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Business Valuation Expert Testimony in Patent Case Allowed in Part

Plaintiff filed a patent infringement claim against the defendant related to managing malware in their browser.  The plaintiff hired a business valuation expert to calculate damages.  The defendant filed a motion to exclude this expert witness testimony.

Facts:  This case (Alfonso Cioffi, et al., v Google, Inc – United States District Court Eastern District of Texas – January 9th, 2017) involves a patent infringement claim related to the Google Chrome web browser.  The plaintiff (Cioffi) claims that the defendant (Google) infringes on three of his patents, all of which involves computer products and methods for dealing with malware downloaded from a network.  Cioffi has hired Mr. Walter Bratic (Business Valuation Expert Witness) in order to prove his case.  Google filed a motion to exclude the expert witness testimony of Mr. Bratic as unreliable.

Google argues that Bratic’s opinions are not reliable for three reasons:  1) He multiplies a royalty rate by an unrelated royalty base; 2) he relies on ad revenue that is un-accused when calculating the royalty rate; and 3) he does not properly apportion damages to the feature of Google Chrome that was allegedly infringed upon.

Discussion: In their motion, Google argues that Bratic’s calculation is not reliable because he relies on an estimate of incremental revenue from new Chrome users for his royalty rate and the total number of Chrome users for his royalty base.  They state that this is like multiplying apples with oranges.  The court disagreed, stating that it is unclear if there is any difference between revenue derived from a new Chrome user than one derived from an existing chrome user.  In addition, the court dismisses as unpersuasive the alleged inflated amount of chrome users.  Any arguments on this matter go to the weight of the evidence, not their admissibility.

Bratic’s calculation on incremental revenue per user is based on a model estimating Google’s revenue from a new Chrome user.  Since the Chrome browser is free, revenue attributed Chrome is based on clicks on advertisements while using the Chrome browser.  Google argues that this calculation is not proper because these ads are “unpatented components.”  The court disagreed, stating that Google has downplayed the relationship between ad revenue and the Chrome browser. Bratic’s assumption is based on Google’s models for estimating the value over other browsers and in doing so, does not improperly include revenue from an unpatented product in his calculation.  Similarly to their other arguments, any discussion on this part of the expert witness report is best reviewed on cross examination.

In addition, Google also argues that Bratic’s use of Chrome’s incremental revenue violates the entire market value rule.  The court disagreed, stating that Bratic relies on another expert’s opinions and states that sandboxing is the feature that allegedly falls within the scope of the asserted claims.

The court did agree with Google on a limited part of their argument, stating that the plaintiffs are precluded from discussing Google’s total revenue or profits based on the entire Chrome browser.

Conclusion:  The motion to exclude the expert witness testimony of Mr. Walter Bratic is granted in part and denied in part.

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