FACTS

EPlus filed an action against Lawson Software, Inc. alleging that Lawson had been infringing EPlus’ method and system claims. The jury found for EPlus and Lawson appealed, arguing that the system claims were indefinite and that the evidence of infringement of the method claims did not support the jury’s verdict. At trial, Lawson had moved to exclude the testimony of EPlus’ damages expert, Dr. Russell W. Mangum III under Daubert. The district court had agreed with Lawson and found that Dr. Mangum’s testimony was analytically flawed and thus had to be excluded. On cross appeal, EPlus argued that the district court abused its discretion in excluding its damages expert.

DISCUSSION

Dr. Russell Mangum, an Economics Expert Witness, was retained by EPlus, Inc. as a damages expert. Dr. Mangum had over 15 years of experience in economic research and analysis and has served as a consulting and testifying expert in the private sector and for local, state, and federal governments. In his report, the expert concluded that, out of the five settlement agreements which Lawson had entered into, EPlus had obtained much higher amount in two of those agreements. In fact, the sum of the higher two amounts well exceeded the sum of the smaller three by 1500%, and the highest paying agreement was over seventy times larger than the smallest. Moreover, the two larger agreements were paid in lump-sums; whereas one of the smaller three included a royalty percentage. Dr. Mangum gave great weight to the two highest paying agreements explaining that the remaining three were not as informative.

The district court had found that Dr. Mangum’s analytical method was flawed and unreliable. In particular, it found that the license agreements were not sufficiently probative because they were obtained during litigation and included lump-sums received for multiple patents and cross-licensing deals. The district court also observed that Dr. Mangum had ignored the settlements that produced smaller rates, even though one of them included a percentage rate rather than a lump sum.

EPlus argued that the district court erred and offered a number of justifications supporting Dr. Mangum’s analysis, majority of which was considered by Court as irrelevant.

HELD

The appellate court upheld the exclusion and noted that the district Court did not abuse its discretion in holding that “Dr. Mangum’s testimony was analytically flawed and thus had to be excluded”.