Motio, Inc v. BSP Software LLC, Brightstar

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Andrew Weiss (economist)
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United States District Court
CASE NO. 4:12-CV-647
Judge Mazzant
Pending before the Court is Defendants‘ Motion to Exclude the Expert Report and
Testimony of Arthur H. Cobb (Dkt. #187). After reviewing the relevant pleadings, the Court
finds that the motion should be denied.
Plaintiff asserts that Defendants infringe claims of U.S. Patent No. 8,285,678 (―the ‘678
Patent‖). The ‘678 Patent is titled ―Continuous integration of business intelligence software.‖ It
was filed on December 30, 2010, and issued on October 9, 2012. The ‘678 Patent relates to
methods of providing automatic version control to a business intelligence system. ‘678 Patent at
Abstract. Plaintiff filed suit for infringement of the ‗678 Patent on October 10, 2012 (Dkt. #1).
Arthur Cobb (―Mr. Cobb‖) authored and presented an analysis of Motio‘s estimated
damages related to Defendants‘ alleged infringement of the ‗678 Patent. Mr. Cobb is expected to
offer testimony at trial (Dkt. #187, Ex. A at pp. 1–2).
On October 27, 2015, Defendants filed the present motion to strike Mr. Cobb‘s report and
testimony (Dkt. #187). Plaintiff filed a response on November 13, 2015 (Dkt. #200). On
November 23, 2015, Defendants filed a reply brief (Dkt. #207), and on December 3, 2015,
Plaintiff filed a sur-reply (Dkt. #212).
Federal Rule of Evidence 702 provides for the admission of expert testimony that assists
the trier of fact to understand the evidence or to determine a fact in issue. Fed. R. Evid. 702. In
Daubert v. Merrell Dow Pharm., Inc., the Supreme Court instructed courts to function as
gatekeepers, and determine whether expert testimony should be presented to the jury. 509 U.S.
579, 590–93 (1993). Courts act as gatekeepers of expert testimony ―to make certain that an
expert, whether basing testimony upon professional studies or personal experience, employs in
the courtroom the same level of intellectual rigor that characterizes the practice of an expert in
the relevant field.‖ Kuhmo Tire Co. v. Carmichael, 526 U.S. 137, 152 (1999).
The party offering the expert‘s testimony has the burden to prove that: (1) the expert is
qualified; (2) the testimony is relevant to an issue in the case; and (3) the testimony is reliable.
Daubert, 509 U.S. at 590–91. A proffered expert witness is qualified to testify by virtue of his or
her ―knowledge, skill, experience, training, or education.‖ Fed. R. Evid. 702. Moreover, in
order to be admissible, expert testimony must be ―not only relevant by reliable.‖ Daubert, 509
U.S. at 589. This gate-keeping obligation applies to all types of expert testimony, not just
scientific testimony.‖ Pipitone v. Biomatrix, Inc., 288 F.3d 239, 244 (5th Cir. 2002) (citing
Kuhmo, 526 U.S. at 147).
In deciding whether to admit or exclude expert testimony, the court should consider
numerous factors. See Daubert, 509 U.S. at 594. In Daubert, the Supreme Court offered the
following, non-exclusive list of factors that courts may use when evaluating the reliability of
expert testimony: (1) whether the expert‘s theory or technique can be or has been tested; (2)
whether the theory or technique has been subjected to peer review and publication; (3) the
known or potential rate of error of the challenged method; and (4) whether the theory or
technique is generally accepted in the relevant scientific community. Id. at 593–94; Pipitone,
288 F.3d at 244. When evaluating Daubert challenges, courts focus ―on [the experts‘] principles
and methodology, not on the conclusions that [the experts] generate.‖ Daubert, 509 U.S. at 595.
The Daubert factors are not a definitive checklist or test.‖ Daubert, 509 U.S. at 593. As
the Court has emphasized, the Daubert framework is ―a flexible one.‖ Id. at 594. The test for
determining reliability can adapt to the particular circumstances underlying the testimony at
issue. See Kuhmo, 526 U.S. at 152. Accordingly, the decision to allow or exclude experts from
testifying under Daubert is committed to the sound discretion of the district court. St. Martin v.
Mobil Exploration & Producing U.S., Inc., 224 F.3d 402, 405 (5th Cir. 2000) (citations omitted).
Defendants argue that Mr. Cobb‘s opinion regarding lost profits relies on an
―unsupported, and speculative, assumption‖ that Motio and BSP control 95% of the market (Dkt.
#187 at p. 5). Defendants note that Mr. Cobb acknowledged there are other competitors that
provide competing products and yet still made conclusions based on the 95% figure (Dkt. #187
at p. 6).
