Bio-Rad Laboratories, University of Chicago v. 10X Genomics Inc. (Federal Circuit, August 3, 2020)

This case finally made it to the Federal Circuit. A2C awaited its outcome and the prospect of available lessons. Way back in September 2018, Judge Andrews in Delaware issued an opinion on Daubert motions. The court found defendant expert Ryan Sullivan’s analysis of comparable licenses sufficiently reliable to pass Daubert.

The court also found that James Malackowski, Bio-Rad’s expert, offered sufficient support for his comparable license analysis opinion, but not enough economic analysis to support his lost profits opinions which asserted a two-supplier market:

Judge Andrews also rejected Mr. Malackowski’s apportionment of the royalty base, which presupposed apportionment through the comparable license relied upon:

Judge Andrews allowed Bio-Rad and Mr. Malackowski to “supplement” damages opinions after having excluded Mr. Malackowski’s lost profits and reasonable royalty opinions. In this second bite of the apple, Mr. Malackowski did not offer a lost profits opinion, but rather only a reasonable royalty opinion. Mr. Malackowski relied upon the same licenses as those relied upon by the opposing expert. And in relying upon those same licenses, Mr. Malackowski’s opinions, like Dr. Sullivan’s initial opinions, were not excluded. Judge Andrews explained that Mr. Malackowski provided sufficient evidence of apportionment with what A2C views as creative analogous analysis of unpatented and unlicensed features:

Trial ensued, Plaintiffs prevailed, and they were awarded approximately $24 million. Defendant appealed the award based upon infringement, validity, willfulness and damages. The Federal Circuit affirmed the jury verdict in full and rejected the claims by defendant 10X that Mr. Malackowski failed to apportion and failed to use comparable licenses. In the first instance, while the Federal Circuit found two of three asserted patents were not infringed, because jury instructions were mute on the question of division of damages among patents, the award necessarily stood:

With regard to comparability, the Federal Circuit noted there was sufficient analysis for its assessment, and that Mr. Malackowski had met a showing of “baseline comparability.” With respect to apportionment, the Federal Circuit agreed with Judge Andrews noting:

This case is interesting to A2C, because it concerns litigation strategy and second bites at the damages apple. Had defendant’s counsel not been so successful in its first Daubert motion, would an appeal have been subsequently more successful? Additionally, would different jury instructions have afforded a new trial on damages for only the single patent?

Netfuel, Inc. v. Cisco Systems Inc. (Order, March 17, 2020)

Judge Davila from the Northern District of California granted a Defendant’s motion to strike the technical expert and damages expert opinions on apportionment, and the damages expert report on all other issues as well. The court’s order serves as a cautionary tale not only for technical experts, but also for damages experts who would rely on technical experts for apportionment.

Plaintiff’s damages expert, Walter Bratic, relied on technical expert, Aviel Rubin, for an apportionment analysis. Dr. Rubin informed Mr. Bratic that certain percentages of practicing products and accused products were associated with the patents in suit. Mr. Bratic applied those percentages to his damages figures to apportion royalty rates. The court found, however, that Dr. Rubin’s percentages were “plucked out of thin air.” As such, the court further ruled that Mr. Bratic’s damages analysis, which relied on those percentages, would not be presented to the jury.

While reliance on a technical expert for damages opinions is both allowed and encouraged, it must also itself be subject to the damages expert’s critical consideration. Judge Davila made clear that a damages expert may not blindly rely upon a technical expert whose opinions have no basis in the facts of the case, but instead derive solely from his or her unrelated expertise. Damages experts must assess the reasonableness or the logic of the opinions relied upon. In this matter, while the apportionment exercise was not performed by Mr. Bratic himself, reliance on Dr. Rubin’s resulted in the exclusion of both.

Mr. Bratic’s comparable license approach to damages was also struck for being “plucked out of thin air.” Heavily citing the GPNE Corp. matter as well as LaserDynamics, the court rejected Plaintiff’s damages analysis in its entirety:

Finally, in this instance, the court would not entertain a “do over.” Judge Davila sagely noted, “Allowing a ‘second bite’ can encourage ‘overreaching on the first bite.'” We decidedly welcome that perspective.

In Re Chanbond Litigation (Opinion, February 4, 2020)

Judge Andrews of Delaware has provided a host of opinions to help guide patent damages experts. Despite his detailed and well-articulated opinions, patent damages experts continue to fail his gatekeeper tests. Such is the case for Mr. Christopher Bakewell in a recent opinion.

