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Eric A. Rudich, Ph.D. is a social psychologist and senior litigation consultant at Magna Legal Services, where he offers jury research, consulting, and graphics services for companies involved in patent litigation. Lewis M. Koppel, Ph.D. is the principal of LMKonsult, LLC, where he consults and testifies on the financial aspects of intellectual property and related litigation. Michael P. Padden is a partner at Pearne & Gordon LLP, where he leads the litigation group, focusing his practice on litigation of intellectual property disputes.
On January 4, 2011, the Federal Circuit released its landmark decision in Uniloc USA, Inc. v. Microsoft Corp.,1 abolishing use of the so-called 25 percent rule, under which a hypothetical licensee would be expected to pay as a reasonable royalty 25 percent of the expected profits of the product incorporating the patent. The court found that this “rule of thumb” was “a fundamentally flawed tool” for determining a baseline royalty rate in the hypothetical negotiation that sets the reasonable royalty to which the patentee is entitled under 35 U.S.C. § 284.2 Because the 25 percent rule fails to tie the reasonable royalty rate to the particular facts of the case at issue, expert testimony relying on that rule is inadmissible under Daubert.3