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.

Johns Hopkins University v. Alcon Laboratories, Inc. et al. (Order Issued April 25, 2018)

Judge Lawrence Stengel of the District of Delaware, Sitting by Designation, approved and adopted the recommendations of Magistrate Judge Sherry Fallon.  Among other recommendations, Judge Fallon recommended denying the motion to exclude plaintiff’s damages expert.

The case involves a method patent for performing eye surgery.  Alcon moved to exclude Brian Napper, plaintiff’s expert, based on alleged violation of the entire market value rule for his use of product and ancillary sales in his royalty base.  Mr. Napper relied upon a comparable patent licensing analysis to support his royalty base which included more than the accused cannula at issue.

Citing to Commonwealth Scientific and Industrial Research Organization (“CSIRO”) v. Cisco, Judge Fallon noted that the royalty base in the comparable license and the one contemplated by Mr. Napper were the same.

Judge Fallon also noted that Mr. Napper provided some accounting for non-infringing uses.  Accordingly, she recommended denying the Daubert motion related to these issues.

An additional issue that arose in the motions for summary judgment was whether the reasonable royalty could be tied to defendant’s sales.  Alcon explained that Alcon would not infringe the patented method because it only sells products; it does not use the products in an infringing manner.  Thus, Alcon reasoned, its sales are not the proper royalty base.  Judge Fallon denied Alcon’s motion because Johns Hopkins showed that the product was purchased for use in an infringing way and because both damages experts (for plaintiff and for defendant) used Alcon sales as the basis for their royalty base.

Greatbatch Ltd. v. AVX Corp. and AVX Filters Corp. Court Grants Motion to Set Aside Verdict (March 30, 2018)

Delaware District Court Judge Stark granted AVX’s motion to set aside the damages verdict.  The reason for the set aside was solely because the jury verdict form did not separate damages for each patent accused, and thus constituted a damages award for all patents and all products.

Judge Stark himself observes this case possesses “a convoluted history.”  It seems that Judge Stark sanctioned AVX because of its late production of core technical documents relevant to the infringement issues on one of the four patents in suit (i.e., the ‘715 patent).  The sanctions levied involved the judge granting a motion for summary judgment that all of AVX’s Ingenio products infringed the ‘715 patent. When the case proceeded to trial concerning the three other patents in suit, the jury returned a damages award in the form of a lump sum of $37.5 million for infringement of all four patents by all of AVX’s accused products.  After the jury trial, the court granted a motion for reconsideration of the sanctions.  A new trial for the ‘715 patent was held and the result was that the jury found no infringement concerning some of AVX’s Ingenio products, while finding infringement with regard to a smaller subset of Ingenio products.

The reason for the jury award set-aside is attributed to the jury verdict form, which failed to request damages figures on a patent-specific and product-specific basis.  Citing two Federal Circuit cases (Verizon Services Corporation v. Vonage Holdings Corp. and DDR Holdings, LLC v. Hotels.com, L.P.), the judge’s opinion seems to provide the only solution – a new trial on damages.

Important to note, AVX initially requested that the verdict form offer a damages line on a patent-by-patent basis; however, Greatbatch prevailed with its insistence for the general verdict form ultimately provided to the jury.  Note in this instance, however, that because not all accused Ingenio products were found to infringe the ‘715 patent, a patent-by-patent jury verdict form might not have obviated the need for a new trial on damages under these specific circumstances.

GlaxoSmithKline LLC and SmithKline Beecham Ltd. v. Teva Pharmaceuticals USA, Inc. (JMOL granted March 28, 2018)

The jury verdict states that Teva infringed the ‘000 patent and owes GlaxoSmithKline (“GSK”) $234,110,000 in lost profits and $1,400,000 in reasonable royalty damages.  District Court Judge Stark granted-in-part Teva’s JMOL motion and determined that Teva did not induce infringement.  Consequently, the jury verdict was vacated.

While largely an issue of liability, this opinion collides with issues of damages. The damages analysis was focused on lost profits, and the lost profits construct requires that a damages expert conceive a but-for world where infringement does not occur.  Conceptualization of that but-for world proved critical for Judge Stark.