Mr. Bakewell, defendant’s damages expert, was excluded from offering his market approach opinion which appeared to have three “valuation datapoints.” The first datapoint involved investment solicitations for financial interests in the company holding the patents-in-suit. The second was a series of patent transfers among interested parties that were ultimately valuing the litigation and not the patents. The final datapoint was an offer to sell the patents-in-suit, which Judge Andrews found relevant but not sufficient to support a market approach on its own.

With respect to the first datapoint, Judge Andrews offered the following guidance:

With respect to the second datapoint, Judge Andrews did not simply accept a patent transaction as relevant to valuing the patents-in-suit. Rather, he pointed to a measure of circular-reasoning, wherein parties to a transaction value prospective litigation, rather than the patents themselves… which in turn is used for damages purposes in litigation:

Further, rather than afford “a transaction” some measure of casual abstraction, Judge Andrews considered the purchaser and seller of those patents. He explained:

Indeed, Mr. Bakewell needed to acknowledge the incentives of the parties to the transaction making these decisions.

Ultimately, Judge Andrews found the last datapoint relevant for damages, but not sufficiently developed to support an affirmative damages opinion. The three-pronged analysis was excluded, one prong at a time.

Sprint Communications Company v. Time Warner Cable (Federal Circuit Opinion Modified March 18, 2019)

The Federal Circuit issued an opinion on March 18, 2019 that helps define what may be considered “a comparable” in a reasonable royalty analysis.  In this case, a jury returned a verdict hitting Time Warner with a $140 million damages figure to be paid to Sprint. For its part, Sprint’s damages expert had offered a reasonable royalty rate analysis based, in part, on an earlier verdict from a different matter involving Sprint and Vonage.

Time Warner appealed the matter to the Federal Circuit on damages, contending that the district court improperly admitted the Sprint/Vonage verdict involving technology of disputed similarity and a different carrier.  The Federal Circuit decided that the district court did not err in its admission:

The opinions of the Federal Circuit in this matter appear to broaden the scope of comparability so as to include comparable jury verdicts.  But consistent with earlier Federal Circuit opinions, the differences between any comparable and the hypothetical negotiation at hand should be addressed.

In addition to the issue of comparability, the court made an interesting comment on apportionment.  The court states that if the Georgia Pacific analysis is done correctly, then the analysis embodies apportionment principles.  This suggests that apportionment may be done through the factor analysis, including at least via Factors 9 and 13:

We expect to see this language appear with frequency in responses to Daubert motions on apportionment.

Qualcomm Inc. v Apple Inc. (Order, January 18, 2019)

In his 11 page order, Southern District of California Judge Sabraw addressed cross Daubert motions on Apple’s experts and Qualcomm’s experts, which in turn provide some general insight for damages experts.

For its part, Apple requested the court exclude Qualcomm’s damages expert (Dr. Kennedy*) and its survey expert (Dr. Prince). Judge Sabraw had provided an opinion a month earlier concerning surveys by Dr. Prince in a different matter, Wi-Lan v. Apple. Judge Sabraw drew analytic contrast between the two cases, however, noting that the survey analysis proffered in Qualcomm addressed fatal limitations advanced in the earlier Wi-Lan expert analysis.

Thus, while Apple took issue with specific formulation of the survey, Judge Sabraw concluded that the formulation spoke more to the survey’s “weight, not admissibility.”

These divergent outcomes concerning surveys from the same expert reveal the essential need for such experts to work closely with technical experts. The obvious precondition for a successful survey is to tie questions to relevant claims; but where those ties are reasonably established, Judge Sabraw’s formulation appears to acknowledge that some “hypothetical ideal survey” must not condemn a “real-world survey” that can otherwise afford some insight into the matter at hand. Rather, limitations of relevant “real-world surveys” can be heard, challenged & defended.

Turning next to Dr. Kennedy’s damages opinion, Apple argued that his “50-50” split was “untethered to the facts of the case.” Judge Sabraw, however, found otherwise:

We can imagine a circumstance where a different expert from an earlier era might advance a “50-50” split based solely on superficial invocation of the Nash Bargaining Solution. But what might otherwise appear as numerical recourse to a rule of thumb can, in fact, be an argued outcome grounded in the facts of the case. So, too, might a “25%” outcome… even if Goldscheider’s formulation no longer enjoys merit after Uniloc. That is to say, round numbers themselves need not be thrown out along with rules of thumb.

