Why was expert testimony on the 25% royalty rule deemed inadmissible in UNILOC v. Microsoft?

Why was expert testimony on the 25% royalty rule deemed inadmissible in UNILOC v. Microsoft?

• A. It relied on confidential internal data
• B. It did not tie the royalty base to the case's facts and hypothetical negotiation
• C. It was not properly disclosed
• D. It contradicted patent law

Answer: (B)

In patent damages, the expert’s method must tie the royalty rate and the royalty base to the facts of the case and to the hypothetical negotiation between the patentee and the infringer. A fixed 25% royalty is a general rule-of-thumb that applies a set fraction of net revenues without considering how the specific invention is valued in this case, the scope of the license, market licensing practices, or the particular terms that would arise in a hypothetical negotiation. In UNILOC v. Microsoft, the court rejected that approach because it did not anchor the royalty to the case’s facts or to a plausible hypothetical licensing discussion. Without that grounding, the method is not reliable for determining damages in this specific dispute. The other options focus on issues like data confidentiality or disclosure or legal rules, but the central flaw here is the lack of case-specific linkage to the hypothetical negotiation.

In patent damages, the expert’s method must tie the royalty rate and the royalty base to the facts of the case and to the hypothetical negotiation between the patentee and the infringer. A fixed 25% royalty is a general rule-of-thumb that applies a set fraction of net revenues without considering how the specific invention is valued in this case, the scope of the license, market licensing practices, or the particular terms that would arise in a hypothetical negotiation. In UNILOC v. Microsoft, the court rejected that approach because it did not anchor the royalty to the case’s facts or to a plausible hypothetical licensing discussion. Without that grounding, the method is not reliable for determining damages in this specific dispute. The other options focus on issues like data confidentiality or disclosure or legal rules, but the central flaw here is the lack of case-specific linkage to the hypothetical negotiation.