Page 20 - Acertaining Economic Damages Calculation

missibility, the district court concluded that the guidance of the Seventh Circuit is clear that an
expert’s opinion must have analytically sound bases so that it is more than mere speculation by
the expert.

Beyond consideration of the sufficiency of the data and the analyses performed, the district court also
considered the methodology employed and ultimately concluded that the methodology was unreliable
because of how the expert dismissed evidence that contradicted his underlying conclusion. Specifically,
the district court identified the following:

• Evidence of technical issues with the infringing units, which called into question the ability of
A.O. Smith to meet a launch date for the product.

• The expert’s failure to analyze competing products, including steps that these products might
take to be more competitive than the infringing units. Moreover, he failed to analyze the actual
sales of the competing products and assumed that the competitive positions would remain static
over time.

• The use of market share estimates that were belied by A.O. Smith’s actual market share.

Finally, the district court noted that the expert made several incredible assumptions that belied basic log-
ic, leading to the conclusion that the expert was completely speculating. Specifically, the district court
cited the following assumptions:

• Market share would remain constant for a 10-year period without any explanation

• Demand for pool products would remain constant for a 10-year period without any analysis, in-
cluding analysis of the economic environment

• The infringing units would enjoy a constant growth rate over the same 10-year period, and that
no other product, either current or future, would affect the product’s market position

• The infringing units have a 10-year life span, which appeared to have no rhyme or reason

The issues with the first expert’s opinion, in turn, affected the district court’s consideration of the relia-
bility of the second expert’s opinion because the data underlying the entire opinion was the first expert’s
projections of the sales of the allegedly infringing units. Beyond the issues with the underlying data, the
district court identified additional fatal flaws with the second expert’s opinion, including

• the use of the same arbitrary assumption regarding the product life-span.

• the use of the same arbitrary assumptions regarding market share and demand over the life of the
product.

• the "cherry-picking" of evidence and summary dismissal of issues associated with product de-
velopment without adequately explaining how the expert reached his conclusion to dismiss.

The cases discussed in this section demonstrate that the courts do not look favorably on expert opinions
that are premised on revenue and growth rate estimates that were not derived through the use of accept-
ed methodologies and generally reflect a lack of analysis to demonstrate how the data used is linked to
the expert opinion.

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