A little history:  It appears that GSK determined that a drug (carvedilol) which was already used to treat high blood pressure and left ventricular dysfunction (“LVD”) after a heart attack, was also effective for treatment of congestive heart failure (“CHF”).  Glaxo applied for, and received a patent (namely, the ‘000 patent at issue) for the method of using carvedilol for CHF treatment.

Meanwhile, Teva and other generic manufacturers had been marketing and selling generic carvedilol for treatment of high blood pressure and LVD; but not explicitly for treatment of CHF.  Four years after Teva entered the generic carvedilol market, the FDA instructed Teva to add CHF treatment indication to its labels.  (The ‘000 patent had been delisted from the Orange Book.)

The question facing GSK’s damages expert, Dr. Robert Maness, and defendants’ experts, Dr. DeForest McDuff and Dr. Sumanth Addanki, was whether in the but-for world where GSK is entitled to lost profits, are generic carvedilol products (which are not indicated for practicing the patented method) on the market?  Given the generic’s prior & ongoing availability for non-accused indications (i.e., high blood pressure and LVD), the answer is not self-evident. The experts answered the question differently and forced Judge Stark to decide.

Judge Stark’s pre-trial determination to exclude defendants’ experts, portions of which are reproduced below, seems to recognize when damages analysis diverges from liability, while also seeming to foreshadow his ruling on the post-trial JMOL motions.  Ultimately, Judge Stark granted the motions to strike defendant experts Dr. McDuff and Dr. Addanki based upon their misapplication of the law when formulating a but-for world of lost profit damages.  Their failure in this instance was to assume the existence of non-party generics, available for non-accused indications, and therefore available to satisfy the but-for demand.  (Dr. Maness’ reliance upon a survey expert who determined what portion of the Teva users likely used the product in an infringing manner was allowed.)

With respect to vacating the jury award, Judge Stark pointed to the fact that GSK failed to establish a causal nexus between the purchase of accused Teva product and actual infringement of the patented method.  Documents did not support Teva’s inducement; so there was no proof that Teva induced infringement.  That is, product was sold, but toward what use, no one could provide the necessary evidence.

A physician, who provided testimony, claimed that when he prescribed the Teva generic for CHF, he did not look at the label first to determine whether the generic product was indicated for the infringing use.  Absent that link between Teva and infringement, Judge Stark concluded the jury award could not stand.

Finally, in his footnote 16, Judge Stark offers insight into broader policy implications of this matter which is well worth the read.  He notes, however, that those implications “have not impacted the Court’s ruling on the pending motions.”

Nox Medical EHF v. Natus Neurology Inc. (Order on Motion to Strike Issued March 26, 2018)

Delaware District Court Judge Andrews issued an order and an opinion regarding patent infringement damages analyses by Richard Bero and Scott W. Cragun.  Judge Andrews granted in part the motion to exclude Mr. Cragun, while denying the motion to exclude Mr. Bero.

The alleged infringing product is a sleep belt that was used together with a non-accused sleep monitor.  Plaintiff’s expert Mr. Cragun was excluded from issuing some, but not all of his lost profit opinions regarding accused belt sales.  Mr. Cragun advanced the view that, but for the alleged infringement, 75 percent of accused belts would have been sold by plaintiff Nox.  The basis for his 75 percent figure was grounded in three different categories of belt consumers: 1) those Nox monitor consumers who purchased the accused belt, 2) those Natus monitor consumers who, but-for infringement, would have purchased both Nox’s monitor and Nox’s belt, and 3) those consumers of defendant’s monitor or other third-party monitors, for which consumers would purchase an accused belt.

Judge Andrews allowed Mr. Cragun’s lost profit calculations on #1 (i.e., the installed base of Nox monitor users), but found that his categories #2 and #3 above were speculative.

With regard to category #2, Judge Andrews notes that Mr. Cragun failed to “identify a single customer who would have but did not purchase Plaintiff’s device due to Defendant’s alleged infringement.”  With regard to category #3, Judge Andrews explains that Nox only had adapters which connected its patented belt to its own monitor base.  To substantiate his third category, Mr. Cragun would have had to prove that “an adapter would have been available in the United States to use Plaintiff’s patented belt with Defendant’s or third-parties’ sleep-monitoring devices.”  Mr. Cragun failed to prove any such adapter was available.

