Beruflich Dokumente
Kultur Dokumente
L.P.,
Plaintiff,
Civil Action No. 12-1013-RGA
v.
MEMORANDUM ORDER
Presently before the Court is Comcast' s Motion to Exclude the damages opinions of
Sprint's experts, Dr. Arthur Brody and Dr. Debra Aron. (D.I. 170). This Motion was included in
Comcast's Motion for Summary Judgment filed on October 6, 2014, but is addressed separately
here. (Id.). The matter has been fully briefed (D.I. 171, 196 & 220), and the parties appeared for
oral argument on January 8, 2015 (D.I. 239). The parties appeared for a Daubert hearing on this
specific issue on January 16, 2015. (D.I. 229). Dr. Brody testified at the hearing. IT IS
Schneider ex rel. Estate of Schneider v. Fried, 320 F.3d 396, 404-05 (3d Cir. 2003) (footnote
and internal citations omitted). 1
Comcast argues that Dr. Brody's opinion should be excluded because it does not meet the
requirements of Federal Rule of Civil Procedure 26 and Federal Rule of Evidence 702, and that
Dr. Aron's opinion should be excluded because it is based on the erroneous conclusions made by
Dr. Brody in his report. (D.I. 171 at 21-24). During direct examination, Dr. Brody explained
that he analyzed Comcast's Technical Requirements Document (TRD) for the IP Multimedia
Subsystem (IMS), and provided two opinions: (1) a requirements opinion (if 228); and (2) a
1 The
Court of Appeals wrote under an earlier version of Rule 702, but the recent amendments to the rule were not
intended to make any substantive change.
components opinion
(ii 229).
(D.I. 229 at 10:7-11: 10). For his requirements opinion, Dr. Brody
found that 258 (7%) of the approximately 3,685 "MUST" requirements "relate to" the
functionality claimed by the '853 patent. (D.I. 172-15 at 6-7 ii 228). For his components
opinion, Dr. Brody found that 7 (38.8%) of the 18 functional components in Comcast's IMS
network were implicated by the '853 patent, and that 7 (16. 7%) of the 42 enumerated functions
of the implicated components were related to the '853 patent. (Id. at 8 ii 229). Thus, Dr. Brody
concluded that 16.7% of the functionality of the 38.8% of the IMS system-6.5% of the system
as a whole-"relate to" the '853 patent. (Id.). Based on these two data points, Dr. Brody
concluded that from 6.5 to 7% of Comcast's IMS network infringed the asserted claims of the
'853 patent. (D.I. 229 at 10:12-18 & 11:3-8).
Comcast argues that Dr. Brody's report does not meet the requirements of Federal Rule of
Civil Procedure 26(a)(2)(B)(i) because his report does not provide the "basis and reasons" for his
opinions. (D.I. 171 at 21). Rule 26(a)(2)(B)(i) requires an expert witness to provide a report
containing: "a complete statement of all opinions the witness will express and the basis and
reasons for them." Fed. R. Civ. P. 26. Comcast argues that Dr. Brody's report does not disclose
how he determined whether a requirement or component was "implicated by" the '853 patent.
(D.I. 171 at 21 & 24). Sprint, on the other hand, argues that Dr. Brody's report explains that he
analyzed Comcast's TRD, and based on his experience in the field, identified the functionalities
that he believed to be related to the '853 patent. (D.I. 196 at 22-23). Dr. Brody concluded that
6.5 to 7% of Comcast's IMS network related to the patented subject matter, but provided no basis
for how he determined which features "related to" the patent. This determination provides the
entire basis for Dr. Brody's opinion, and thus requires at least some explanation. Without such,
Dr. Brody's report does not meet the requirements set forth in Rule 26.
II
1
Additionally, Comcast argues that Dr. Brody's apportionment methodology was not
reliable because he did not measure the value attributable to the '853 patent. (D.I. 171 at 23).
The Federal Circuit has made clear that "a patentee must in every case give evidence tending to
separate or apportion the defendant's profits and the patentee's damages between the patented
feature and the unpatented features." VirnetX Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1326 (Fed.
Cir. 2014) (quoting Garretson, 111 U.S. at 120). Further, the "patentee must show in what
particulars his improvement has added to the usefulness of the machine or contrivance." Id.
