inasmuch as documentation related to royalty rates between Plaintiff and its related entities may not even be relevant on the issue of determining a reasonable royalty in the very technology at issue in this case, documents regarding royalty rates involving other technologies certainly cannot be relevant. Just to be clear, this Court is not deciding whether or not evidence of the royalty rate paid by Plaintiff’s affiliates to Plaintiff on the technology involved in this case is relevant. This Court is deciding that evidence regarding the royalty rates paid by Plaintiff’s affiliates to Plaintiff on other technologies and evidence regarding the decision by the IRS that the rates paid on those technologies was not the product of arms-length negotiations is not relevant in this case."

Medtronic Sofamor Danek USA, Inc., et al v. Nuvasive, Inc., 3-08-cv-01512 (CASD July 31, 2015, Order) (Dembin, M.J.)