Posted On: January 7, 2013 by Gregory J. Brodzik

Judge Andrews reserves final decision on defendant’s Daubert motion to exclude plaintiff’s damages expert until live testimony hearing before trial

Judge Richard G. Andrews recently issued a memorandum opinion addressing defendant’s motion to exclude the live testimony of plaintiff’s expert, whom plaintiff offered to opine on the damages related to defendant’s alleged infringement of U.S. Patent No. 5,859,547 (“the ‘547 patent”), entitled “Dynamic Logic Circuit.” AVM Technologies, LLC v. Intel Corporation, C.A. No. 10-610-RGA, slip. op. (D. Del. Jan. 4, 2013). Judge Andrews concluded that “[w]hile I am thus of the opinion that [plaintiff’s expert’s] testimony about damages should be entirely excluded, I also believe that my final decision on the matter would be better informed if I heard live testimony, subject to cross-examination, from [plaintiff’s expert], before the beginning of trial.” Id. at 7.

Judge Andrews first addressed defendant’s argument that plaintiff’s expert’s opinion was unreliable because his “calculation of a reasonable royalty rate violates the entire market value rule because he made no effort to apportion the percentage of [defendant’s] accused revenues that is attributable to the ‘547 patent.” Id. at 3. Judge Andrews noted that “the general rule is that royalties will be based on the ‘smallest salable patent practicing unit.’” Id. at 4 (quoting LaserDynamics v. Quanta Comp., Inc., 694 F.3d 51, 67 (Fed. Cir. 2012)) (internal quotation marks omitted). However, under the “entire market value rule” exception, “[t]he patentee may rely on the entire market value of the accused product if the patentee demonstrates that the patented feature creates the ‘basis for customer demand’ or ‘substantially create[s] the value of the component parts.’” Id. at 4 (quoting Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1318 (Fed. Cir. 2011)) (internal quotation marks omitted). Consistent with its expert’s position, plaintiff argued that royalties should be based on the sales of microprocessors because those were the “smallest saleable patent-practicing unit.” See id. at 5. Judge Andrews found, however, that “[t]he use of a saleable unit that is greater than the patented feature is going to introduce Uniloc error.” Id. Judge Andrews further explained, “I gather that dynamic logic circuit(s) may be an important part of a microprocessor. It is completely unclear to me how many other important parts there are, although my sense is that there are many.” Id. at 6 (emphasis added). Thus, “[a]ssuming for the sake of argument that dynamic logic circuits are the single most important part of [defendant’s] microprocessors, it is still a long haul to conclude that they ‘drive demand’ for the entire microprocessor.” Id. Judge Andrews ultimately concluded that plaintiff’s expert’s report “provides little, if any, basis for allowing his testimony” regarding a reasonable royalty rate. Id.

Judge Andrews then addressed defendant’s argument that plaintiff’s expert’s use of four license agreements to estimate damages was unreliable. Judge Andrews noted that plaintiff must “show that the prior licenses are truly comparable to the license that the parties would have negotiated for the asserted patent before introducing this evidence to the jury.” Id. Judge Andrews found that the use of these licenses was unreliable in certain respects. For instance, this is a “single patent case,” but “three of the four license agreements” relied on gave plaintiff “a license to entire patent portfolios that included dozens of patents.” Id. at 7. Further, plaintiff’s expert’s report “does not indicate that he performed any analysis to compare the benefits and value of the technology covered by this agreement, and he conceded as much at his deposition.” Id.

AVM Technologies, LLC v. Intel Corporation, C.A. No. 10-610-RGA, slip. op. (D. Del. Jan. 4, 2013)