In a recent decision from the United States District Court for the Eastern District of Texas, the court granted in pat and denied in part plaintiff's motion to exclude the expert testimony of defendants' damage experts. Plaintiff argued that the opinions of defendants' experts were unreliable and used flawed methodologies because they failed to establish that the license agreement upon which their analyses were based were comparable to the technology of the patent-in-suit.

With respect to defendants' first expert, the district court noted that the expert had not attempted to establish a link between the technology underlying the first license and the technology underlying plaintiff's patent. But the court noted that the expert testified he had relied upon the defendants' technical expert to learn than that the technology in the first license agreement is more important, in the opinion of the technical expert, than the technology covered by plaintiff's patent. The court found that this testimony and reliance was sufficient to provide a link between the technology underlying the first license and that underlying plaintiff's patent and, accordingly, denied that part of the motion.

With regard to the second license, the court stated that the expert relied upon this second license agreement to establish that defendants would have agreed to a lump-sum license as opposed to a running royalty. The court concluded that the expert had not established a link between the technology underlying this second license agreement and the technology underlying plaintiff's patent. Accordingly, the court held that the expert could only use the license to discuss general licensing practices, such as preference for a running royalty or a lump sum, but the second license could not be used to testify as to the royalty rates themselves or those found in the second license agreement.

Turning to the second expert, the court concluded that the expert's general statement that the technology in the license agreements is in the same general field as the technology described by plaintiff's patent was insufficient to establish a link between the licenses and the patent. The district court also found that the expert had made no effort to rely on a technical expert that could establish such a link. Accordingly, the court concluded that the second expert could only testify as to general licensing practices based on the license agreement but could not testify as to royalty rates discussed in those license agreements.

Finally, the court considered a cross-license that the second expert had relied upon to determine a royalty rate. Here, the court found that the expert had attempted to establish a link between the licensed technology and the patent by describing and analyzing the technology licensed in the cross-license agreement. Accordingly, although a close call, the court concluded that the expert had "presented sufficient evidence to allow the jury to weigh the economic value of the patented feature against the economic value of the features and services covered by the cross-license."

* * *

The distinction drawn by the court in admitting certain expert testimony but not others is an important point to note. In order to permit an expert to testify as to certain royalty rates in license agreements to establish a reasonable royalty for a patent, it is important to make sure that the damage experts demonstrate a connection between the licensed technology and the technology at issue in the patent-in-suit, showing that link based on the damage expert's own analysis or on the analysis of a technical expert. Absent that evidence, the expert may be precluded from relying on the license agreements to determine a reasonably royalty for the patent-in-suit.

Convolve, Inc. v. Dell, Inc., Case No. 2:08-CV-244-CE (E.D. Tex. July 8, 2011)