Page 83 - Acertaining Economic Damages Calculation

[Expert] did not do any of the calculations that distinguish a lost asset damage model from a
straightforward lost-profits one. Instead, he calculated the value based solely on expected future
profits. Because of this, the record contains no evidence of the market value of the exclusive li-
cense... The only evidence of damages — [Expert’s] testimony — reflects a speculative lost-
profit analysis and fails to show any evidence of the fundamental aspect of its own damage theo-
ry. fn 27

Holston Investments Inc. B.V.I. v. LanLogistics, Corp., 2010 WL 2495413 (S.D. Fla. June 18, 2010) fn 28

After finding as a matter of law that the defendant LanLogistics, Corp. (LanLogistics) violated a con-
tractual right of first refusal allowing plaintiff Holston Investments, Inc. B.V.I. (Holston) to purchase
LanBox, Inc. (LanBox), a subsidiary company, the court held a bench trial to determine the amount of
damages due plaintiffs. The court heard expert testimony from both sides on the investment value of
LanBox at the time of the sale.

Among the areas of dispute between the parties’ damages experts, LanLogistics emphasized that its ex-
pert relied on other bids as evidence of value. Although the court agreed that an open bidding process
would generally be the best evidence of value, the testimony at trial failed to prove that such process had
occurred. Instead, the trial testimony reflected that many of the bidders had insider relationships with the
LanLogistics-affiliated companies. Therefore, the evidence was inadequate to demonstrate an open bid-
ding process.

Given this evidence, the court disagrees with defendant’s expert that the other bids were the best evi-
dence of value and relied upon plaintiff’s expert’s calculation of damages as the basis for its judgment.
Plaintiff’s expert presented a business valuation that considered a capitalization of earnings-based in-
come approach and a prior transactions-based market approach.

Best Evidence and the Use of Statistical Sampling

Experts sometimes face a problem with the large magnitude of transactions that must often be examined
as part of a damages analysis. In addressing this issue, some experts may use statistical sampling proce-
dures and apply the results to the broader population of data, while still maintaining the integrity of their
opinions. One recent case addressing the use of statistical sampling is Commonwealth Sci. & Indus. Re-
search Org. v. Cisco Systems.

Commonwealth Sci. & Indus. Research Org. v. Cisco Sys., 2014 WL 3805817 (E.D. Tex. July 23, 2014)

This case concerns an alleged infringement of U.S. Patent No. 5,487,069 (the ‘069 patent) by defendant
Cisco Systems, Inc. (Cisco) and the related dispute over damages owed to plaintiff Commonwealth Sci-
entific and Industrial Research Organization (CSIRO), the principal scientific research organization of
the Australian Federal Government. The court approved a joint stipulation by the parties to try the case
solely for damages, not liability. As Cisco previously acquired Linksys, which used the patented tech-
nology, Linksys products were included.

fn 27 Flourine on Call, 380 F.3d at 861 (emphasis added).

fn 28 Although portions of this case were remanded on appeal, the issues pertaining to this decision were not relevant to the issues dis-
cussed herein.

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