Patent Damages
28Jan/13Off

MDFL takes an expansive view of comparable licenses

The MDFL in Harris Corp. v. Ruckus Wireless, Inc., Case No. 6:11-CV-618-Orl-36KRS (M.D. Fla. January 16, 2013), ruled on plaintiff Harris’s motion to strike the expert report and exclude testimony (i.e., a Daubert motion) of defendant’s damages expert Richard Ostiller.  Harris made several arguments challenging the reliability of Ostiller’s opinions, the most interesting of which involved Ostiller’s reliance on two license agreements that he concluded were comparable and the methodology he used to locate those licenses (which did not involve either of the parties to the lawsuit).  The court denied the motion.

Ostiller applied the Georgia-Pacific framework, arriving at his royalty rate starting point of 2.3% based on two allegedly comparable licenses.  Harris challenged the licenses, arguing they were “radically different,” because neither involved the parties in the case or the patents in suit, and it was unclear whether they were even directed to the same or similar technology.   Indeed, Harris argued that Ostiller failed to provide testimony to support the conclusion that the two parties to each agreement were similarly situated to the plaintiff and defendant at the time of the hypothetical negotiation.  It was interesting that Ostiller located the two agreements by using keywords taken from the patents in suit and associated legal filings and searching in royalty databases (see below).  Moreover, one of the agreements was an asset purchase, including products and associated technology, and the other was a mixed technology/patent license.  Technology-wise, the best Ostiller could do was assert they were “analogous to certain of the technologies embodied in the patents in suit.”  Despite this thin technological connection, the court bolstered this opinion with defendant’s expert, Dr. John Thompson, who “confirmed the technology in both agreements was comparable to the to the technology involved in the patents in suit.”  Ostiller took the royalty rates in the two agreements and computed the average.  This became his starting point for the Georgia-Pacific analysis.

The court’s concluding paragraph on the comparability issue is worth quoting in full:

The Tantivity and DPAC Agreements are not perfectly analogous, and they need not be. In fact, it is nearly impossible to find an identical agreement in any patent dispute. However, the Court agrees with Ostiller that the Agreements “provide clarity with respect to the financial arrangements between the parties” and are “instructive in developing a reasonable royalty rate in this matter.” Id. Additionally, Ostiller’s opinions are not based solely on those Agreements. Rather, he used them as a starting point in his damages analysis. Thus, the Court will not strike Ostiller’s testimony on the grounds that he relied upon license agreements that were “radically different” from the hypothetical agreement under consideration. This argument goes to the weight to be accorded Ostiller’s opinions and not the admissibility of the opinions.

From the opinion, it  appears the agreements were between different parties, did not involve the patents in suit, involved at best “analogous” technology, and were not comparable in terms of rights granted—one was an asset purchase and the other involved patents and technology.

Another interesting part of the opinion involves how Ostiller located the licenses.  Apparently, he found them in databases called RoyaltyStat and RoyaltySource.  The court found these databases were sufficiently reliable, citing Black & Decker v. Bosch Tools, 2006 WL 5156873, at *3 (N.D. Ill. 2006); St.-Gobain Corp. v. Gemtron Corp., 2006 WL 1307890, at *2 (W.D. Mich. 2006).  Again, the court’s words are interesting and quoted in full:

Next, Plaintiff asserts that because Ostiller’s methodology for determining which market transactions are relevant to this case is not falsifiable, his Expert Report and testimony must be stricken. Doc. 65, pp. 11-12. In support of this argument, Plaintiff contends that Ostiller cannot replicate his methodology because:

(1) he is not familiar with the process by which the companies

RoyaltyStat and RoyaltySource gather information/transactions in

response to inquiries; and (2) he is unable to provide a list of search

terms he used to gather the transactions he obtained from which he

then selected the “particularly relevant market transactions.”

Id. at 11.

During his deposition testimony, Ostiller stated that he did not know how the databases he utilized processed the information once it was provided. See Doc. 62, Ex. 1, pp. 90-92. However, experts are permitted to rely upon licensing materials obtained from databases such as RoyaltyStat and RoyaltySource in formulating their opinions. See, e.g., Black & Decker v. Bosch Tools, 2006 WL 5156873, at *3 (N.D. Ill. 2006); St.-Gobain Corp. v. Gemtron Corp., 2006 WL 1307890, at *2 (W.D. Mich. 2006). Moreover, requiring experts to have a complete understanding of the innerworkings of third party sources would be extremely difficult in practice, and is unsupported in case law.

Also at his deposition, Ostiller testified that he could not recite the list of search terms provided to RoyaltyStat and RoyaltySource from memory. See Doc. 62, Ex. 1, p. 88. However, Ostiller stated that he possibly still had the list of keywords he used, and offered a number of keywords that he believed were on that list. Id. at 91. In other words, with the proper keywords, it is certainly possible that Ostiller’s methods could be recreated. Accordingly, the Court will not strike Ostiller’s testimony on the grounds that his methods are not falsifiable. This argument, too, goes to the weight to be accorded Ostiller’s opinions.

Comments (2) Trackbacks (0)
  1. Appreciate it for helping out, fantastic information. “If at first you don’t succeed, find out if the loser gets anything.” by Bill Lyon.

  2. Thanks guys, this is great stuff.


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