1:10-cv-00204
N.D. Ill.Feb 28, 2014Background
- Sloan sued Zurn for patent infringement of U.S. Patent No. 7,607,635 (dual‑mode flush valve). Sloan seeks compensatory damages including lost profits, collateral profits, and price‑erosion (higher prices Sloan alleges it could have charged absent Zurn).
- Sloan’s damages expert Bero quantified a per‑unit royalty and attributed a substantial portion to a “price effect” based on testimony from Sloan employees.
- Sloan disclosed three employee‑experts (John Aykroyd, Jim Allen, Bill Madison) to support the price‑erosion component; each would testify that Sloan could have charged higher prices without losing sales.
- Zurn moved under Daubert to exclude those employee opinions, arguing the witnesses lack qualifications and reliable economic methodology to opine on market demand or but‑for pricing effects.
- The court applied Rule 702/Daubert/Kumho principles and Federal Circuit price‑erosion precedent requiring a credible but‑for analysis that accounts for how higher prices affect demand and alternate technologies.
- The court excluded the employees’ opinions to the extent they would testify that Sloan could have charged higher prices without any diminution in sales, permitting only testimony about Sloan’s intended/priced strategy (not market response).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Admissibility of employee testimony that Sloan "could have and would have" charged higher prices with no sales loss (general price‑erosion claim) | Employees experienced in pricing/sales can testify from experience that Sloan would have charged higher prices and customers would have paid them | Employees lack economics training, performed no demand/market analysis, and offer unreliable, speculative methodology | Excluded: employees may testify to Sloan’s intended prices but not that customers would have paid higher prices without reduced sales |
| John Aykroyd’s opinion that Sloan could have charged more with no diminishing sales | Aykroyd has sales/pricing experience and observed market actions showing Zurn forced lower pricing | He has no economics training, no analysis of price‑demand, and conceded alternatives exist; opinion lacks reliable foundation | Excluded for lack of reliable methodology and facts linking price increases to demand impact; may testify about intended price only |
| Jim Allen’s assertion of specific $20/$10 premiums with no sales loss | Allen set Sloan’s initial MDF pricing and believes customers would have paid premiums | No economic analysis supports no demand reduction; opinion appears based on belief/experience but not methodologically reliable | Excluded to the extent it claims no decrease in sales; may testify about initial pricing strategy only |
| Bill Madison’s opinion that Sloan would have sold at higher prices absent Zurn | Madison has long sales experience and observed customer behavior | Madison acknowledged alternatives would affect quantity, conducted no study, and lacked key facts (e.g., Zurn pricing); methodology unreliable | Excluded as to market‑response conclusion; limited to testimony about Sloan’s hoped‑for prices |
Key Cases Cited
- Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (expert admissibility requires reliability and relevance)
- Kumho Tire Co. v. Carmichael, 526 U.S. 137 (trial court gatekeeping applies to all expert testimony)
- Power Integrations, Inc. v. Fairchild Semiconductor Intern., Inc., 711 F.3d 1348 (recognizes price erosion as patent damages and explains economic rationale)
- SynQor, Inc. v. Artesyn Techs., Inc., 709 F.3d 1365 (patentee must show but‑for higher price and account for price effect on demand and alternatives)
- Crystal Semiconductor Corp. v. TriTech Microelectronics Int’l, Inc., 246 F.3d 1336 (patentee’s price‑erosion proof must present evidence of sales at the higher price and demand effects)