Judge Andrews did find Mr. Bero’s reasonable royalty calculation to be based on an acceptable methodology and chose not to exclude those opinions, despite what appears to be a strong motion by the plaintiffs.  Mr. Bero appears to have used a novel method as the starting point for his royalty rate considerations: namely, he multiplied the estimate of plaintiff’s lost sales (i.e., 15%) times defendant’s profit margin on accused products to establish his starting point:

We will await to see whether the jury is convinced.

Integra Lifesciences Corp. et al. v. Hyperbranch Medical Technology, Inc. (Motion to Strike Granted in Part March 13, 2018)

Magistrate Judge Burke granted in part and denied in part John Jarosz’s damages analysis on November 14, 2017.  Four months later, Judge Stark adopted the Magistrate’s order.

Judge Stark denied Defendant’s motion to strike Mr. Jarosz’s price-erosion analysis, but granted exclusion of Mr. Jarosz’s market-share apportionment.

Review of the redacted order by Magistrate Judge Burke reveals that the decision to strike – or not to strike – appears to have nothing to do with the actual analysis done, but instead pivots on whether Plaintiffs failed properly to disclose their damages theories.  For Mr. Jarosz’s market-share apportionment analysis, Judge Burke and Judge Stark both agree that the late disclosure “could cause prejudice to Defendant.”  The footnote excerpted below suggests that even late disclosure is better than no disclosure:

This case affords yet another cautionary tale about timely disclosure.

 

Idenix Pharmaceuticals LLC, et al. v. Gilead Sciences, Inc. (JMOL decided February 16, 2018)

This case went to trial in December 2016 and Judge Stark issued his second opinion on JMOL on February 16, 2018.  Relevant for damages is Judge Stark’s opinion that comparability of licenses should go to the weight, and not the admissibility of a damages opinions:

Courts appear to disagree about comparable license analysis.  In some cases, courts have determined that licenses are not comparable and opinions should be stricken.  In others, the comparability goes to the weight, and not the admissibility of the evidence.  Given the lack of a clear road map to determine comparability, this issue will continue to be difficult for damages experts to navigate.

Additionally, Judge Stark makes the following patent-portfolio observation in a footnote:

This footnote is interesting for two reasons.  First, as a matter of law, an expert may aggregate patents into an assumed portfolio for the purposes of a hypothetical negotiation.  Second, as a matter of fact, Judge Stark appears persuaded that Mr. Carter tied his aggregation to the facts of the case.  It is unclear whether Mr. Carter would have been precluded from testifying about his portfolio approach had it been the subject of a Daubert motion, like the one found here in the Oracle v. Google matter.  Referencing general “real-world negotiations” is not necessarily a strong tie to specifics of a contemplated negotiation.  The hypothetical negotiation is not a real-world negotiation.  Arguing patent aggregation under this guise appears potentially fraught.

Also relevant is Judge Stark’s opinion that the entire market value rule did not apply in this case and that Plaintiffs were entitled to get damages on a royalty base consisting of the entire pharmaceutical.

United States of America v. Gibson, Harra, North and Rakowski (Order on Motion to Exclude Issued February 12, 2018)

Damages experts make occasional recourse to event studies:

Prior to Delaware District Court Judge Andrew’s ruling on the admissibility in a false statements case of four event studies conducted by a damages expert, the Government decided it would no longer pursue damages. Instead, it would offer the testimony of its expert, Dr. Alan Hess, who compared the relevant entity’s stock price before and after an alleged bad act, to prove the materiality of the alleged false claims.

While three of the four event studies were not excluded under Daubert, Judge Andrews concluded that a fourth failed to isolate reliable causality with regard to the specific bad acts at issue. Although Dr. Hess claimed he could have isolated that causal analysis, he did not do so.

The court also precluded Dr. Hess from presenting analysis comparing the financial performance of the relevant bank to its peers.

Critical takeaways from the order are 1) Event studies are admissible and helpful to a trier of fact; 2) Event studies that do not isolate the critical event are subject to exclusion, and 3) Industry reports and analysis on a stand-alone basis do not speak to the facts of a case, and are unlikely to survive Daubert.