Page 79 - Acertaining Economic Damages Calculation

smartphone have to be to compensate you for the occasional partial obstruction caused by these
windows?" fn 19

Although the court indicated that "consumer surveys designed to determine the value of a particular fea-
ture or property of a consumer product are a common and acceptable form of evidence," fn 20 Motorola’s
survey did not look for consumer opinion on partial obstruction, and Apple’s expert’s calculation was
based on what the court determined were a variety of arbitrary, unverified, and, in some cases, impossi-
ble assumptions. For example, under the expert’s method, "the total value of all the attributes on each
respondent’s list would come to 500 percent of the value of the phone." fn 21

Conducting a consumer survey is, in general, outside the expertise of most damages experts and typical-
ly requires relying on the work of another expert. In this case, by relying on a survey that was not de-
signed or intended to answer questions specifically relevant to the items at issue, the damages expert
opened himself to criticism, which resulted in the exclusion of his testimony.

Best Evidence and the Use of Contemporaneous Transactions to Establish Damages

Courts often find contemporaneous transactions to be probative in establishing damages. One case,
Schonfeld v. Hillard, has been cited in a number of opinions. As discussed in the text that follows, the
court found contemporaneous transactions to provide more reliable evidence of damages than projected
lost profits, which were found to be more speculative and unreliable and, thus, failed to meet the reason-
able certainty standard. Even though contemporaneous transaction(s) supported considerably lower
damages than what was being claimed under a lost profits approach, it was evident that the courts found
them more persuasive. In other cases, the availability of contemporaneous data was found to add to the
credibility of the expert’s analysis, provided they reflected legitimate arm’s-length transactions.

Schonfeld v. Hilliard, 218 F.3d 164 (2d Cir. 2000)

International News Network, Inc. (INN) was formed to distribute a British news and information chan-
nel in the United States. INN brought in Reese Schonfeld (Schonfeld), a founder and former president of
Cable News Network (CNN), first as a consultant and then as a shareholder to help negotiate a pro-
gramming license with the British Broadcasting Corp. (BBC). After obtaining a 20-year exclusive li-
cense with the BBC, INN initially agreed to sell its contract rights to Cox Cable Communications (Cox).
However, Schonfeld agreed to walk away from this deal based upon representations made by Russ and
Less Hilliard, INN’s other shareholders, to invest up to $20 million to fund programming to be pur-
chased by INN from the BBC under a new supply agreement. The Hilliards’ failure to provide the prom-
ised funding ultimately led to the failure of the venture.

Schonfeld filed suit against the Hilliards, alleging, among other things, fraud and breach of contract.
Schonfeld’s damages expert calculated lost profits of $112 million to $269 million based upon a con-
temporaneously prepared INN business and marketing plan prepared by a leading financial services

fn 19 Apple, Inc., 2012 WL 1959560, at *5.

fn 20 Id.

fn 21 Id. at *4.

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