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 Eastern District of Texas, in Mars, Inc. v. TruRX LLC, No. 6-13-cv-00526 (E.D. Tex. March 14, 2016) (Mag. Judge Nicole Mitchell), questioned whether the “inexorable flow” doctrine of lost profits is viable. The Federal Circuit had previously addressed inexorable flow in an earlier litigation involving Mars. Mars, Inc. v. Coin Acceptors, Inc., 527 F.3d 1359, 1365 (Fed. Cir. 2008) (refusing to award “lost profits” to the patent holder when its subsidiary corporation lost sales due to infringement, but recognizing the possibility of lost profits if the parent-patent holder can prove that the subsidiary’s lost profits inexorably flow up to the parent), mandate recalled and amended on other grounds, 557 F.3d 1377 (Fed. Cir. 2009).
The Northern District of California, in Nortek Air Solutions, LLC v. Energy Lab Corp., No. 14-cv-02919-BLE (July 15, 2016) (Judge Beth Labson Freeman), granted Energy Labs’ Daubert motion to exclude testimony of Nortek’s damages expert, Dr. Stephen Prowse, regarding reasonable royalty damages. The motion included three reasons; we address the first one here: “Dr. Prowse’s royalty analysis fails to apportion the value of the allegedly patented features from the unpatented features in the accused products ….” Slip op. at 8. The accused products were air handling systems.
In response to the motion, Nortek argued that Dr. Prowse had properly relied on the value of the accused air handling system as a whole rather than a smaller component for several reasons: (1) “because the asserted claims are directed to the entire air handling unit rather than any individual features,” and (2) because “the air handling unit is the smallest saleable unit and thus an appropriate royalty base.” Id.
The Western District of Wisconsin, in Kahr v. Cole, Case No. 13-C-1005 (Judge Griesbach) (July 28, 2016), granted defendant’s motion in limine to exclude evidence of plaintiff’s claimed lost profits. Plaintiff contended that it should be allowed to introduce evidence at trial of lost profits under the “inexorable flow” doctrine—in other words, plaintiff, who did not manufacture the patented product, had a licensee who did, and that the licensee’s losses from the alleged infringement inexorably flowed to the patent owner-licensor. The court cited the fact that the plaintiff did not have an exclusive license with the manufacturer (DDM). The Kahr court cited two cases, in which, according to Kahr, the courts had indicated that a non-manufacturing patent owner-plaintiff can recover lost profits if the patent owner has an exclusive license with the manufacturer. Slip op. at 2 (citing Carver v. Velodyne Acoustics, Inc., 202 F. Supp. 2s 1147, 1149 (W.D. Wash. 2002), and Kalman v. Berlyn Corp., 914 F.2d 1473 (Fed. Cir. 1990)). The Kahr court cited testimony from the plaintiff in which he testified that he could have licensed his patent to the defendant. Slip op. at 2.
The District of Massachusetts, in In re NeuroGrafix (‘360) Patent Litigation, Case No. 1-13-md-02432 (Judge Stearns) (August 1, 2016), denied defendants’ summary judgment motion to limit plaintiff’s damages for its licensees’ failure to mark. The fact pattern is one that is relatively common when multiple defendants are sued under the same patents: The plaintiff had settled with two manufacturers, and in the agreement gave a license to the manufacturers, but then failed to ensure that they marked the licensed MRI system with the patent number. The court denied the motion, citing the following facts: (1) “it is unclear to the court what, if any, products should have been market with the [patent],” (2) the licensees “expressly denied infringement in their respective settlement agreements,” and (3) the agreements did not “identify a specific set of licensed products.” Elec. Order at 1. “Finally, the court notes that obtaining a patent license after being sued is a common compromise undertaken to settle a claim and avoid expensive and uncertain litigation. Because defendants have not met their burden of production in showing that there are licensed products practicing the patented technology that should be marked, their motion for summary judgment on this ground will be denied.” Id.
The Southern District of Florida, in Arctic Cat Inc. v. Bombardier Recreational Products, Inc., Case No. 14-cv-62369 (Judge Bloom) (May 31, 2016), denied Defendant’s Motion for Judgment as a Matter of Law on laches, and found Defendant had failed to meet its burden of proving the defense.
Defendant contended the doctrine of laches precluded Plaintiff’s recovery of post-filing damages. The evidence during the Plaintiff’s case-in-chief showed that Plaintiff knew Defendant was selling personal watercrafts more than 10 years before Plaintiff filed suit. Defendant argued that Plaintiff should be charged with constructive knowledge of Defendant’s sale of personal watercrafts with the accused technology because well over 6 years before suit was filed (a) Defendant openly distributed product information clearly disclosing the use of the accused technology; (b) operator’s guides and published articles were publically available clearly disclosing the use of the accused technology; and (c) Defendant’s website included product information saying its products included the accused technology.
District of Minnesota Orders Additional Expert Discovery and Sanctions Based on Information Not Produced During Discovery
The District of Minnesota, in Luminara Worldwide, LLC v. Liown Electronics Co. Ltd. et al., Case No. 14-3103 (Magistrate Judge Noel) (May 18, 2016), agreed that Plaintiff should have produced its manufacturing capacity data on which its damages expert relied for his lost profits analysis during discovery. The Court allowed Defendants to take further discovery and supplement their expert report. The Court declined to exclude the data because there was enough time before trial to complete the additional discovery. The Court denied Defendants’ motion to strike the history of the technology at issue from the Plaintiff’s report, leaving it for cross-examination.
In this case, Defendants moved to strike Plaintiff’s expert report regarding damages because the damages expert presented theories based on evidence Plaintiff withheld during fact discovery.
District of Connecticut Declines to Exclude Survey, Finding Alleged Deficiencies Go To Weight, Not Admissibility
The District of Connecticut, in Gerber Scientific International, Inc. v. Roland DGA Corp., et al., Case No. 3:06cv2024 (Judge Covello) (June 27, 2016), denied Defendant’s Summary Judgment of No Lost Profits. Plaintiff’s damages expert presented a lost profits theory relying solely on a survey. Defendant contended that the survey was “unreliable, untrustworthy, and prejudicial.” (Slip op. at 1). The Court noted that there is a split in authority over the proper consequence for unreliable or untrustworthy survey evidence. “While some courts . . . believe such flaws are proper grounds for exclusion, others view methodological errors as affecting only the weight of the evidence.” Schering Corp. v. Pfizer, 189 F.3d 218, 225-26 (2d Cir. 1999).
While the Court agreed that “indications of unreliability and/or untrustworthiness may result in the exclusion of a survey,” the Court held that “the deficiencies alleged by [Defendant] in this case are not clearly egregious or sufficiently prejudicial to warrant exclusion at this time.” (Slip op. at 1).