Expert’s Royalty Base Apportionment Analysis Insufficient​

The court deferred ruling on defendant's motion to exclude the testimony of plaintiff's damages expert regarding a reasonable royalty for unreliable apportionment and ordered plaintiff to produce a supplemental report curing the expert's deficiencies. "[Plaintiff's damages expert] considered [an industry expert's] opinion on the desirability of [plaintiff's] patented features and reduced [defendant's] total revenue by 50% to account for a 'conservative calculation' of the 'but-for' revenue allegedly 'enabled' by [plaintiff's] patents. Then, [he] subtracted out those revenues he believed were subject to lost profits from the 50% 'but-for' revenue to determine the incremental revenue that comprises the royalty base. . . . Though [plaintiff] argues that the original 50% reduction was sufficient to 'isolate or apportion the incremental revenue associated with use of the patents in suit,' the Court finds that such reduction is insufficient. . . . [The expert] fails to properly apportion out the value of the unpatented features of [the] accused products in determining his reasonable royalty opinion. Consequently, [his] current opinion fails to provide an ultimate combination of royalty base and royalty rate based on the 'incremental value that the patented invention adds to the end product.'"

BMC Software, Inc. v. ServiceNow, Inc., 2-14-cv-00903 (TXED February 1, 2016, Order) (Gilstrap, J.)