On April 12, 2013, Judge Ellis of the Eastern District of Virginia issued an opinion in Suffolk Tech. LLC v. AOL Inc. and Google Inc., Case No. 1:12-cv-625 (Doc. No. 518), addressing use of the Nash Bargaining Solution (NBS) by Suffolk’s damages expert (Roy Weinstein). Google argued that Weinstein’s testimony was inadmissible because use of the NBS was not tied to the facts of the case. The court granted Google’s motion.
According to the court, Weinstein applied the Georgia-Pacific factors to the revenue stream associated with the accused product and then conducted a hypothetical negotiation based on the NBS. The court concluded that the NBS did not appear “to be tied to the facts of this case.” Slip op. at 3. According to the court, Weinstein appeared to “conclude summarily that the result of this hypothetical negotiation would be a ‘50/50 split of the incremental profits attributable to the patent-in-suit.’” Slip op. at 3 (quoting Weinstein’s report).
On March 1, 2013, the EDTX issued an opinion in VirnetX Inc. v. Cisco Systems, Inc., Case No. 6:10-cv-00417-LED (Doc. No. 745), granting in part and denying in part Cisco’s motion to exclude certain opinions by VirnetX’s damages expert, Roy Weinstein. The court addressed two issues: (1) whether Mr. Weinstein had accounted for the smallest salable patent practicing unit (SSU) in determining the royalty base the accused products; and (2) the acceptability of Mr. Weinstein’s reliance on the Nash Bargaining Solution (NBS) profit splitting model. The court ruled for Cisco on issue #1 and for VirnetX on issue #2.
The SDCA in Gen-Probe Inc. v. Becton Dickinson & Co., Case No. 09-CV-2319 BEN NLS and 10-CV-0602 BEN NLS (S.D. Cal. November 26, 2012), ruled on Daubert motions by plaintiff Gen-Probe and defendant Becton Dickinson (“BD”) regarding damages issues. The court denied both motions.
NDCA Allows Use of Nash Bargaining as “Check” on Royalty Rate; Rejects Use of EMVR Because Accused Products only “Capable” of Infringement
On March 29, 2012, in Mformation Techs., Inc. v. RIM, No. C 08-04990 JW (NDCA), Judge Ware ruled on motions to exclude expert testimony, including testimony from damages experts. The case addresses two interesting damages issues: 1) use of the Nash bargaining solution in determining a reasonable royalty rate, and 2) the entire market value rule for accused products that are only “capable” of infringement, i.e., that do not always infringe.
Oracle v. Google: NDCA Judge Alsup Rejects Nash Bargaining Solution and Grants Google’s Motion to Exclude Oracle’s Expert’s Report and Testimony Advocating $1.4B to $6.1B in Damages
The battle between Oracle and Google, concerning patent and copyright infringement relating to features of Java and Android, is approaching an October trial date. Damages is a huge issue in the case—in fact, in an opinion issued by Judge Alsup on July 22, 2011, Oracle’s expert has submitted a report advocating that Google should pay Oracle somewhere between $1.4 and $6.1 billion in damages. See Oracle America, Inc. v. Google Inc., No. C 10-03561 WHA (N.D. Cal. July 22, 2011).
On May 21, 2011, Oracle served the expert report of Dr. Iain M. Cockburn, who is a professor of finance and economics at Boston University. Dr. Cockburn provided an opinion on damages using the Nash bargaining solution and other economic analysis. Nash bargaining is named for its creator, Dr. John Nash, a Nobel Prize winning mathematician at Princeton, who was the subject of an Oscar-winning movie entitled “A Beautiful Mind.” Nash proposed that two people bargaining over a unit of some good (e.g., money) will get nothing unless their portions total no more than the total of the good, e.g., the total amount of money. A Nash bargaining solution is a “Pareto efficient” solution to a bargaining problem. Pareto efficiency, named after an Italian economist, can be summarized as follows: if an initial allocation of a good among two or more individuals can be changed to make one individual better off without making another individual worse off is a Pareto improvement, and a Pareto efficient (or Pareto optimal) allocation is achieved when no further Pareto improvements can be made. (See http://en.wikipedia.org/wiki/Pareto_efficiency.) Simply put, the Nash bargaining solution is the best possible result for both parties.