Case Cite

Alexam, Inc. v. Best Buy Stores L.P., No. 2:13-cv-00002-MHS-CMC, slip op. (E.D. Tex. May 15, 2013).

IPDQ Commentary

In Alexam, the magistrate judge appeared to breathe new life into the “Rule of Thumb,” relying on a Federal Circuit opinion authored by Chief Judge Rader to do so! But, a quick review of Energy Transportation Group, Inc. v. William Demand Holding A/S, 697 F.3d 1342, 1357 (Fed. Cir. 2012) may shake reliance on this case as support for the continued viability of a rule of thumb analysis in opposing a Daubert challenge .

First, Energy Transportation was decided in response to a motion challenging as “outrageous” a jury’s verdict and seeking a new trial. To succeed on such a challenge, the moving party “must show that the award is, in view of all the evidence, either so outrageously high or so outrageously low as to be unsupportable as an estimation of a reasonable royalty.” Id. at 1356 (emphasis added) (citation omitted). The Daubert standard and methodology are far different.

Second, the language from Energy Transportation that the Alexam court appears to have used is hardly a glowing endorsement of “rule of thumb.” “In this case, however, Mr. Musika [the damages expert’s] references to the 25 percent ‘rule’ (which is no longer a ‘rule’) did not irretrievably damage the reasonableness of his method and result in arriving at recommended royalty rates.” Id. at 1356. This language suggests the testimony at issue may have come before Uniloc.

Finally, the ruling by the Federal Circuit does not re-adopt the rejected “rule of thumb” analysis:

Thus, this court perceives that the record supports the jury’s award with substantial evidence based on Mr. Musika’s TWR analysis and discussion of the premium on operating profits enjoyed by the accused products. Defendants have not shown the award is outrageous or grossly excessive. The district court did not err in denying a new trial.

Case Summary

Arguing improper application of a “rule of thumb” analysis and the EMVR, Defendant sought to exclude the opinion of Plaintiff’s damages expert, James McGovern. Id. slip op. at 1, 3. Denying the motion, the Magistrate Judge held:

  • In a ruling in an earlier case involving a different expert, but the same Plaintiff, the court held first that the use of a “rule of thumb” was more properly addressed in a motion in limine, then concluded it would allow the expert to testify after he established a proper predicate connecting the 50% rate to the facts of the case. Id. slip op. at 4.
  • Even assuming the court were to rule the 50% number must be excluded, the ruling in Energy Transportation Group, Inc. v. William Demand Holding A/S, 697 F.3d 1342, 1357 (Fed. Cir. 2012) provides use of a “rule of thumb” does not irretrievably damage the reasonableness of a damages inquiry. Id.
  • McGovern properly utilized the Georgia-Pacific methodology in reaching his opinion. Id. In any event, concerns about his methodology are best addressed through cross-examination at trial. Id. slip op. at 4-5.