Plaintiff notes that Mr. Cobb did not merely base his opinion upon the 95% market
ownership figure at face value, but rather, states where he obtained this figure, explains that his
independent analysis of other potential competitors leads him to discount their presence, and
further gave him no reason not to assume that the 95% figure provided to him, and presented in
his report, was accurate (Dkt. #200 at p. 7). However, Plaintiff highlights that Mr. Cobb
prepared and provided other lost profits figures for the circumstance that the finder of fact
determines that 95% market share is incorrect, specifically calculations assuming an 85% market
share and a 75% market share (Dkt. #200 at pp. 7–8). The Court finds that Mr. Cobb makes no
expert assertion that the 95% figure is correct, and is not being presented to prove a market share
figure. Rather, he simply relies upon the figure presented by Motio management as a reasonable
assumption, and, even accounts for circumstances where the fact finder finds that 85% or 75% is
more appropriate.
Defendants assert that, even if 95% of the market was controlled by Motio and BSP, it
does not necessarily follow that ―but for‖ infringement, Motio would have received any
additional profits (Dkt. #187 at p. 8). Further, Defendants contend that Mr. Cobb failed to
perform a market reconstruction analysis, claiming that the Federal Circuit‘s decision in Grain
Processing Corp. v. Am Maize-Prods., 185 F.3d 1341, 1350 (Fed. Cir. 1999) requires a market
reconstruction analysis for any lost profits opinion (Dkt. #207 at p. 1).
Plaintiff states that the Federal Circuit does not require a complete market reconstruction
for a two-supplier market, and he argues that this is effectively a two-supplier market (Dkt. #212
at p. 1) (citing Lam, Inc. v. Johns–Manville Corp., 718 F.2d 1056, 1065 (Fed. Cir. 1983)).
Plaintiff argues that focus of Defendants‘ motion is not an attack on Mr. Cobb‘s opinions, his
qualifications, or his methodologies, but rather, an accusation against the facts upon which Mr.
Cobb bases his opinions (Dkt. #200 at pp. 5–6). Plaintiff contends that this is an argument
appropriate at trial, but should not constitute a Daubert motion (Dkt. #200 at p. 6).
The Court agrees, and finds that, under the factual assumption Mr. Cobb bases his
opinion on—that this is effectively a two-supplier market—it is reasonable to assume causation.
Further, Mr. Cobb did not arbitrarily determine the 95% figure, but did conduct an independent
analysis to determine that the figure wasn‘t clearly unreasonable.
Defendants contest Mr. Cobb‘s approximation of a royalty rate of 75%, claiming the
figure is not tied to the facts of the case and has no relation to the patented technology at issue,
and is, rather, merely arbitrary (Dkt. #187 at p. 10). Plaintiff argues that Mr. Cobb‘s opinion
regarding a reasonable royalty is properly premised upon the Georgia Pacific factors (Dkt. #200
at pp. 13–14; Dkt. #212 at pp. 3–4). Plaintiff notes that the end result of a hypothetical
negotiation is, by its very definition, unable to be known with certainty, but that his estimation
was based on the relevant factors (Dkt. #212 at p. 4). Plaintiff explains that, ―[i]n reality, Motio
would have little or no incentive to discount a royalty to provide patented technology to its only
competitor, particularly given that the products at issue are highly profitable,‖ and that his
royalty rate of 75% is appropriate given that direct competition over the same finite number of
customers (Dkt. #200 at p. 14) (citing Dkt. #187, Ex. A at p. 33).
The Court notes that reliability and validity do not require certainty, but there must be
evidence that the knowledge is more than mere speculation of the expert witness. Daubert, 509
U.S. at 590. The Supreme Court noted that ―it would be unreasonable to conclude that the
subject of scientific testimony must be ‗known‘ to a certainty; arguably, there are no certainties
in science.‖ Id. Here the Court finds that Mr. Cobb reached his opinions based upon his
knowledge, training, and experience and application of the Georgia Pacific factors.
Defendants further argue that Mr. Cobb‘s application of the ―entire market value‖ rule in
calculating lost profits and reasonable royalty is unsupported by any demonstration that the
patented technology is the basis for demand, simply assuming that this is the case (Dkt. #187 at
p. 12). Defendants contend that, therefore, Mr. Cobb‘s analysis is based ―on speculation and
conjecture,‖ is not reliable, and should be excluded (Dkt. #187 at p. 13). Plaintiff notes that Mr.
Cobb states in his report that he assumes, for the purposes of his opinions, that the technology
encompassed by the ‗678 Patent is the essential driver behind demand for Defendants‘ ICS and
IVC products and that this assumption is not inappropriate, particularly as it is drawn from the
deposition testimony of one of the Defendants‘ witnesses, Andrew Weiss (Dkt. #200 at p. 15)
(citing Dkt. #187, Ex. A at p. 9). The Court acknowledges Mr. Cobb‘s assumption and does not
find that Mr. Cobb‘s assumption was unsupported or that his analysis is unreliable.
