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Jan 02

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25% Reasonable Royalty Rule is Rejected even with no Objection

In Spine Solutions vs. Medtronic Sofamor Danek, Case No. 2:07-02175-JPM-dkv (W.D. Tenn. Nov. 23, 2011), a District Court ordered a new trial on damages based on the Federal Circuit’s ruling in Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292 (Fed. Cir. 2011). In the Uniloc case, the widely-used 25% royalty rule was rejected as not having sufficient basis to meet the minimum evidence threshold.

The Medtronic case is interesting because it addresses what should occur when an objection was not made in the underlying trial, yet subsequent Appellate authority concludes that the underlying evidence was objectionable. The Court was tempted to not reopen the prior evidence, describing the issue as follows:

It may be appropriate in some circumstances for a court to revisit an issue that would otherwise be deemed waived and beyond the scope of an appellate mandate. Such circumstances must be exceptional. Otherwise, the underlying rationales for the doctrines of law of the case and the mandate rule, such as finality, judicial economy, and consistency, would be thwarted.” [Citations omitted]

The Court determined that the 25% rule was sufficiently accepted before the Federal Circuit’s Uniloc decision that the defendant had a good basis for not objecting to its use when the evidence was first being offered. Therefore, the lack of a prior objection does not preclude overturning the jury’s verdict. The Court concluded that the jury’s conclusion was unmistakably tainted by a rule of thumb that is no longer valid, so it would be unjust for the Court to let the jury’s verdict stand.

This fact pattern exists in other cases.  When a party wants another damages try, the logic of this Medtronic case provides the basis for damages to be reopened.

 

About the author

David Nolte

I am a founding principal of Fulcrum Inquiry, an accounting and economic consulting firm that performs damage analysis for commercial litigation, forensic accountings, financial investigations, and business valuations. I am a Certified Public Accountant (CPA) and an Accredited Senior Appraiser (ASA), as well as having other professional credentials. I regularly serve as an expert witness involving damages measurement. My litigation-oriented resume is on Fulcrum's website.

Permanent link to this article: http://betweenthenumbers.net/2012/01/25-reasonable-royalty-rule-is-rejected-even-with-no-objection/

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