Mfg. Res. Int'l, Inc. v. Civiq Smartscapes, LLC

MANUFACTURING RESOURCES INTERNATIONAL, INC., Plaintiff; v. CIVIQ SMARTSCAPES, LLC, et al., Defendants.

Civil Action No. 17-269-RGA

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

September 4, 2019

MEMORANDUM OPINION

Arthur G. Connolly III, Ryan P. Newell, and Kyle Evans Gay, CONNOLLY GALLAGHER LLP, Wilmington, DE; Jeffrey S. Standley, James Lee Kwak (argued), and F. Michael Speed, Jr. (argued), STANDLEY LAW GROUP LLP, Dublin, OH, attorneys for Plaintiff.

John W. Shaw (argued), Karen E. Keller, David M. Fry, and Nathan R. Hoeschen, SHAW KELLER LLP, Wilmington, DE; Douglas J. Kline (argued), Srikanth K. Reddy (argued), and Molly R. Grammel, GOODWIN PROCTER LLP, Boston, MA; Naomi L. Birbach, GOODWIN PROCTER LLP, New York, NY; Yuval H. Marcus, Cameron S. Reuber, Matthew L. Kaufman, and Lori L. Cooper, LEASON ELLIS LLP, White Plains, NY, attorneys for Defendants.

ANDREWS, U.S. DISTRICT JUDGE:

Currently pending before the Court are Plaintiff's Daubert Motion (D.I. 207) and Defendants' Daubert Motion. (D.I. 202). The parties have fully briefed the issues. (D.I. 203, 212, 239, 240, 247, 252). I heard helpful oral argument on August 22, 2019. (Hr'g Tr.).

I. BACKGROUND

Plaintiff Manufacturing Resources International, Inc. filed suit against Defendants Civiq Holdings, Civiq Smartscapes, Comark Holdings, and Comark on March 14, 2017 alleging infringement of seventeen patents.¹ (D.I. 1 ¶ 144). Defendants counterclaimed. (D.I. 18). Both parties have amended their claims. (D.I. 84, 101). The parties completed fact discovery on November 30, 2018 and expert discovery on April 5, 2019. (D.I. 163). Trial is scheduled to begin on September 9, 2019. (D.I. 26).

The disputed patent claims remaining in the case are claim 1 of U.S. Patent No. 8,854,595 ("the '595 Patent"), claims 8, 11, and 14-15 of U.S Patent No. 8,854,572 ("the '572 Patent"), claims 2 and 6 of U.S. Patent No. 8,773,633 ("the '633 patent"), claim 18 of U.S. Patent No. 9,629,287 ("the '287 patent"). (D.I. 212 at 3; D.I. 264). I have granted summary judgment of infringement as to claims 1 and 2 of the U.S. Patent No. 9,173,325 ("the '325 patent"). (D.I. 282 at 9; D.I. 283).

Plaintiff moves to exclude the opinions of Mr. Eichmann, Defendants' damages expert, relating to forward citation analysis and reasonable royalty calculations. (D.I. 212 at 3). Defendants move to exclude (1) all damages opinions from Plaintiff's damages expert, Ms. Bennis; (2) both Dr. Silzars' and Ms. Bennis' opinions regarding non-infringing alternatives; and (3) Dr.Silzars' testimony regarding secondary considerations and infringement by Hyundai products. (D.I. 203 at 1-2).

II. LEGAL STANDARD

Federal Rule of Evidence 702 sets out the requirements for expert witness testimony and states:

A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if: (a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case.

Fed. R. Evid. 702. The Third Circuit has explained:

Rule 702 embodies a trilogy of restrictions on expert testimony: qualification, reliability and fit. Qualification refers to the requirement that the witness possess specialized expertise. We have interpreted this requirement liberally, holding that a broad range of knowledge, skills, and training qualify an expert. Secondly, the testimony must be reliable; it must be based on the "methods and procedures of science" rather than on "subjective belief or unsupported speculation"; the expert must have "good grounds" for his or her belief. In sum, Daubert holds that an inquiry into the reliability of scientific evidence under Rule 702 requires a determination as to its scientific validity. Finally, Rule 702 requires that the expert testimony must fit the issues in the case. In other words, the expert's testimony must be relevant for the purposes of the case and must assist the trier of fact. The Supreme Court explained in Daubert that Rule 702's 'helpfulness' standard requires a valid scientific connection to the pertinent inquiry as a precondition to admissibility.

By means of a so-called "Daubert hearing," the district court acts as a gatekeeper, preventing opinion testimony that does not meet the requirements of qualification, reliability and fit from reaching the jury. See Daubert ("Faced with a proffer of expert scientific testimony, then, the trial judge must determine at the outset, pursuant to Rule 104(a) of the Federal Rules of Evidence whether the expert is proposing to testify to (1) scientific knowledge that (2)will assist the trier of fact to understand or determine a fact in issue.").

