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A “Classic Example” of Competing Damages Experts

January 24, 2003

Decision icon Decision

Last Month at the Federal Circuit - February 2003

Judges: Plager (author), Michel, and Lourie

In Micro Chemical, Inc. v. Lextron, Inc., No. 02- 1155 (Fed. Cir. Jan. 24, 2003), the Federal Circuit ruled that the lower court had properly performed its gatekeeping role under the Federal Rules of Evidence and did not abuse its discretion in allowing Micro Chemical, Inc.’s (“Micro Chemical”) damages expert to testify. The Court further ruled that substantial evidence supported the jury’s damages award.

The patent-in-suit, U.S. Patent No. 5,315,505, relates to a system for tracking the medical records of livestock. Both the Plaintiff, Micro Chemical, and the Defendants, Lextron, Inc. and Turnkey Computer Systems, Inc., provide feedlots with these systems either for free or at a substantial loss, as these systems support sales of interrelated products. After stipulating that the Defendants’ unmodified systems infringe, the parties’ only dispute remaining at trial related to the amount of damages.

The Defendants filed a motion to exclude testimony of the Plaintiff’s expert, Edward Fiorito, arguing that Fiorito (1) based his opinion on disputed facts, and (2) misapplied the Georgia-Pacific factors in determining a reasonable royalty. The district court denied this motion. Using Tenth Circuit law, the Federal Circuit responded to the Defendants’ first argument by explaining that it is not the role of the district court to evaluate the correctness of facts underlying one expert’s testimony. In response to the second argument, the Court noted that Fiorito properly applied the Georgia-Pacific factors, including the effect of sales of nonpatented products on determining a reasonable royalty. Thus, according to the Court, the Defendants’ contentions were without merit, and the district court did not abuse its discretion in permitting Fiorito to testify.

The Federal Circuit also affirmed the district court’s rulings regarding the damages award, noting that each side presented an expert supporting its reasonable-royalty calculation. Because the jury’s award hinged on which facts and whose expert was more credible, substantial evidence supported the verdict.