A patent damages expert, who testified on the amount of damages for patent infringement, based his testimony on a settlement agreement occurring almost four years after infringement began. The Delaware magistrate judge recommended not excluding this testimony because the expert accounted for the gap in time in his analysis.


M2M Solutions sued Sierra Wireless for patent infringement in Delaware. Blackbird Technologies joined the case after M2M Solutions assigned the patent to Blackbird Technologies.

M2M Solutions and Blackbird Technologies submitted an expert's opinion calculating damages due for Sierra Wireless's alleged patent infringement. Amongst other legal challenges, Sierra Wireless moved to exclude the expert opinion and the magistrate judge recommended the court deny Sierra Wireless's motion.

The M2M Solutions Decision

In Federal court, trial judges apply the Daubert standard in deciding whether to admit expert testimony.  Under Daubert, judges act as gatekeepers ensuring that expert testimony rests on a reliable foundation and provides relevant information to fact-finders.  As opposed to a strict rule barring admissibility of evidence, the Daubert standard allows for evidence to pass to the fact-finder at trial to determine its weight and credibility after being subjected to cross‑examination.

In estimating the damages owed to the plaintiffs, M2M Solutions and Blackbird Technologies' expert relied on a "hypothetical negotiation" approach. This approach aims to determine the terms on which a willing licensor (patent holder) and willing licensee (accused infringer) would have negotiated a license at a date right before the alleged infringement began. Sierra Wireless, however, alleged that certain aspects of the expert's opinion rendered it unreliable.

Sierra Wireless argued that the expert improperly relied on a prior settlement agreement entered into by the Plaintiffs. Specifically, Sierra Wireless argued the expert's reliance on this settlement agreement was unreliable because it post-dates the hypothetical negotiation by nearly four years. Sierra Wireless also argued that the settlement agreement was not comparable to the hypothetical negotiation because Blackbird Technologies was a party to the settlement agreement but would not have been a party to the hypothetical negotiation.  Lastly, Sierra Wireless pointed to a disclaimer in the agreement indicating that the agreement did not reflect a reasonable royalty in litigation.

The magistrate judge rejected all these arguments.  With respect to the date of the settlement agreement, the judge explained that it is well-established that an expert may rely on evidence that post-dates the time of the hypothetical negotiation. Moreover, the expert accounted for the time difference between the settlement agreement and hypothetical negotiation date by evaluating and comparing sales beginning in 2014 that formed the basis of the 2018 settlement agreement.  The judge also disagreed that Blackbird's presence as a party to the settlement agreement made the agreement not comparable to the hypothetical negotiation because the settlement agreement expressly identified M2M Solutions as a party and signatory as well.  Finally, the judge rejected Sierra Wireless's reliance on the disclaimer because the expert acknowledged the differences between the settlement agreement and the hypothetical negotiation in his analysis.

Sierra Wireless next challenged the expert's failure to account for relevant sales after the first quarter of 2017. The judge again disagreed and cited law explaining the existence of additional sales did not make the expert's opinion inadmissible.

Finally, Sierra Wireless argued the expert's opinion should be excluded because the expert's damages calculation relied on a third-party product unrelated to the patent-in-suit and the hypothetical negotiation to value the functionality provided by the patented technology. Blackbird Technologies and M2M Solutions countered that valuations of infringing features based on comparable features in the marketplace may factor into damages calculations. The judge agreed, finding the expert had sufficiently relied on technical opinions, public product information, and public pricing information to establish the comparability of allegedly infringing features with features of the third-party product.

Each argument by Sierra Wireless addressed the weight and credibility of the expert's opinion rather than its admissibility. Accordingly, the judge recommended denying Sierra Wireless's Daubert motion seeking to exclude Blackbird Technologies' and M2M Solutions's expert's opinion on damages.

Strategy and Conclusion

An expert's opinion relying on evidence that post-dates the hypothetical negotiation and properly accounts for the gap in time may be admissible and considered by the court when it determines the proper amount of damages to award.  The same is true when the expert's opinion relies on agreements that may have different or unapplicable provisions if the expert considers the circumstances surrounding those differences and accounts for them in his or her opinion.

Further Information

The M2M Solutions  decision can be found  here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.