Au New Haven, LLC v. YKK Corp.

AU NEW HAVEN, LLC, and TRELLEBORG COATED SYSTEMS US, INC., Plaintiffs, v. YKK CORPORATION, et al., Defendants.

15-CV-3411 (GHW)(SN)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

March 19, 2019

OPINION AND ORDER

SARAH NETBURN, United States Magistrate Judge:

TABLE OF CONTENTS

BACKGROUND ............................................................................................................................ 1

APPLICABLE LAW ...................................................................................................................... 2

DISCUSSION OF PLAINTIFFS' DAUBERT MOTIONS ........................................................... 5

I. Plaintiffs' Motion to Exclude Arntson ..................................................................................... 5

II. Plaintiffs' Motion to Exclude Dr. Meirowitz's Testimony .................................................... 7

A. Dr. Meirowitz's Invalidity Report ................................................................................... 9

1. Enablement and Definiteness ..................................................................................... 9

2. On-Sale Bar .............................................................................................................. 12

3. Derivation ................................................................................................................. 14

4. Foreign Law ............................................................................................................. 16

B. Dr. Meirowitz's Non-Infringement Report .................................................................... 17

1. Comparison of Accused Products with Drawings .................................................... 18

2. Reliance on Marketing Materials ............................................................................. 21

3. Intent to Induce Infringement ................................................................................... 22

4. Meaning of Water-Resistance .................................................................................. 25

5. Water-Resistance Testing Methodology .................................................................. 26

6. Testing Conducted by YKK Employees .................................................................. 27

7. YKK's Manufacturing Process ................................................................................ 28

8. Non-infringing Alternative ....................................................................................... 29

III. Plaintiffs' Motion to Exclude Kindler ................................................................................. 29

A. Lost Profits Legal Instruction ......................................................................................... 30

B. Relevance of Opinions Regarding a Non-Exclusive Royalty ........................................ 31

C. Reliability of Non-Exclusive Royalty Opinion .............................................................. 32

D. Reliability of Kindler's Rebuttal of Donohue's Damages Estimate .............................. 33

E. Relevance of Hypothetical Royalty to Contract Damages ............................................. 34

F. Relevance of Alternative Measure of Lost Profits for High End Outerwear ................. 35

G. Relevance of Failure to Mitigate Opinion ...................................................................... 35

H. Reliability of Disgorgement Offset Opinion .................................................................. 36

IV. Plaintiffs' Motion to Exclude All Opinions Relating to Non-Infringing Alternatives ....... 37

DISCUSSION OF DEFENDANTS' DAUBERT MOTIONS ..................................................... 38

I. Defendants' Motion to Exclude Bagley ................................................................................. 39

II. Defendants' Motion to Exclude Cockrell ............................................................................. 41

A. Cockrell's First Three Opinions Regarding High End Outerwear ................................. 42

B. Non-Infringing Alternatives ........................................................................................... 44

C. Consumer Confusion ...................................................................................................... 45

III. Defendants' Motion to Exclude Donohue ........................................................................... 46

A. Reliance on Cockrell ...................................................................................................... 47

B. Donohue's Causation Opinions ...................................................................................... 47

C. Donohue's Statistical Sampling and Extrapolation ........................................................ 48

D. Donohue's Lost Profits Estimates for Luggage ............................................................. 50

CONCLUSION ............................................................................................................................. 51

This case is about patents for water-resistant zippers—the '214 Patent and related foreign patents—owned by Plaintiffs. Plaintiffs allege that Defendants have infringed on the patent by exceeding the scope of an exclusive license granted by Plaintiffs. Both parties move to exclude expert witnesses before trial. Plaintiffs move to exclude testimony from three of Defendants' experts: (1) Dr. Randy Emil Meirowitz, a technical expert who supports Defendants' non-infringement and invalidity defenses; (2) Paul Krak Arntson, who speaks to industry definitions and the outerwear industry's use of the zippers; and (3) Lauren R. Kindler, Defendants' damages expert.¹ Defendants have cross-moved to exclude testimony from three of Plaintiffs' experts: (1) David W. Cockrell, a clothing designer who speaks to industry definitions and use of the zippers; (2) Margo A. Bagley, a law professor and Plaintiffs' foreign patent law expert; and (3) James J. Donohue, Plaintiffs' damages expert.²

For the reasons discussed below, both parties raise some valid arguments, but none of the motions is justified in its entirety. These motions are granted in part and denied in part.

BACKGROUND

The '214 Patent originates from conversations between Mike Blenkarn of Arc'teryx and Stuart Press of Uretek, Inc. in the 1990s. At that time, Blenkarn was looking for someone who could make a water-resistant zipper. He found Press, who made the water-resistant zipper claimed in the '214 Patent.

After Press came up with his invention, Uretek began to water-proof zippers for YKK Corporation's American affiliate. Originally, YKK simply paid Uretek for the lamination service, but YKK later wanted to manufacture and sell the water-resistant zipper globally at a lower cost. To facilitate that goal, YKK and Uretek entered into an exclusive licensing agreement that granted YKK the use of the '214 Patent and related patents with one exception: Uretek did not grant YKK the right to use the patent for sales of zippers into the "high end outerwear," "marine," "luggage (excluding sports and cosmetic bags)," or "military" markets.

After several years of cooperation, Uretek came to believe that YKK was selling the patented zippers into those excluded markets. They were ultimately unable to resolve this dispute, giving rise to this litigation. Plaintiffs—who are comprised of the company that later purchased Uretek as well as the rebranded corporate iteration of Uretek, Au New Haven, LLC—have sued for infringement of the '214 Patent, breach of the licensing agreement, deceptive marketing under the Lanham Act, and deceptive practices under the Connecticut Unfair Trade Practices Act. Defendants—who are comprised of YKK's parent company and its local affiliates—assert a variety of defenses, including that: (1) the '214 Patent and its foreign analogues are invalid; (2) some of YKK's water-resistant zippers do not infringe on the patents; and (3) the licensing agreement does not prohibit sales into excluded markets. In the alternative, Defendants also allege that Plaintiffs' claim for damages—which assumes that Uretek would have laminated all of the allegedly infringing zippers—are inflated and unfounded.

Both parties move to exclude experts who support these claims and defenses.

APPLICABLE LAW

Under Federal Rule of Evidence 702, an expert who is "qualified . . . by knowledge, skill, experience, training, or education" may testify if the testimony would be helpful to the trier offact, is "based on sufficient facts or data," is "the product of reliable principles and methods," and the expert has reliably applied the facts of the case.³ The "proponent of expert testimony has the burden of establishing by a preponderance of the evidence that the admissibility requirements of Rule 702 are satisfied."⁴

Rule 702 imposes "a special obligation upon a trial judge to 'ensure that any and all scientific testimony . . . is not only relevant, but reliable.'"⁵ The court must determine whether the expert "employs in the courtroom the same level of intellectual rigor that characterizes the practice of an expert in the relevant field."⁶

The first step in evaluating a motion to exclude is determining "whether the expert has sufficient qualifications to testify."⁷ If so, the second "question is 'whether the proffered testimony has a sufficiently reliable foundation.'"⁸ It is "critical that an expert's analysis be reliable at every step," for "any step that renders the analysis unreliable under the Daubert factors renders the expert's testimony inadmissible."⁹ To determine the reliability of the testimony, the Court may consider factors including:

(1) whether a theory or technique can be (and has been) tested, (2) whether the theory or technique has been subjected to peer review and publication, (3) a technique's known or potential rate of error, and the existence and maintenance of standards controlling the

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