Layne-Farrar also opines that a 16 percent royalty rate is appropriate given Finjan’s past licenses. The total revenues are $21.5M so the total possible apportioned revenue base for Finjan’s five patents, using this infringing module method, is 15.3M. Assuming each module has equal value, Finjan’s patents, at maximum, account for 5/7 the value of the UTM’s total revenues. The district court then provided an example of the problem: Layne-Farrar opines that a total of 5/7 modules of Sophos’s UTM product are infringed by Finjan’s patents.
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“While the volume discount royalty rate reduces the overall damage calculation, it does not resolve the issue I previously identified as it continues to attribute the full value of certain features to multiple patents.” The district court explained that the amended methodology, which used a volume discount royalty rate method, suffered from the same problem. Sophos then moved to exclude the supplemental report as well. The district court concluded that this methodology “functioned to inflate Layne-Farrar’s royalty base and her final damages calculation.” Nonetheless, the district court permitted the expert to submit a supplemental report.
The district court explained that the expert’s, Layne-Farrar, “method of applying a royalty rate to an apportioned base for each patent and adding the resulting royalties was not reliable because under her apportionment method she had attributed the full value of certain features of Sophos’s products to multiple patents and so had counted the value of these features multiple times.” In this patent infringement action between Finjan and Sophos, the district court had previously granted a motion to exclude Finjan’s damage expert.
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