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.

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.

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.