By Tony Zeuli of Merchant & Gould
Tony Zeuli is a trial lawyer specializing in patent and trademark litigation with the IP firm Merchant & Gould. He also has considerable experience before the Court of Appeals for the Federal Circuit. Tony has given several presentations and published numerous articles on intellectual property litigation, especially patent claim construction. His articles have also appeared in The Federal Lawyer and Bench & Bar. Prior to joining Merchant & Gould, Tony was a physics engineer at Argonne National Laboratory, where he was involved in the study of nuclear physics. Mr. Zeuli can be reached at 612.371.5208, or by email at firstname.lastname@example.org, or by visiting his web site at http://www.zeuli.com.
Be careful if your damages expert is relying on agreements that settled patent litigation as a basis for a reasonable royalty. More and more judges are becoming unwilling to permit an expert witness to testify when part of his damage calculation of a reasonable royalty is based on lump sums or royalty amounts derived from agreements that settled patent litigation. The reasons given for excluding the experts’ testimony is that agreements settling litigation are not relevant to what a willing licensor and willing licensee would have negotiated for a royalty. I know what you are thinking: it is a hypothetical negotiation so where is the harm?
The problem is that a hypothetical negotiation should take place between a willing licensor and a willing licensee with the expectation that they would arrive at the approximate value of the technology. A litigation settlement, on the other hand, does not fall under that construct. A defendant may be willing to pay more than the patented technology is worth to avoid the uncertainty or cost of litigation. A patentee might be willing to accept less than the technology is worth to likewise avoid the uncertainty or cost of litigation.
Indeed, the Supreme Court warned as much over a hundred years ago in Rude v. Westcott, when the Court stated “It is clear that a payment of any sum in settlement of a claim for an alleged infringement cannot be taken as a standard to measure ...