(quoting Garretson, 111 U.S. at 121). Comcast contends that Dr. Brody's analysis measures the
portion of the IMS network that is made up by the entire billing functionality, rather than the
incremental improvement added by the '853 patent. (D.I. 171 at 23). The '853 patent does not
f
l
I'
I
i
purport to cover billing functionality generally, but instead claims to increase "flexibility" in
billing by eliminating the "cumbersome arrangement" between the interexchange carrier (IXC)
and the vendor, and to create "substantial efficiencies" by eliminating the need to transmit billing
information back to the originating switch. (D.I. 47-1 at 5, 1:53-2:61). Dr. Brody's report does
not mention the improvements added to Comcast's IMS network by the '853 patent, and
provides no explanation for how requirements and components were found to "relate to" the
claimed subject matter. Therefore, Dr. Brody's analysis is not tied to the improvements
attributable to the patented invention, and his opinion is unreliable for purposes of Rule 702.
Sprint attempts to salvage Dr. Aron's opinion by claiming that she "took additional steps"
to determine a reasonable royalty, "including applying the Georgia-Pacific factors." (D .I. 196 at
24). According to the Federal Circuit, "a reasonable royalty analysis requires a court to ...
carefully tie proof of damages to the claimed invention's footprint in the market place." VirnetX,
767 F.3d at 1327 (alterations in original). Dr. Aron begins her analysis with the projected
l
l
savings that Comcast would generate by implementing the IMS network. (D.I. 172-21 at 3 if
162). Dr. Aron, however, does not address what, if any, impact the '853 patent had on generating
these savings. Dr. Aron makes clear that her understanding of the '853 patent as it relates to the
IMS network is based solely on Dr. Brody's report (Id.
is based on the two data points provided by Dr. Brody. (Id. at 4-5 ifif 165-67). I have seen no
evidence that ties Comcast's savings to the claimed invention. 2
I think an analogy may be helpful. Let's assume there is a company that uses a local area
network computer system. It costs $1,000,000 per year to operate. The company decides to
upgrade. It gets a new local area network computer system. The new network system has
upgraded routers. The upgrades to the routers are protected by a patent. A technical expert
concludes that the new network system performs 5000 different functions. The technical expert
also concludes that the routers perform 250 different functions. (Or that the upgrades to the
routers perform 250 different functions. The point will be the same.). After the new system is in
use, the company calculates that it now only costs $800,000 per year to operate the local area
network system. What is the contribution of the routers (or the upgrades to the routers) to that
$200,000 per year that is being saved? There is insufficient information to make a reasonable
estimate. Saying that the new routers (or the upgrades to the routers) are responsible for
25015000 (or 5%) of the savings is not based on science. It is not a reasonable estimate. It is
simply a guess.
Dr. Aron relies almost exclusively on Dr. Brody's report, which fails to provide any
scientific methodology that can be relied upon for determining how the patented features add
value to the IMS network. Therefore, Dr. Aron's analysis, even with the Georgia-Pacific factors,
Dr. Aron stated in her report that she requested documents from Comcast providing "additional detail behind
Comcast's incremental savings from its IMS-CDV implementation," but no such information has been provided.
does not tie proof of damages to the claimed invention's "footprint." It follows that Dr. Aron's
methodology for determining a reasonable royalty is unreliable, and her opinion based on such
methodology should be excluded.
For the reasons set forth above, IT IS HEREBY ORDERED that Comcast's Motion to
Exclude the damages opinions of Dr. Brody and Dr. Aron is GRANTED.
Entered this
cir~
MEMORANDUM ORDER
Before the Court is Sprint's Motion in Limine 3. (D.I. 235-1 at 237). Sprint moves to
preclude Comcast from offering into evidence, referencing, or eliciting testimony about
settlement and license agreements entered into by Comcast relating to comparable technology.
(Id.). IT IS HEREBY ORDERED that Sprint's Motion in Limine 3 is GRANTED.
This motion implicates the second Georgia-Pacific factor, which looks at "[t]he rates
paid by the licensee for the use of other patents comparable to the patent in suit." GeorgiaPacific Corp. v. US. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970). "This factor
examines whether the licenses relied on by the patentee in proving damages are sufficiently
comparable to the hypothetical license at issue." Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d
1301, 1325 (Fed. Cir. 2009). "[T]here must be a basis in fact to associate the royalty rates used
in prior licenses to the particular hypothetical negotiation at issue." Uniloc USA, Inc. v.
Microsoft Corp., 632 F.3d 1292, 1317 (Fed. Cir. 2011). A patentee cannot rely on license
agreements that are "radically different from the hypothetical agreement under consideration."