Again, Defendants attempt to challenge the factual basis upon which Mr. Cobb calculates
damages, but the Court‘s gate-keeping function under Daubert is not intended to replace the
adversarial system and the jury‘s responsibility to evaluate and weigh the evidence presented by
each party‘s experts. See Daubert, 509 U.S. at 596 (―Vigorous cross-examination, presentation
of contrary evidence, and careful instruction on the burden of proof are the traditional and
appropriate means of attacking shaky but admissible evidence.‖); see also United States v. 14.38
Acres of Land Situated in Leflore Cty., Miss., 80 F.3d 1074, 1078 (5th Cir. 1996) (The trial court
must act ―with proper deference to the jury‘s role as the arbiter of disputes between conflicting
opinions. As a general rule, questions relating to the bases and sources of an expert‘s opinion
affect the weight to be assigned that opinion rather than its admissibility and should be left for
the jury‘s consideration.‖). Defendants do not question Mr. Cobb‘s qualifications or calculations
or methodology, but simply challenges the reliability of Mr. Cobb‘s opinions.
The Fifth Circuit has noted that a court ―must bear in mind the purpose of [the expert‘s]
testimony when addressing its reliability.‖ Mathis v. Exxon Corp., 302 F.3d 448, 461 (5th Cir.
2002). The purpose of Mr. Cobb‘s testimony is ―to develop methods to estimate Motio‘s
damages and to estimate Motio‘s damages related to BSP‘s alleged infringement of the ‗678
Patent.‖ (Dkt. #187 at p. 2). The Court finds that, considering the purpose of the testimony is to
make estimations of damages, certain underlying factual assumptions are appropriate and Mr.
Cobb‘s report is relevant and sufficiently reliable. As previously stated, the Court‘s role as a
gate-keeper should not invade upon the trier fact‘s role in making credibility determinations at
trial. See Daubert, 509 U.S. at 596.
The Court makes no determination on the merits of
Defendants‘ challenges to the factual assumptions, but recognizes that these particular challenges
would be more appropriately presented to the trier of fact, rather than the Court under a Daubert
Finally, Defendants ask the Court to exclude testimony of Avnet‘s total sales from 2012
through 2014 despite the fact that his damages analysis does not rely on these revenues (Dkt.
#187 at p. 14).
Defendants argue that Avnet‘s total sales are mainly attributable to ―the
distribution of electronic components‖ which has no connection to the accused technology or the
asserted patent (Dkt. #187 at p. 14). Defendants cite the Federal Circuit for the proposition that
―a patent owner should not be permitted to reference the total revenue earned by a defendant
where that revenue is unrelated to patented technology at issue.‖ (Dkt. #187 at p. 14). In Uniloc,
the Federal Circuit described the ―danger of admitting consideration of the entire market value of
the accused where the patented component does not create the basis for customer demand….The
disclosure that a company has made $19 billion dollars revenue from an infringing product
cannot help but skew the damages horizon for the jury, regardless of the contribution of the
patented component to this revenue.‖ Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1320
(Fed. Cir. 2011). Defendants‘ contend that Mr. Cobb‘s opinion is needlessly prejudicial, that he
need not present the total sales figure, but could offer his opinion by comparing profit margins as
percentages without discussing the dollar amount of Avnet‘s total revenues (Dkt. #207 at p. 5).
Plaintiff argues that Mr. Cobb‘s reference to Defendants‘ total sales is appropriate as part
of his determination of Defendants‘ gross profit in furtherance of his analysis that a 75%
reasonable royalty figure would still leave Defendants with a profit ―more than two times the
Gross Profit‖ reported by Defendants in 2012, 2013, and 2014 (Dkt. #200 at p. 16) (citing Dkt.
#187, Ex. A at p. 33). Plaintiff contends Defendants make no Daubert argument regarding the
use of Defendants‘ total sales, and that such an argument would be more properly advanced as a
motion in liminie (Dkt. #200 at p. 16). The Court makes no judgment as to whether presentation
of Defendants‘ total sales is appropriate in the form presented, but does find that Mr. Cobb relies
upon the total sales appropriately as part of his analysis of reasonable royalty. The Court further
agrees with Plaintiff that the argument regarding prejudice and alternative methods of
referencing total sales by Defendants is more properly advanced as a motion in liminie.
It is therefore ORDERED that Defendants‘ Motion to Exclude the Expert Report and
Testimony of Arthur H. Cobb (Dkt. #187) is hereby DENIED.
SIGNED this 8th day of January, 2016.

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