Judge Admits Reasonable Royalty Testimony Despite Apportionment Deficiencies

Image of TRX training equipment
Image: TRX training equipment
Judge Freeman denied defendant WOSS’ Motion in Limine to exclude plaintiff TRX’s damages expert.  WOSS moved to exclude TRX’s expert with respect to both lost profits and reasonable royalty damages.

WOSS argued that TRX’s lost profit calculations were improperly based on the price of TRX’s entire product rather than just the patented components.  WOSS further argued that TRX’s lost profit calculation made the unsubstantiated assumption that TRX’s products practice the claimed invention.

Judge Freeman denied WOSS’ motion with respect to lost profits on both points.  First, she ruled that TRX was not required to apportion in their lost profits analysis because the analysis was based on the Panduit factors.  Judge Freeman cited Brocade Communications Systems, Inc. v. A10 Networks, Inc., 2013 WL 10601009, *2-3 (N.D. Cal. 2013) in support of this position.  Second, Judge Freeman pointed out that TRX need not sell patented articles to recover lost profits.  Here she cited Rite Hite Corp. v. Kelley Co., 56 F.3d 1538, 1548 (Fed. Cir. 1995).

WOSS next argued that TRX’s reasonable royalty analysis was improper because it did not apportion for the value of the patented features.  TRX based its reasonable royalty on the entire value of the patented products and argued apportionment was not necessary.  WOSS countered by pointing out that TRX’s expert contradicted their own position by earlier characterizing an invalidated patent as fundamental and leading to significant commercial success.

Judge Freeman found that TRX’s apportionment analysis was deficient but declined to exclude TRX’s expert for the flaw.  She found deficiencies because TRX did not attempt to apportion the royalty base, and because TRX’s rate apportionment analysis was largely qualitative in nature.  Judge Freeman explained that TRX’s expert gave reasons for why apportionment was not needed.  She therefore declined WOSS’ motion on this issue because “the expert [is] free to determine that … incremental value and the value for the entire product are one in the same.”

About the Author
Dr. Eric Becker is an economic expert at Becker North, Inc.  He specializes in the application of economics to complex commercial disputes.  His experience in intellectual property matters includes the analysis of economic damages, lost profits, reasonable royalty and commercial success.  Dr. Becker earned his Ph.D. in economics from Yale University.

Citations
Fitness Anywhere LLC v. Woss Enterprises, LLC, 5-14-cv-01725, Doc 209, Order Regarding Motions in Limine (C.A.N.D., March 6, 2017).

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