In a series of recent decisions in XpertUniverse, Inc. v. Cisco Systems, Inc., C.A. No. 09-157-RGA (D. Del.) (“XpertUniverse”), Judge Richard G. Andrews considered defendant’s Daubert motions related to two of plaintiff’s experts and its motions for partial summary judgment.
As to the admissibility of plaintiff’s expert’s testimony, the Court assessed the “trilogy of restrictions on expert testimony: qualification, reliability and fit.” XpertUniverse (D. Del. Mar. 7, 2013), at 1 (internal citation omitted). The expert’s qualification was not contested. Id. As to fit, while defendant’s “witnesses are going to testify that some of the materials [the expert would rely on] describe features that did not make it into the actual accused . . . products,” to the Court, “[i]t certainly seem[ed] to be theoretically possible for an expert to determine product features based on documentation. Whether Dr. Nourbakhsh,” plaintiff’s expert, “worked from the right materials, what those materials show, and what features are in the products are more factual questions for the jury than Daubert issues for the Court.” Id. at 3. As to reliability, the Court examined whether the expert could “testify about what ‘functionalities’ customers use in the absence of any direct knowledge.” Id. at 2. Plaintiff primarily asserted induced and/or contributory infringement and it was crucial to establish whether, and how, defendant’s customers utilized “optional functionalities” in order to show direct infringement. Id. at 3. The Court concluded that the evidence on which the expert relied to conclude that customers used such features was “exceedingly thin,” and the expert’s conclusion was also “beyond his expertise and knowledge, and therefore in the realm of speculation.” Id. at 4, 5. Therefore the Court excluded the expert’s conclusion “about direct infringement by [defendant’s] customers.” Id. at 5. Finally, also related to reliability, the Court concluded that the expert’s opinions with regard to secondary considerations of non-obviousness based on commercial success, failure of others, copying, praise, and industry acceptance went “beyond his computer science and call center expertise” and were inadmissible. Id. at 6. On the other hand, the expert was “clearly qualified to offer an opinion” on long-felt need and this testimony was admissible. Id.
Because the Court concluded that this expert may not opine as to customers’ direct infringement and may only opine on long-felt need as to secondary considerations of non-obviousness, it also granted in part defendant’s motion for partial summary judgment as to indirect infringement by some of its products. XpertUniverse (D. Del. Mar. 8, 2013). Plaintiff’s “only basis for demonstrating indirect infringement is Dr. Nourbakhsh’s opinion that [defendant’s customers] will use the methodology recited by the [asserted] method claims,” and this testimony was unreliable. Id. at 17 (internal citations and quotation marks omitted). Defendants had also moved for summary judgment on plaintiff’s non-patent claims based on rescission, fraud, breach of contract, misappropriation of trade secrets, and trademark infringement, and the Court granted these motions in part. Id. at 23-24.
Finally, the Court considered the admissibility of the testimony of plaintiff’s damages expert, Mr. Bratic. XpertUniverse (D. Del. Mar. 11, 2013). It noted that “Bratic’s opinions necessarily evolved after the Court’s [decision on the motions for partial summary judgment],” therefore it “address[ed] Bratic’s opinions as it understands them based on Bratic’s testimony on March 8, 2013.” Id. at 2. As to the patent infringement claims, the expert “opin[ed] that based on a hypothetical negotiation between [plaintiff and defendant] as of the earliest patent infringement, [defendant] would have paid [plaintiff] a lump sum of $32.4 million in exchange for a license to the two patents in suit. Bratic opine[d] that [defendant] would have paid [plaintiff] 50% of the $65 million he believes” a third party invested to develop a product that “Bratic opine[d] is a proxy for [plaintiff’s] technology.” Id. at 4.
“The primary basis for decision is the opinion’s faulty basis for recommending a lump sum” as opposed to a running royalty based on ongoing sales or usage. Id. at 5. The Court noted that “the parties at the hypothetical negotiation would be aware that [plaintiff] never sold a single product and [defendant’s] sales have totaled less than $1 million. Bratic’s numerous methodological flaws are thrown into sharp relief by his conclusion: $32 million in a lump sum royalty on $937,000 in sales of accused products simply makes no sense.” Id. at 6. Addressing the specifics of these flaws, the Court first noted that the “only explanation” for the lump sum payment was “the vision selling strategy implemented by [defendant] and the significant convoyed sales generated from the sale of Accused Products. Bratic’s sole basis for quantifying this [strategy] and convoyed sales” was testimony that the Court had “determined lack[ed] foundation.” Id. (internal citations and quotation marks omitted). Second, the expert “also [did] not provide any logical link between these grounds” and his quantification of the lump sum. Id. Therefore, the expert’s “opinion that the parties would have realized that the appropriate royalty structure for rights to the patents in suit would have been a lump sum royalty is not based on sufficient data or information.” Additionally, the expert’s $65 million estimation of the amount the third party invested in the relevant product was also “based on insufficient information.” Id. As a result, the Court concluded that this expert could not “opine . . . that a hypothetical negotiation between the parties would have concluded in a lump sum of $32.5 million.” Id. at 10.
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