Tuesday, February 6, 2018

Expert's Application of Rubinstein Bargaining Model Renders Reasonable Royalty Opinion Unreliable

The court granted defendant's motion to exclude the testimony of plaintiff's damages expert regarding reasonable royalties for three patents because his application of the Rubinstein bargaining model was unreliable. "⁠[The expert's] method is simply fancy guesswork. . . . Although [his] method is not . . . a rule of thumb or a 50-50 split, [he] does not tether the methodology to the facts of this case. . . . Using [the parties' weighted average cost of capital] as a proxy for patience in the Rubinstein model does not consider the actual stakes in the hypothetical negotiation or even the specific patents negotiated. As a result, [his] model would split the gains in the same way for a fundamental patent at the core of a company's technology and for a piece of technology that the company might consider not at all valuable. . . . It is not that [the expert] chose the wrong [weighted average cost of capital] as an input -- it is that using [weighted average costs of capital] the way he does has no relationship to the patents in this case and cannot reliably show how the parties would negotiate over these patents."

Limelight Networks, Inc. v. XO Communications, LLC et al, 3-15-cv-00720 (VAED February 2, 2018, Order) (Gibney, USDJ)

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