Month: February 2018

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.

Lawrence E. Tannas v. Multichip Display, Inc., et al. (Decided February 21, 2018)

Judge Guilford of the Central District of California issued an opinion regarding damages, fees and prejudgment interest in this patent infringement case.

Neither plaintiff nor defendants used damages experts, and the court decided that, “Plaintiff essentially relies on attorney argument with minimal analysis” which renders its proffered damages award unsupported.  The court specifically notes that even if attorneys want to argue that an established royalty rate exists, they must provide sufficient proof for that rate.  In this case, the court held that the plaintiff failed to do that.

A second opinion, regarding legal fees, quotes both former Justice O’Connor and current Justice Kagan when concluding that the fixed sum of $250,000 is reasonable considering “what is happening in the legal profession as hourly billing has become increasingly unpopular and clients prefer to look at aggregate, global numbers”:

Finally, the plaintiff requested statutory prejudgment interest of 7%, compounded quarterly. After finding apparent fault with plaintiff’s lack of basis for its preferred quarterly-compounded 7% rate, the court instead decided that 5% without compounding was the appropriate rate.

Limelight Networks, Inc. v. XO Communications and Akamai Tech. (Opinion February 2, 2018)

On February 2, 2018, Judge Gibney re-struck the expert opinions of Stephen Prowse and Paul Meyer.

Dr. Prowse had applied the Rubenstein Bargaining Model to the hypothetical negotiation.  The judge decided that such a model was properly tied neither to the facts of the case, nor to the patents in suit.  Judge Gibney found Mr. Meyer’s reasonable royalty analysis based upon comparable licenses no more relevant than Dr. Prowse’s.  Judge Gibney found Mr. Meyer’s comparable license analysis failed to establish that the agreements compare economically to the hypothetical license at issue.

Dr. Prowse’s analysis was excluded because it was deemed to be similar to the Nash Bargaining Model and the 25% rule of thumb, both of which have been excluded in the past.  The concept of a Rubenstein Bargaining Model is that where two parties engage in a negotiation, the party with the most patience and least concern receives the benefit of that patience.  In his effort to apply the model, Dr. Prowse used each company’s weighted average cost of capital as a proxy for patience.

This game theoretic model is much like other game theory models which mathematically conclude that the party with the most bargaining power or least concern enjoys the better outcome.  The problem with such models is that they are irrelevant as a guide for damages experts seeking to determine the outcome of a hypothetical negotiation.  In a hypothetical negotiation, there is no assessment for patience: only consideration for the value of the patented technology to those using the technology.  Unlike the Rubenstein Model (and the Nash Model), the hypothetical negotiation is not iterative and the parties do not have endless time to complete the negotiation.  While Judge Gibney did not delve into such specifics, he notes that:

Mr. Meyer’s exclusion based upon the use of comparables is possibly the more interesting of the two damages exclusions.  Mr. Meyer had attempted to assess economic and technical comparability.  In the end, however, the judge found the expert did not apportion the comparable licenses on a patent-specific basis; and when using a company acquisition price as another comparable, the expert failed to determine what portion of that acquisition was specifically for the comparable patent.

Scentsational Technologies v. Pepsi, Inc. et al. (Order on Motion to Strike, Issued February 14, 2018)

In a biting opinion regarding a motion to strike a damages analysis, Judge Forrest of the Southern District of New York struck the entire report of Wayne Hoeberlein, CPA.

The case involved accusations of trade secret misappropriation associated with scented packaging, as well as breach of contract.  Mr. Hoeberlein was retained by plaintiff attorneys to derive damages.  Mr. Hoeberlein appears to have relied (almost entirely) on a packaging expert, Dr. Sand, whose own opinions on the likelihood for commercialization were also struck by Judge Forrest.

Courts rightfully and reasonably afford damages experts the capacity to rely on the testimony of other experts (e.g., technical experts or licensing experts); however, when doing so, Courts do not simultaneously afford those damages experts a capacity to suspend their critical faculties  Where damages experts do not ask critical questions, push back against unreasonable and unsubstantiated damages theories, or ignore countervailing documents and data, they run high likelihood of having opinions excluded.

 

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.

Waymo LLC v. Uber Technology, Inc. et al. (Order on Acquisition Damages January 18, 2018)

As we all watch the Waymo v. Uber trial unfold this week, we thought it interesting to discuss Judge Alsup’s order issued on the eve of trial. The order strikes Waymo’s new theory regarding damages associated with the acquisition of the trade secrets at issue, as distinguished from damages associated with acquisition and use of those trade secrets.

Judge Alsup concludes that Waymo had not preserved its right to proffer a damages theory based upon Uber’s “acquisition” alone, but instead had only offered damages theories, previously struck, regarding the use of the trade secrets.

Fascinating to us is the notion that trade secret damages may be derived solely from “acquisition,” as opposed to acquisition and use/benefit.  Looking back at the motions written by both parties attempting to answer Judge Alsup’s question about whether “acquisition alone” is enough to support “an unjust enrichment theory,” it appears both sides conflate monetary remedies (such as unjust enrichment) with actual damage.  Our understanding is that damages experts are not retained simply to sum up values found in financial schedules, but rather to follow acceptable methodologies to quantify harm.  They are to apply their special understanding and expertise to provide analysis that laypersons could not do themselves.

Equating an “acquisition” to a damages analysis seems incorrect. We note that Judge Alsup was careful not to use the term “damages” in his questions to the attorneys on the subject of this acquisition issue.  Yet briefs provided by both attorneys do relate the acquisition of the trade secrets alone with “damages”; whereas we believe such quantification should be considered “a monetary remedy.”