Dr. Kennedy’s opinion based upon the Prince survey results was deemed admissible. Dr. Kennedy’s controversial 50/50 profit split was grounded in enough facts of the matter to be allowed as well.

For its part, Qualcomm requested that the court exclude Apple’s damages expert, Dr. Prowse, for failure to establish the economic comparability of relied-upon licenses. A related question concerned whether Apple’s technical experts had done the minimum necessary to establish that the patents-in-suit were technically comparable to others the subject of Apple license agreements. Judge Sabraw agreed with Qualcomm that those technical experts’ opinions “are conclusory and do not meet the standard for technological comparability.”

Given failure to establish technological comparability, related damages opinions, too, must fail. Judge Sabraw offered, however, that Dr. Prowse did establish the necessary economic comparability between the relevant license agreements and a hypothetical license agreement.

Since Uniloc, and the abandonment of rules-of-thumb, the rigor demanded of damages analysis has increased. In response, and with the goal of grounding analysis in the facts of a case, damages experts must make increasing recourse to the analytic foundations established by technical experts and/or survey experts. This pair of cases (i.e., Qualcomm v. Apple and Wi-LAN v. Apple) reveals the multiplicity – and vulnerabilities – of such dependence.

(*These two cases involve experts with identical surnames: Dr. Patrick Kennedy is Qualcomm’s damages expert, while Mr. David Kennedy is Wi-Lan’s damages expert.)

Bayer Healthcare LLC, v. Baxalta Inc., et al. (Order January 25, 2019)

It remains unclear what damages theories might remain after Judge Andrews provided his order on Daubert motions. Defendant’s expert was excluded in part and Plaintiff’s expert was excluded in part. The resulting questions: “What remains – what might damages testimony at trial look like?”

The order explains that Bayer sued Baxalta for patent infringement concerning the drug Adynovate. Dr. Rausser, Baxalta’s expert, claimed that the damages were small based upon the perspective that the patent possessed little to no value. Plaintiff’s counsel argued that Dr. Rausser failed to assume infringement, used non-comparable licenses and derived a lump sum from licenses that were, in contrast, running royalty licenses. Judge Andrews struck Dr. Rausser’s opinion based upon Plaintiff’s final complaint, noting:

Dr. Addanki, Bayer’s expert, argued that the patents are valuable and that damages would be derived from a 50/50 split of profits. Evoking the Nash Bargaining Solution (which damages experts should understand now to create Daubert exposure), Dr. Addanki claims that this outcome would be “reasonable as a matter of economics.” Judge Andrews disagreed and struck the 50/50 split analysis and “any subsequent opinions that rely on that mid-point rate.”

It would seem little remained of damages for this matter given the exclusions. We shall return later to see whether and how Baxter might advance opinions regarding damages at trial.

Princeton Digital Image Corp. v. Ubisoft Entertainment SA, et al. (Opinion December 11, 2018)

We have previously written about a damages opinion having been excluded for relying on a jury verdict from an unrelated matter. Another recent effort to use a jury verdict has also been excluded in this opinion from Judge Burke in the District of Delaware.

In the opinion, Judge Burke observes that some may reasonably conclude that courts appear to have established jury-verdict reliance as per se unreliable:

In contrast to this view, however, Judge Burke suggests no such blanket rule should be presupposed to exist:

Judge Burke goes on to describe in a footnote a scenario where a jury verdict might prove relevant for damages:

It appears clear to us that the lesson remains to exercise extreme caution when entertaining use of a jury verdict in damages analysis. While the unique facts of a case may support such reliance, those occasions will likely prove exceedingly rare.

Acceleration Bay LLC v. Activision Blizzard, Inc. (Opinion on Motion to Exclude – August 29, 2018)

Delaware District Court Judge Andrews ruled on a very creative damages analysis.  And when we say “creative” we mean really, really outlandishly creative.

Plaintiff’s expert, Dr. Christine Meyer, determined the hypothetical negotiation date for her patent infringement damages analysis and then recalculated a jury verdict award from a separate and unrelated patent infringement matter (namely, Uniloc USA, Inc. v. EA) to use as her anchoring point for her Georgia Pacific analysis.

