No. 08-10521
GE/PMI’s Federal Rule of Evidence 702 and Daubert[1] objections to Dr. Prescott’s testimony and permitted him to testify at trial. After hearing his testimony, the district court concluded that it should be stricken in its entirety, determining that Dr. Prescott’s conclusions regarding MGE’s lost profits were based on insufficient facts and data, including unsupported assumptions regarding MGE’s lost market share and service pricing. The district court also found Dr. Prescott had no experience in assessing hypothetical reasonable royalty rates and that his proffered hypothetical reasonable royalty rate was not based on objective analysis.
Once Dr. Prescott’s testimony was stricken, MGE offered a final witness, MGE general manager Michael O’Brien, who presented testimony relating only to MGE’s reasonable royalty damages. O’Brien was never designated as an expert on damage calculations. The district court ultimately found his testimony insufficient to permit MGE to offer a jury instruction on reasonable royalty damages.[2]
MGE’s only remaining evidence of damages was DX 37, the bar graph indicating PMI’s total revenue from 2001 through 2004. Though this was an exhibit prepared by GE/PMI, the district court admitted the exhibit during Dr.
- ↑ Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 592 (1993).
- ↑ Typically, to demonstrate reasonable royalty damages, a plaintiff presents evidence as to “what the parties would have agreed to as a fair price for licensing the defendant to put the trade secret to the use the defendant intended at the time the misappropriation took place.” Univ. Computing Co. v. Lykes Youngstown Corp., 504 F.2d 518, 539 (5th Cir. 1974). However, O’Brien was only able to testify as to the royalty amounts that MGE would ask a competitor to pay to prevent that competitor from entering the UPS service industry—that is, staggeringly high royalty amounts that would price out competitors. Such amounts are not cognizable as a “reasonable royalty” calculation at which a buyer and seller would agree to be market value for a particular piece of software. See Alcatel USA, Inc. v. Cisco Sys., 239 F. Supp. 2d 660, 669 (E.D. Tex. 2002) (“[T]his measure is to be calculated based on a reasonable royalty to which the parties would have agreed at the time of the alleged misappropriation. While the Court recognizes that some degree of speculation is inherent in calculating a suppositious licensing agreement between two parties that has never occurred, this hypothetical construct . . . must contain some degree of certitude.” (emphasis added)).
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