The District of Delaware, in Helios Software, LLC v. Awareness Tech., Inc., Civil Action No. 11:1259LPS (Judge Stark) (April 13, 2015), addressed a variety of motions to exclude damages testimony. Plaintiff and defendant each moved to dismiss its counterpart’s damages expert on various grounds. The most interesting issues are addressed below.
On February 5, 2015, in Rembrandt Wireless v. Samsung, Case No. 2:13CV213-JRG-RSP, Judge Payne entered a Magistrate’s Recommendation recommending that Samsung’s motion for summary judgment be denied. Samsung argued that Rembrandt should be barred from receiving any pre-notice damages, because Rembrandt had allegedly not complied with the marking statute. Specifically, Samsung alleged that while Rembrandt itself had no products to mark, one of its licensees – Zhone – had sold products embodying claim 40 of the asserted ‘580 patent but had not marked them.
On March 2, in azd-2-12-cv-01797-267, Case No. CV-12-01797-PHX-JAT, Judge Teilborg of the District of Arizona denied a motion for summary judgment based on a marking defense. Holland moved for summary judgment of no damages for units sold before the date of actual notice, arguing that no constructive notice had been provided since PCT did not properly mark. The products at issue were coaxial connectors, and PCT argued that the products were too small to make it feasible to legibly mark on the products themselves. That being said, Holland pointed out that PCT did affix a label to some of the connectors, bearing the PCT logo as well as the PCT part number. These labels, however, are 5mm in height and have text of only 2.8mm, and PCT countered that it was not feasible to add the patent information to these labels, or to make the labels any larger.
On January 28, in Open Text S.A. v Box, Inc., Case No. 13-cv-04910-JD,Judge Donato of the NDCA denied a motion-in-limine that would have prevented Defendant Box from putting forth a fully paid-up, lump sum form of damages at trial. Plaintiff Open Text moved to prevent Box from arguing a fully paid-up lump sum covering the life of the patents, arguing that such an outcome “would preclude Open Text from seeking an injunction or post-verdict ongoing royalties.” The Court cited numerous cases holding that a fully paid-up lump sum award is an allowable form of damages.
On January 29, two opinions from two jurisdictions denied motions to exclude reference to settlement agreements. In the NDCA, in Open Text S.A. v Box, Inc., Case No. 13-cv-04910-JD,Judge Donato denied a motion by plaintiff to exclude defendant’s expert’s opinions regarding four settlement agreements the defendant’s expert opined were comparable. In a nutshell, plaintiff argued that the agreements were depressed in value because they were settlements, but the Court disagreed, and held it was subject matter for cross-examination: “The differences between the Box licenses and the hypothetical negotiation that Open Text points to (like the timing of the licenses, or the fact that the patent office had issued a non-final rejection of the licensed claims in one of the licenses) would be easily understandable to a jury.”
The NDCA, in Digital Reg of Texas v. Adobe, Civil Action No. 12-1971 CW (Judge Claudia Wilken) (August 19, 2014), granted a motion to exclude testimony from Digital Reg’s damages expert Robert Parr on a number of grounds.
The patents-in-suit related to digital rights management. Mr. Parr, in deriving his royalty rate, looked at software piracy rates across the software industry and from Symantec (who had settled out), but not Adobe itself. Moreover, Mr. Parr did not seek to adjust the industry data or Symantec data to account for differences that might be applicable to Adobe. Digital Reg stated that the information it desired was not produced by Adobe, and Adobe responded that it did not track that specific statistic. The Court analyzed all of the various things Mr. Parr could have done, but did not do, and held “the inputs of Mr. Parr’s damages calculation are inherently unreliable.”
The District of Nebraska, in Prism Technologies LLC v. AT&T Mobility, Civil Action No. 8:12-cv-00122-LES-TDT (Judge Lyle E. Strom) (September 22, 2014), granted a motion to exclude testimony from Prism’s damages expert James Malackowski. As described by the Court:
Mr. Malackowski’s model has multiple stages. First, he attempted to isolate the “economic footprint” of the invention in each defendant’s revenues to create a royalty base in a three-step calculation. First, he identified each defendant’s data services revenue. Second, he reduced the revenue of RIM subscribers per Prism’s RIM agreement. Third, he “apportioned” these revenues by each defendant’s cost savings fraction….The cost-savings fraction is a separate, two-step, calculation. Mr. Malackowski identified the numerator of this fraction as the cost savings value of the asserted patents (Filing No. 265-3, at 43-46).Then, Mr. Malackowski identified the denominator as the total network costs for each defendant (Id.). The resulting fraction represented the “benefit cost savings” of the infringing system.
From this royalty base, Mr. Malackowski applied a royalty rate that varied between 2-4%. The defendants took issue with this damages model on three main grounds, 1) that a revenue-based royalty was inappropriate as a matter of law, 2) that the “cost-savings” apportionment was flawed, and 3) the methodology was effectively a “black box” that could not be correlated with the invention’s economic footprint.
“The name of the game is the claim.” Chief Judge Rich wrote those words back in 1990. Giles S. Rich, The Extent of the Protection and Interpretation of Claims--American Perspectives, 21 Int'l Rev. Indus. Prop. & Copyright L., 497, 499 (1990) ("To coin a phrase, the name of the game is the claim."). That statement has typically been invoked in the context of claim construction. However, in the ever-changing landscape of patent damages law, it seems to have growing force and effect.
Judge Ron Clark of the Eastern District of Texas, in Affinity Labs of Texas, LLC v. Ford Motor Co., Civil Action No. 1-12-CV-580 (Aug. 22, 2014) (Doc. No. 200), denied a motion to exclude Ford’s damages expert, Julie L. Davis, from testifying about allegedly comparable license agreements. Affinity’s issue was that the agreements were for lump sums, and that Ms. Davis had converted those payments into per unit royalties. The opinion is brief, and the relevant portion is quoted:
The Southern District of Florida, in Atlas IP, LLC v. Medtronic, Inc., Civil Action No. 13-CIV-23309 (Judge Cecilia Altonaga) (Oct. 6, 2014), granted a motion to exclude testimony from Atlas’ damages expert Donald Merino. First, Medtronic alleged that Merino’s royalty base was “inflated and unreliable because it is derived from the entire market value of Medtronic end products, instead of the smallest salable patent-practicing unit.” The Court held that “while undoubtedly the end product derives value from the allegedly infringing technology, Medtronic buys a chip from third parties, and the chip includes the allegedly infringing technology.” Because of that, the chip was the SSPPU. But rather than start an apportionment analysis with the chip, Merino started with the end product, and apportioned from there. Atlas argued that this was permissible under the Rembrandt v Facebook decision, but the Court disagreed. Instead, the Court held that starting with a base larger than the SSPPU and then apportioning down was simply “form over substance,” and rejected Merino’s approach based on “his improper use of the EMVR.”