MAX Encryption Technologies (“MAZ”) filed a patent infringement action against Blackberry for patent entitled “Method of Transparent Encryption and Decryption for an Electronic Document Management System,” U.S. Patent No. 6,185,681 (the “‘681 patent”). As the case progressed toward trial, Blackberry filed a motion to exclude the testimony of MAZ’ damages expert, Chase Perry.
As explained by the district court, “[i]n reaching his baseline estimate for damages, Mr. Perry relied on a previous license agreement involving the patent-in-suit. The previous license agreement, however, was made in the context of settling a litigation dispute, and thus did not reflect the royalty the parties would have reached ‘just before infringement began.’ Therefore, the damages amount arrived at in the settlement agreement had to be translated into a damages number that the same parties would have arrived at just before infringement began had they, instead, assumed that the patent was infringed and valid. This implies that the amount of the previous settlement would need to be increased to arrive at the royalties that would have been agreed to in a hypothetical negotiation.’