Id. at 1316. "[C]omparisons of past patent licenses to the infringement must account for the
'technological and economic differences' between them." Wordtech Sys., Inc. v. Integrated
1
Network Solutions, Inc., 609 F.3d 1308, 1320 (Fed. Cir. 2010). "When relying on licenses to
1 My memory is that Comcast conceded the motion as to the GlobeTec Trust agreement at the pretrial conference on
January 23, 2015, but the transcript of the conference is not on the docket yet.
2
Ms. Davis found that the dates for the hypothetical negotiations would be as follows: (I) '605 and '339 patents:
2000; (2) '832 patent: 2005; and (3) '853 patent: October 2010. (D.1. 236-3 at 124).
related to telephone billing. (Id. at 130). The agreement, however, was the result of a settlement
between Comcast and a non-practicing entity, meaning that there were likely major economic
differences between the negotiating parties. Sprint points out that Ms. Davis addresses the
economic differences not at all. (D.1. 235-1 at 238). In response, Comcast points to Ms. Davis's
report and deposition as evidence that she did. (Id. at 240). Review of the cited materials (D.I.
237-6 at 37-40; D.I. 237-6 at 20-24, 108:10-114:16) does not support Comcast's response. 3
Therefore, the RTI license agreement is not shown to be "sufficiently comparable" to the
hypothetical negotiation.
Comcast's agreement with Jefferson Valley took place in August 2012-seven (7) years
after the hypothetical negotiation for the '832 patent. (D.1. 236-3 at 130). The license agreement
included nine (9) U.S. patents along with foreign patents and patent applications, which is quite
different from the one patent that would be at issue in the hypothetical negotiation. Mr. Bradner
concluded that one of the patents was comparable to the '832 patent because it provided similar
"telephony related functionality" and "operational benefits." (Id. at 131 ). Mr. Bradner' s vague
allegations of comparability, however, are not sufficient, especially where the agreement
occurred seven years after the hypothetical negotiation date. Thus, the Jefferson Valley licensing
agreement is "radically different" from the hypothetical agreement that would have resulted from
negotiation between Comcast and Sprint.
The agreement between Comcast and TR Labs took place in August 2013-thirteen (13)
years after the hypothetical negotiation for the '605 and '339 patents. (Id. at 132). This is a
considerable temporal difference, and would have a dramatic effect on the economic positions of
Ms. Davis had no "specific knowledge about what [RTI] is," and assumed it was a non-practicing entity. (D.1.
237-6 at 21, 109:4-20). She made no "adjustments'' notwithstanding that "Sprint and RTI are not similar
organizations." (Id. at 22, 11 :23-24). Using settlement with a non-practicing entity, involving different patents,
without a fuller analysis, does not provide a methodologically sound basis for comparison.
the negotiating parties. The TR Labs agreement was the result of a litigation settlement, and was
for a "fully paid-up, royalty free" license. (Id.). The GlobeTec license agreement took place in
October 2014---fourteen (14) years after the hypothetical negotiation for the '605 and '339
patents. (Id. at 133). The GlobeTec license was also the result of settlement. Both license
agreements occurred over a decade after the hypothetical negotiation date, and were entered into
with non-practicing entities for purposes of settlement. There is no "basis in fact" to use these
license agreements as comparisons for the hypothetical negotiation between Comcast and Sprint.
While Ms. Davis's report provides examples of how the four license agreements differ
from the hypothetical agreements, she does not explain how her methodology accounts for these
differences. (Id. at 134-35). First, all of the agreements license a number of patents, all of
which are not in suit. Comcast, on the other hand, would only be licensing two patents, at most,
in a single hypothetical negotiation. Second, and most importantly, three out of the four licenses
resulted from litigation settlements with non-practicing entities, who most likely were in
drastically different bargaining positions than Sprint would have been in at the time of
hypothetical negotiation. Ms. Davis provides no information regarding the nature of the
litigation or the context of the settlements, and thus there is no reason to believe that the
settlements in question are comparable. 4 Therefore, the four licenses are not sufficiently
comparable to the hypothetical licenses, and, to the extent the lack of comparability could be
accounted for, Ms. Davis has not attempted to do so. Thus, all four agreements should be
excluded.
The Court has some knowledge of the GlobeTec litigation, as it was assigned to me. GlobeTec initiated twentyeight (28) lawsuits in this District, all of which were settled (most quite quickly) with little litigation. None of them
reached a Markman hearing.
For the reasons set forth above, IT IS HEREBY ORDERED that Sprint's Motion in
Limine 3 is GRANTED.