Judge Gilstrap in the Eastern District of Texas recently held that plaintiff’s damages expert failed to properly apportion the royalty base “because he has failed to specify, distinguish, and then separate the value of BMC’s patented features from the unpatented features of ServiceNow’s products.” Plaintiff’s damages expert created his relevant royalty base by simply reducing defendant’s total revenue by 50%, then subtracting out the revenues he determined were subject to lost profits. The Court rejected plaintiff’s argument that the “original 50% reduction” was sufficient to isolate or apportion the incremental value associated with the infringement of the asserted patents. Although the Court recognized that the damages expert adequately identifies a portion of defendant’s revenue that is at risk, the Court rejected the asserted royalty base because the expert failed to apportion out any of the value of the unpatented features in the accused products. Relying on the Federal Circuit’s recent Ericsson opinion, the Court held that the “expert fails to provide an ultimate combination of royalty base and royalty rate based on the ‘incremental value that the patented invention adds to the end product.’” Ultimately, the Court carried defendant’s motion to exclude and ordered plaintiff to supplement its damages exert report to correct the deficiency within ten days, reserving the right to readdress this issue after supplementation.
BMC Software, Inc. v. ServiceNow, Inc., Case No. 2:14-cv-903 (E.D. Tex. Feb. 1, 2016) (Gilstrap, J.).