Published on:

District Court Excludes Damage Expert’s Reliance on Incremental-Value Analysis

In this patent infringement action, defendant Athenahealth, Inc. (“Athenahealth”) moved to exclude the plaintiff CliniComp International Inc.’s damage expert testimony of Dr. Nisha Mody, which included a check on the reasonableness of the damage calculation based on an incremental-value analysis.

As explained by the district court, Dr. “Mody’s damages model is based on a reasonable-royalty-rate analysis, which calculates the royalty the parties would have agreed to during a hypothetical negotiation that would have occurred on the eve of infringement. Her analysis multiplies the number of infringing customers by the cost to design around the claimed invention per customer to determine the amount of damages. Mody also performs a second calculation to check the reasonableness of her damages calculation. She refers to this as an “incremental-value” analysis. For the incremental-value analysis, Mody determines that Athenahealth estimated that the athenaOne suite would increase revenue by 10 percent. She then calculates the damages by multiplying 10 percent by the total revenue Athenahealth earned from the athenaOne suite.”

Although the district court rejected the challenge to the reasonable-royalty-rate analysis, the district court agreed that the incremental-value analysis was improper. The district court explained that Dr. “Mody’s 10-percent apportionment is derived from an analyst report from 2008, approximately five years after infringement began. That report provides, ‘physicians optimize revenue collections and operational/clinical workflows. The company has a track record of delivering tangible financial results to clients, including an average 10% improvement in annual collections.’ Mody opines that this 10-percent improvement in annual collections would result in a 10 percent increase in revenue for Athenahealth’s customers.”

Relying on another expert’s opinions, Dr. Mody then concludes that “data analytics drives demand for the athenaOne suite, and assumes that the entire 10-percent increase in revenue for Athenahealth’s customers would be due to data analytics.” Dr. Mody then concludes that the claimed invention is the “source” of the data analytics employed by Athenahealth. As a result, Dr. Mody then assumed that the entire 10 percent increase in revenue was tied to infringement.

The district court found this assumption problematic as the opinion’s “vague reference to data analytics is not tied to any infringing feature, and none of the evidence Mody cites sufficiently supports her assumptions.” The district court also explained that Dr. Mody “assumes that a 10-percent increase in revenue for Athenahealth’s customers leads to the conclusion that Athenahealth would also experience a corresponding 10-percent increase in revenue. Mody multiplies by 10 percent the total revenue from Athenahealth’s entire suite of products to get the approximate damages under her incremental-value analysis.”

The district court found that this analysis did not sufficiently support the assumption that Athenahealth’s revenue would also increase by 10 percent. Dr. “Mody relies on marketing materials and Athenahealth’s website to show that Athenahealth promises its athenaOne suite will improve certain metrics for its customers. However, the court finds this insufficient to show that Athenahealth would also have a 10-percent increase in revenue. Mody’s report reflects that Athenahealth’s pricing is not transparent and varies with each customer. So, lacking is support for the assumption that the 10-percent apportionment is directly tied to such an increase in revenue due to the athenaOne suite. The court concludes that Mody’s incremental-value analysis is not sufficiently tied to the facts of the case.”

The district court concluded that “[i]n focusing on whether Mody’s opinions should be admitted, and not the content of her opinions, the court concludes that Mody’s opinions regarding her reasonable-royalty-rate analysis is based on data that is sufficiently tied to the facts. Further, the court concludes that during trial proceedings, Mody’s testimony in this regard will “assist the trier of fact to understand the evidence or to determine a fact in issue.” Fed. R. Civ. P. 702. However, the court concludes that Mody’s testimony regarding the incremental-value analysis is not sufficiently tied to the facts and will not assist the trier of fact. Mody’s opinions regarding the incremental-value analysis will be excluded.”

Clinicomp International, Inc. v. Athenahealth, Inc., Case No. 1:18-CV-00425-LY (W.D. Tex. Dec. 14, 2020)

The authors of are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. For more information about this case, contact Stan Gibson at 310.201.3548 or