Expert’s Failure to Explain Basis For Hypothetical Negotiation “Compromise” Renders Opinion Unreliable

The court granted defendant's motion to exclude the testimony of plaintiff's damages expert regarding a reasonable royalty as unreliable for relying on a rule of thumb profit split. "In calculating a reasonable royalty resulting from a hypothetical negotiation, [the expert] determines [the parties'] respective maximum and minimum 'economic positions.' His analysis results in no overlap (i.e., the maximum amount [defendant] is willing to pay for a license is less than the minimum amount [plaintiff] is willing to accept). As [the expert] notes, 'both parties would need to compromise in order to arrive at a reasonable royalty.' He then proceeds to choose a rate between [defendant's] maximum and [plaintiff's] minimum. . . . [T]he Court agrees with [defendant] that [the expert's] failure to expressly account for varying pricing structures and the lack of a sufficiently detailed explanation for how he reached the 'compromises' set out in Table 15 renders [his] reasonable royalty analysis, as presently articulated, insufficiently reliable."

Yodlee Inc. v. Plaid Technologies Inc., 1-14-cv-01445 (DED February 1, 2017, Order) (Stark, USDJ)