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The Use of Market and Industry Data in Patent Damages: The Two Approaches under Federal Rule of Evidence 703

By Christine Byrd and Randall L. Jackson
December 29, 2006

Whether calculating lost profits or performing a 'reasonable royalty' analysis under the Georgia-Pacific factors, a damages expert in a patent case is required to consider a large variety of data ' not just data from the plaintiff or the defendant, but also data from third-party sources, such as trade industry publications or market analyst reports. The admissibility of an opinion based on third-party information, however, has been a source of conflict since 1993, when the U.S. Supreme Court decided Daubert v. Merrell Dow Pharms., Inc.

To be admissible, an expert opinion must overcome the twin hurdles of Federal Rules of Evidence 702 and 703. Rule 702, 'Testimony by Experts,' sets forth the trial court's 'gatekeeper' function for expert testimony as required by the U.S. Supreme Court's decisions in Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993) (regarding scientific expert testimony), and Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999) (extending Daubert's holding to all expert testimony). However, Rule 703, 'Bases of Opinion Testimony by Experts,' was not the subject of either decision. While some trial courts have treated the two rules as if they shared a single standard, others have recognized them as entirely distinct. These conflicting approaches have resulted in inconsistent opinions on the use of market or industry data. Nowhere are these conflicting approaches more important than in patent damages analyses, where the case law requires the expert to consider the very data that some trial courts have rejected.

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