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May 23

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No Expert Leads to No Damages

A recent ruling in a New Jersey federal court will no doubt serve as a warning for litigants who decline to employ the services of an expert to establish reasonable royalties.  In the matter of Unicom Monitoring, LLC (“Plaintiff”)v. Cencom, Inc. et al (Civil Action No. 06-1166 (MLC)), U.S. District Judge Mary L. Cooper granted Defendant’s motion for summary judgment based on Plaintiff’s failure to prove damages despite a finding of infringement.  The Court found that the fact witnesses Plaintiff offered were not capable of the providing the required information to calculate damages.  Without an expert to address the issues, damages were deemed appropriate, but not quantifiable.

The Court explained how an expert could have provided needed assistance to the Court:

“Although there are many Georgia-Pacific factors which the Court can consider, the failure to present competent evidence regarding how the factfinder should perform the reasonable royalty calculation is fatal to [Plaintiff’s] claim for reasonable royalty damages. A factfinder cannot be asked to speculate from numbers unsupported by law and divorced from expert guidance, but rather the factfinder needs either clear guidance from an expert about how to apply complex calculations or simple factual proofs about what this patentee has previously accepted in factually analogous licensing situations.”

Accordingly, the Court found that despite the finding of liability and an entitlement to damages, Plaintiff did not meet its burden in proving the amount of damages and dismissed the case with prejudice (more details are available in this article).  This result should serve as a cautionary tale for those who decline to employ experts in such circumstances and put themselves at risk for a similar chain of events.

About the author

Renee Howdeshell

Renee Howdeshell is a founding member of Fulcrum Inquiry, an accounting, finance and economic consulting firm that performs damage analyses for commercial litigation, forensic accountings, royalty & distribution audits, financial investigations, and business valuations. Ms. Howdeshell holds a degree in Finance and Marketing from the University of Virginia's McIntire School of Commerce and is a Certified Public Accountant (CPA) and a Certified Fraud Examiner (CFE). She has testified as an expert witness in federal court, CA state court and arbitration regarding the results of her work. She can be reached at (213) 787-4112 and her resume is available at www.fulcrum.com.

Permanent link to this article: http://betweenthenumbers.net/2013/05/no-expert-leads-to-no-damages/

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