CRA provided expert testimony on accounting and intellectual property licensing issues in an arbitration dealing with the alleged breach of a worldwide, exclusive license agreement related to orthopedic knee implant technology.
CRA was retained by the licensee/defendant, a global orthopedic device manufacturer. The dispute centered on the amount and appropriateness of deductions made from gross sales to derive net sales subject to the royalty rate. CRA provided guidance, from an accounting perspective, as to how certain licensing terms should be interpreted and performed a detailed analysis of various accounting deductions under dispute, including distributor commissions, direct sales force expenses, instrumentation credits, cash and volume discounts, returns, refunds, royalties paid to third parties, freight, and warehouse expenses. CRA also performed several comparisons and quantitative trend analyses to demonstrate the reasonableness of overall deductions, despite the fact that some internal accounting classifications had changed over time.