Detail Counts to Support Patent Damage Analysis

In Yodlee v. Plaid Technology, No. 14-1445-LPS-CJB (D. Del. 2017), Judge Leonard Stark gave guidance on the boundaries of an admissible opinion for a reasonable royalty analysis in a patent case.  Yodlee v. Plaid involves a patent relating to a method and apparatus for gathering summary information from websites and presenting that information as HyperText Markup Language.  The Plaid software used a different pricing model and included features in addition to those allegedly covered by the patents in suit.  Yodlee offered damage theories for both lost profits and reasonable royalties through damages expert Mark Robinson. Judge Stark’s comments on Mr. Robinson’s reasonable royalty analysis is interesting with respect to apportionment and profit splitting.

The apportionment requirement mandates that an expert apportion defendants profits between patented and unpatented features.  Erricsson, Inc. v. D-Link Sys. Inc., 773 F.3d 1201 (Fed. Cir. 2014).  In his expert report, Mr. Robinson attributed the patents contribution at 60%.  Plaid argued that this was arbitrary.  In response, Yodlee referenced Mr. Robinson’s analysis of the functionality of the accused product.  Judge Stark was unpersuaded by Mr. Robinson’s apportionment analysis.  Judge Stark held that Mr. Robinson’s analysis was deficient as he relied on witnesses not listed in Yodlee’s Rule 26 disclosures and Mr. Robinson’s analysis lacked sufficient detail in the explanation as to how the apportionment matter was justified.  Judge Stark, however, allowed Mr. Robinson an opportunity to amend his report.

With regard to profit splitting Mr. Robinson’s portion of the reasonable royalty analysis Plaid sought to per se exclude as an impermissible “rule of thumb” profit split.  In the author’s opinion, Mr. Robinson’s analysis was less of a “rule of thumb” and more of a arbitrary compromise between Yodlee’s minimum demand and the maximum Plaid would pay.  Judge Stark found that Mr. Robinson’s analysis of the Georgia Pacific factors was far too superficial to justify a generic compromise between Yodlee’s minimum and Plaid’s maximum.  In particular, Judge Stark held that the analysis must include accommodation for the different pricing models and failed to provide sufficient detail as to how the parties would reach various compromises.  Again, Judge Stark allowed Mr. Robinson to supplement.

Lessons for Practice

Here, the main takeaways are to make sure that experts who materially rely on witnesses those witnesses should be identified to opposing counsel, and preferably in a Rule 26 disclosure to allow fair examination of the facts.  Apportionment continues to be a centrally important issue in a damage analysis.  The author recognizes that the different pricing models used by various software products may present challenges for a traditional Georgia Pacific analysis.   Nonetheless a reasonable royalty should include as much detail as possible to support an admissible opinion.

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