The defendants moved to exclude the expert report of Mr. Ratliff, asserting that he made critical errors in his expert report on damages. The defendants specifically alleged that Mr. Ratliff committed basic math and reasoning errors in adjusting the royalty rate in an exclusive license from 1% to 4% for the non-exclusive hypothetical license.
The defendants first asserted that Mr. Ratliff made three math errors in adjusting a license agreement to derive the reasonable royalty rate for the hypothetical license. After reviewing the expert report, the district court found the approach sufficiently reliable to be admissible under the Federal Rules of Evidence and Daubert. "Why Cree and BU lowered the original 2% running royalty to 1% in the amended agreement, and whether additional payments from Cree and the sublicensees make the licensing scheme the economic equivalent of a 3% running royalty, are factual questions that go to the weight of his testimony."
The second contention was more successful. The defendants contended that Mr. Ratliff contradicted basic principles of patent law and economics in opining that the non-exclusive hypothetical license could command a higher royalty rate than the actual license because an exclusive license provides the licensee with more rights and benefits than a non-exclusive license. Mr. Ratliff based his opinion on his "own experience and surveys published in LES," which "reflect little or no difference in the semiconductor industry between exclusive and nonexclusive rates, especially where the licensee is incentivized and allowed to sublicense (since that effectively opens the door to the whole market)."
The district court found this to be insufficient. "As the defendants highlight, Mr. Ratliff does not provide citations for any of the alleged surveys published in LES. Mr. Ratliff further acknowledges in his report that 'an exclusive license would have a higher rate than a nonexclusive license everything else being equal.' . . . BU bears the burden of showing that Mr. Ratliff's expert testimony is reliable. The Court will not allow Mr. Ratliff to testify that the non-exclusive hypothetical BU-Epistar license would command a higher royalty rate based on surveys he has reviewed because he has not provided citations to any such surveys or demonstrated how they are related to the specific facts of this case."
Accordingly, the district court excluded part of Mr. Ratliff's expert opinion.
Trustees of Boston Univ. v. Everlight Elec. Co., Ltd., Case No. 12-11935-PBD (D. Mass. Oct. 2015)