The Eastern District of Texas, in Affinity Labs of Texas, LLC v. Ford Motor Co., Civil Action No. 1-12-CV-580 (Judge Ron Clark) (Aug. 22, 2013) (Doc. No. 201), denied a motion to exclude testimony from expert Carl Degan. Ford contended there were two deficiencies in Degan’s opinions: (1) his failure to factor sunk engineering costs into his profitability analysis; and (2) his failure to apportion.
The Eastern District of Texas, in Affinity Labs of Texas, LLC v. Ford Motor Co., Civil Action No. 1-12-CV-580 (Judge Ron Clark) (Aug. 22, 2013) (Doc. No. 200), denied a motion to exclude testimony from damages expert Julie Davis in which she had converted lump sum royalties into per unit royalties. The opinion is brief, and we quote the relevant portion in full:
Affinity next argues that Ms. Davis’s testimony regarding her conversion of a lump-sum license agreement into per-unit royalties was improper and requires exclusion. “[L]ump sum payments … should not support running royalty rates without testimony explaining how they apply to the facts of the case.” Whitserve, LLC v. Computer Packages, Inc., 694 F.3d 10, 30 (Fed. Cir. 2012). Ms. Davis provided a chart as part of her expert report detailing her conversion of the Apple lump-sum royalty to per-unit royalty. [Doc. # 141-5]. As to the Panasonic license, upon which Affinity itself relies, Ms. Davis did not rely upon it specifically to calculate a value, but rather generally states that it would lead to a “very modest running royalty rate.” Affinityalso argues that Ms. Davis’s analysis of Ford’s licenses with 911 Notify, LLC and Tendler Cellular of Texas, LLC is flawed. The calculation of a reasonable royalty is not an exact science, and just because one approach may be better does not make other approaches inadmissible. Apple Inc. v. Motorola, Inc., --- F.3d ---, 2014 WL 1646435, *19 (Fed. Cir. Apr. 25, 2014). The issues that Affinity raises regarding Ms. Davis’s calculations are a matter of weight for the jury to determine, rather than a matter of exclusion.
District courts have been wrestling with how to handle damages experts who are fully excluded by Daubert motion. Courts have essentially three options: (1) give no further bites at the apple and exclude the expert from trial; (2) give the expert one, and only one, more chance at an admissible theory of damages (one more bite at the apple); or (3) allow the expert to submit a supplemental or replacement report but put no express limitations on the number of times the expert can bite the apple. The additional apple bites are sometimes referred to as “do-overs.” This is a pejorative term in that is conjures a first failure, and then another chance to get it right. Regardless, the term is apt for an expert whose report has been deemed unreliable and inadmissible and who is permitted to submit a supplemental or replacement report.
On July 23, 2014, Judge Davis of the Eastern District of Texas issued findings of fact and conclusions of law regarding damages figures in CSIRO v Cisco, Case No. 6:11-cv-00343-LED. Infringement and validity were stipulated, and the parties agreed to a bench trial on damages, which lasted four days. CSIRO’s ‘069 patent related to IEEE 802.11 wireless standards (excluding 802.11b).
There was an allegation that CSIRO had made a RAND commitment to the IEEE regarding one of the 802.11 standards (802.11a), but Judge Davis put very little emphasis on this point, as CSIRO had volunteered to license the ‘069 patent anyway (even for 802.11 standards where there were no RAND commitments) and the number of accused products involving 802.11a was less than 0.1% of the total accused products.
On June 20, 2014, Judge Gonzalez Rogers of the Northern District of California issued an opinion on defendant Freescale’s motion to exclude certain testimony of plaintiff’s damages expert, Catharine M. Lawton. MediaTek, Inc. v. Freescale Semiconductor, Inc., Case No. 11-cv-5341 YGR. Freescale moved on three issues: “(1) [Lawton’s] apportionment analysis; (2) her royalty rate estimate for certain patents-in-suit; and (3) her opinion on the U.S. share of Kindle e-reader sales.” Slip op. at 1. The court denied the motion on each issue.
On June 11, 2014, Judge Bernal of the Central District of California issued an opinion on motions in limine, including denying Texchem’s request to exclude opinions by e.PAK’s damages expert, Lawrence Simon, concerning a third partY license. The case is Texchem Advanced Products Inc. v. e.PAK Int’l Inc., Case No. EDCV 12-1341 JGB (SPx). Texchem argued that the license agreement was not comparable to the hypothetical negotiation. The court denied the motion. The court cited the Federal Circuit’s recent opinion in Apple Inc. v. Motorola, Inc., 2014 WL 1646435 (Fed. Cir. Apr. 25, 2014). We quote the court’s brief analysis in full:
On April 21, 2014, Judge Guilford of the Central District of California issued an opinion on Daubert motions. The case is Universal Electronics, Inc. v. Universal Remote Control, Inc., Case No. SA-CV 12-00329 AG (JPRx). The parties had filed several motions to exclude evidence on a wide array of issues. One motion of interest relates to plaintiff’s damages expert’s opinions on reasonable royalty. The expert, Frank Bernatowicz, had reached a “baseline” royalty rate of 3% using allegedly comparable licenses as a benchmark. Defendant moved to exclude the royalty opinions contending that Bernatowicz’s license analysis was flawed. The court agreed and excluded Bernatowicz’s testimony on reasonable royalty damages.
On June 21, 2014, Judge Davis of the Eastern District of Texas issued an opinion on a Daubert motion. The case is Thinkoptics, Inc. v. Nintendo of America, Inc., Case No. 6:11-CV-455. Thinkoptics moved to exclude the testimony of Nintento’s damages expert, Professor Daniel J. Slottje. The court granted the motion, but also allowed a do-over.
On June 20, 2014, Judge Rogers of the Northern District of California issued a Daubert opinion in MediaTek Inc. v. Freescale Semiconductor, Inc., Case No. 11-cv-5341 YGR, addressing numerous grounds raised by the Defendant. The discussion on royalty rate and market share were very short and not particularly noteworthy, but the royalty base discussion addressed an issue that is of considerable importance and relevance to other cases.
MDPA approves smallest salable unit as base; allows lump sum agreements as evidence of running royalty
On May 27, 2014, Judge Caldwell of the Middle District of Pennsylvania issued an opinion on a motion for reconsideration of an earlier Daubert opinion. The case is Kimberly-Clark Worldwide, Inc. v. First Quality Baby Products, LLC, Civil No. 1:09-CV-1685. The court addressed defendants’ motion to exclude opinions by plaintiff’s damages expert, Julie L. Davis, on two issues: (1) whether Ms. Davis’ use of the smallest salable patent-practicing unit (“SSU”) as the royalty base violated the entire market value rule (“EMVR”); and (2) whether Ms. Davis’ use of lump sum agreements as evidence of a running royalty rate should be allowed. The court ruled in plaintiff’s favor on both issues.