Schneider ex rel. Estate of Schneider v. Fried, 320 F.3d 396, 404-05 (3d Cir. 2003) (cleaned up).²

III. DISCUSSION

A. Mr. Eichmann's Forward Citation Analysis

Plaintiff moves to exclude the portion of Mr. Eichmann's opinions relating to the calculation of a reasonable royalty due to Mr. Eichmann's reliance on a forward citation analysis. (D.I. 212 at 36). Plaintiff argues that Mr. Eichmann's forward citation analysis is not a reliable principle or method. (Id.). Defendants argue that forward citation analysis has been accepted as a reliable method by multiple courts and Plaintiff's objections go to weight and credibility, not admissibility. (D.I. 239 at 34-40).

Forward citation analysis is a method of estimating the value of a particular patent based on the number of times the patent is cited by later patents. (D.I. 212 at 36). Mr. Eichmann's forward citation analysis begins with a license agreement between Plaintiff and OnDIGItech in 2009, which licensed the '064 application (the parent provisional of all asserted patents in this case), as well as another provisional application, for a lump sum of $500,000 and a royalty of 6% on gross sales of licensed products. (Id. at 37). Mr. Eichmann's opinion uses a forward citation analysis to calculate the relative value of the asserted patents, using the 6% royalty in the OnDIGItech license as the value for all granted patents originating from the two applications. (D.I. 210, Ex. 32 ¶¶ 133-38).

"[D]amages models are fact-dependent." Commonwealth Sci. & Indus. Research Org. v. Cisco Sys., Inc., 809 F.3d 1295, 1301 (Fed. Cir. 2015). To that end, "there may be more than one reliable method for estimating a reasonable royalty." See Apple v. Motorola, Inc., 757 F.3d 1286, 1315 (Fed. Cir. 2014), overruled on other grounds by Williamson v. Citrix Online, LLC, 792 F.3d 1339 (Fed. Cir. 2015). Multiple courts have found forward citation analyses to be reliable. See Comcast Cable Comm'ns, LLC v. Sprint Comm'ns Co., LP, 218 F. Supp. 3d 375, 383-84 (E.D. Pa. 2016); Intel Corp. v. Future Link Sys., 2017 WL 2482881, at *4 (D. Del. June 1, 2017); Evolved Wireless, LLC v. Apple Inc., 2019 WL 1178517, at *3-4 (D. Del. Mar. 13, 2019). Forward citation analysis has an academic pedigree that supports it as a reliable methodology. See Comcast, 218 F. Supp. 3d at 383 nn. 8-9 (citing Dietmar Harhoff, Frederic Scherer, and Katrin Vopel, Citation, family size, opposition and the value of patent rights, Research Policy, 1596 (2002); Bronwyn H. Hall, Adam Jaffe, and Manuel Trajtenberg, Market Value and Patent Citations, RAND Journal of Economics 36 (1) (Spring 2005); Manuel Trajtenberg, A Penny for Your Quotes: Patent Citations and the Value of Innovations, RAND Journal of Economics 21 (1) (Spring 1990); Adam B. Jaffe and Gaétan de Rassenfosse, Patent Citation Data in Social Science Research: Overview and Best Practices, Nat'l Bureau of Econ. Research Working Paper Series (2016), available at http://www.nber.org/papers/w21868.) Even in Finjan, Inc. v. Blue Coat Sys., Inc., 2015 WL 4272870, at *7-8 (N.D. Cal. July 14, 2015), upon which Plaintiff relies, the expert's forward citation analysis was only unreliable because the expert had not tied the forward citation analysis to the facts of the case. Thus, the correct inquiry is whether Mr. Eichmann's forward citation analysis fails to take into consideration the specific facts of this case such that it is unreliable.

Plaintiff asserts that Mr. Eichmann's forward citation analysis does not consider the context of the technology that the accused infringer actually wanted—critical technology for a viable outdoor display. (D.I. 212 at 40). But Mr. Eichmann ties his forward citation analysis to a specific comparable license between Plaintiff and OnDIGItech. (D.I. 210, Ex. 32 ¶¶ 134-35). Plaintiff's disagreement with Mr. Eichmann's conclusions about the value of its patent is an issue of weight rather than admissibility. "At base, 'the question of whether the expert is credible or the opinion is correct is generally a question for the fact finder, not the court.'" Bayer HealthCare LLC v. Baxalta Inc., 2019 WL 330149, at *1 (D. Del. Jan. 25, 2019) (quoting Summit 6, LLC v. Samsung Elecs. Co., Ltd., 802 F.3d 1283, 1296 (Fed. Cir. 2015)). Forward citation analysis can be a reliable method to decide the relative value of patents and to assist in determining a reasonable royalty. Mr. Eichmann sufficiently ties his analysis to the facts of this case. Plaintiff's arguments thus go to the weight and credibility of Mr. Eichmann's testimony, which can be addressed on cross-examination. Thus, I will deny Plaintiff's Daubert motion.

B. Ms. Bennis' Damages Opinion

Defendants ask the Court to exclude the entirety of Ms. Bennis' damages opinions. Defendants assert that Ms. Bennis' lost profits opinion is flawed because (1) Ms. Bennis improperly relies on information exchanged during confidential settlement communications, (2) improperly concludes without support that Defendants would have purchased the entire...