Yes, you read that correctly, and we represented it faithfully:

It appears from Judge Andrew’s opinion that Dr. Meyer attempted to introduce an unrelated jury verdict award as a “comparable license” analog by relying upon a technical expert’s analysis of both the unrelated verdict-patents and their relative value as compared to the patents in suit.  Such malarkey was unacceptable and the motion to exclude on this issue was granted.

Apart from this unrelated jury verdict “analytic” sideshow, Judge Andrews offered insight into lump sum and running royalty rates.

Dr. Meyer’s lump sum opinion was not excluded for looking into the future and thereby forecasting hypothetical future sales.  But Judge Andrews suggests that such analysis would have been excluded if she had ultimately settled upon a running royalty rate:

Judge Andrews thereby clarifies a subtle, but important (and now specifically-articulated) rule for lump-sum opinions as necessarily distinct from running royalty opinions.

Chrimar Holding Company, LLC et al. v. ALE USA Inc. et al. (Federal Circuit – Decided May 8, 2018)

Plaintiff damages expert Robert Mills had his analysis excluded in part by Judge Love of the Eastern District of Texas.  The part that was not excluded formed Mr. Mills’ testimony in trial which resulted in a damages award of $324,558 for ALE’s patent infringement.

ALE challenged the damages award at the Federal Circuit stating that, “Mr. Mills, in calculating a reasonable royalty,  (1) relied on licenses not comparable to the hypothetical negotiation for the present case; (2) did not adequately separate the value of patented features from the value of standardization and the value of nonpatented features; and (3) prejudicially referred to ALE’s total net revenue and profit.”  The Federal Circuit sided with Chrimar and found ALE’s arguments wanting.

With regard to the first issue, the court noted that there was not sufficient basis to exclude Mr. Mills in the Daubert motion nor in the JMOL phase of the matter, and that his license analysis satisfied the standard of “reasonable adjustments for differences in contexts.”

Regarding the second issue, the court said that Mr. Mills relied upon a standards expert, and a damages expert has right to do so for their own opinion.

Finally, for the third issue, the court explained that it was ALE itself which had first “opened the door” to introduction of defendant’s net revenue.

As in Exmark v. Briggs, the court appears perhaps to afford EMV somewhat greater latitude as part of a comparable license approach, especially where licenses make reference to a unit larger than what might otherwise be considered “the smallest saleable unit” under other analytic approaches to damages.

Prisua Engineering Corp. v. Samsung Electronics Co., Ltd., et al. (Verdict February 26, 2018)

A jury in the Southern District of Florida found that Samsung infringed Prisua’s asserted patent claims and owed $4.3 million for that infringement.  Prior to that verdict, Judge Moore issued opinions and orders on cross Daubert motions, as well as multiple motions in limine.

Of interest is that neither of the Daubert motions – on Prisua’s expert or Samsung’s expert – were granted; however, a critical motion in limine was.

Prisua moved to exclude Samsung’s damages expert, Mr. Lettiere, based upon his use of information that: 1) post-dated the hypothetical negotiation, 2) pertained to litigation settlements, 3) relied upon software licensing agreements, and 4) used the market-based approach.  Citing Lucent and Sinclaire Refinery, Judge Moore denied #1. The judge declined to grant #2 based upon citations from Cornell, but reserved judgment. With regard to #3, Judge Moore observed, “The Court is persuaded that the ArcSoft Licensing Agreements—which directly relate to the allegedly infringing technology—are relevant and the probative value of Mr. Lettiere’s related testimony outweighs the risk of prejudice.” Finally, with regard to #4, the market-based approach was permitted to stand.

Samsung moved to exclude Mr. Leathers’ damages analysis because he relied upon Prisua’s pre-litigation offer to Samsung to license its patents.  While such basis for exclusion appears compelling, Judge Moore refused to exclude via Daubert the implied pre-litigation benchmark rate.

In a motion in limine, however, Samsung successfully argued exclusion of the licensing negotiations between Prisua and Samsung:

From Samsung’s JMOL on damages, it appears that Mr. Leathers advanced the $0.09 royalty rate, but represented that the rate was derived using the ArcSoft Licensing Agreement.  We will see whether Judge Moore finds this testimony (and the implied disregard of the pre-litigation offer) compelling, or whether instead he will grant the JMOL offered by Samsung.