The Use of Market and Industry Data in Patent Damages: The Two Approaches under Federal Rule of Evidence 703

To be admissible, an expert opinion must overcome the twin hurdles of Federal Rules of Evidence 702 and 703. Rule 702, 'Testimony by Experts,' sets forth the trial court's 'gatekeeper' function for expert testimony as required by the U.S. Supreme Court's decisions in Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993) (regarding scientific expert testimony), and Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999) (extending Daubert's holding to all expert testimony). However, Rule 703, 'Bases of Opinion Testimony by Experts,' was not the subject of either decision. While some trial courts have treated the two rules as if they shared a single standard, others have recognized them as entirely distinct. These conflicting approaches have resulted in inconsistent opinions on the use of market or industry data. Nowhere are these conflicting approaches more important than in patent damages analyses, where the case law requires the expert to consider the very data that some trial courts have rejected.

The key difference between Rules 702 and 703 is the phrase 'reasonably relied upon,' which appears in Rule 703 but not in Rule 702. Judicial interpretations of Rule 703's 'reasonably relied upon' provision have been inconsistent since its origin in 1975 and remain so today. According to Wright & Miller, Federal Practice & Procedure '6274 (1990), 'The most difficult issue raised by rule 703 is determining the extent of the trial court's power to exclude expert opinion under the 'reasonably relied upon' clause.' (emphasis added)