DDE excludes settlement agreements; allows licenses as a “check”; addresses apportionment of accused products & services
The District of Delaware, in ART+Com Innovation GMBH v. Google Inc., Case No. 14-217-RGA (Judge Richard G. Andrews) (April 28, 2016), considered several motions related to royalty calculations. In a previous blog post, we addressed the motion for reconsideration of the 13% apportionment issue addressed below. This post covers the earlier order addressing that issue plus others.
Plaintiff ART+Com Innovation (“ACI”) challenged the reliance of Google’s expert Reed on seven licenses as a "check" on his reasonable royalty analysis. Five of these licenses were settlement agreements. The court excluded these (except as to their lump-sum nature) because they were products of litigation and not economically comparable. The other two licenses were the product of licensing negotiations. ACI disputed that these licenses were technologically comparable. The court allowed these licenses because Reed acknowledged the differences, and his analysis was consonant with using the licenses as a "check" against his reasonable royalty calculations. The jury could then weigh the evidence for itself.
The Southern District of Florida, in Arctic Cat Inc. v. Bombardier Recreational Producs, Inc., Case No. 0-14-cv-62369 (May 3, 2016) (Judge Beth Bloom), addressed motions to strike and summary judgment. Arctic Cat (patentee) filed a Daubert motion against defendant BRP’s expert, Dr. Keith Ugone. Arctic Cat contended that Dr. Ugone’s methodology was a “black box” and that his use of Arctic Cat’s licensing proposals as an indicator of value was impermissible. Slip op. at 9. The court denied this motion—on the “black box” issue, stating that Dr. Ugone’s methodology was “based on specific evidence, and his report clearly explains each step in his methodology.” Id.
The Middle District of Florida, in StoneEagle Services, Inc. v. Pay-Plus Solutions, Inc., Case No. 8:13-cv-02240 (Judge Hernandez) (June 19, 2015), allowed the plaintiff’s damages expert (Weston Anson) to offer a theory based on the “market approach” and him to testify on the technical comparability of an allegedly comparable license agreement. The court reasoned that the defendants could challenge the market approach and the expert’s qualifications on cross examination.
NDTX affirms damages verdict; cites most favored licensee clause; limited infringement did not warrant a lower award
The Northern District of Texas, in Jean Melchior v. Hilite International, Inc., Case No. 3:11-CV-3094-M (Judge Barbara M. Lynn) (July 15, 2015), ruled on post-trial motions, including denying defendants motion for a new trial on damages. The court held that the damages award was not excessive or against the great weight of the evidence.
Hilite’s arguments were effectively two-fold: (1) that Melchior’s expert, Dr. Poindexter, had relied too heavily on Georgia-Pacific factor 1 and in particular on a license agreement between Melchior and Borg Warner; and (2) that Dr. Poindexter’s testimony failed to account for limited use of the patented invention in the infringing devices, in which the devices are only in the patented position for a fraction of a second.
The District of Utah, in Waterton Polymer Products USA, LLC v. Edizone, LLC, Case No. 2:12-CV-17 TX (Judge Ted Stewart) (Nov. 6, 2014), denied the accused infringer’s motion in limine to preclude patentee’s introduction of evidence regarding minimum royalty payments by third party licensees of the patentee.
Each of the disputed license agreements were directed to the patent-in-suit and included a percentage-based running royalty and a minimum royalty amount. The accused infringer argued that the minimum royalties were not relevant because the license agreements specifically envisioned active sales and marketing by the licensees, whereas the accused infringer alleged it endeavored not to make sales in the U.S. and made only one such sale.
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.
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.
On May 9, 2014, Judge Davis of the Eastern District of Texas issued a Daubertopinion in Tracbeam, L.L.C. v. Google, Inc., Case No. 6:13-cv-00093-LED, addressing numerous motions to exclude from both parties. The Court denied the vast majority of the motions, but granted-in-part motions brought by both sides as to reliance on “comparable” license agreements.
On April 21, 2014, Judge Guilford of the Central District of California issued aDaubertopinion in Universal Electronics, Inc. v. Universal Remote Control, Inc., Case No. SACV 12-00329 AG (JPRx), addressing numerous motions to exclude. The issue of primary interest concerns plaintiff’s expert’s setting of a 3% “baseline royalty rate” based on four license agreements the court found not sufficiently comparable. The expert is Frank Bernatowicz.