United States District Court, District of Delaware
MAGNETAR TECHNOLOGIES CORP. and G&T CONVEYOR CO. Plaintiffs,
SIX FLAGS THEME PARKS INC., et. al., Defendants.
REPORT AND RECOMMENDATION
MARY PAT THYNGE UNITED STATES MAGISTRATE JUDGE
In this patent infringement case, plaintiffs Magnetar Technologies Corp. ("Magnetar") and G&T Conveyor Co. ("G&T") (collectively, "plaintiffs") sued the defendant theme park operators on March 1, 2007, alleging infringement of U.S. Patent Nos. 5, 277, 125 ("the '125 patent") and 6, 659, 237 ("the '237 patent"). Plaintiffs assert defendants use infringing magnetic braking systems or assemblies in numerous amusement park rides. Plaintiffs contend defendants infringe claim 3 of the '125 patent and/or claims 1 and 10 of the '237 patent.
Presently before the court is the defendants' motion to exclude the testimony of plaintiffs' lay opinion witness Edward M. Pribonic ("Pribonic").
II. PRIBONIC FACTUAL BACKGROUND
Pribonic is the founder and President of Magnetar. Pribonic is also the named inventor on the '237 patent,  as well as several other patents relating to magnetic brakes. He has a bachelor's degree in mechanical engineering,  and a professional engineering license.
Pribonic has worked as an engineer for the past forty-three years. After receiving his bachelor's degree, he worked approximately eighteen years as an engineer or engineering manager for oil, construction, and steel companies. For the past twenty-five years, he has worked within the field of amusement rides and devices.
From 1987-1991, Pribonic served as the manager of engineering and architecture for Disneyland. In this capacity, he was responsible for overseeing sixty professionals and providing design work for safety improvements, maintenance, and expansion of all rides within the park. From 1991-1992, he served as senior facility design manager for Walt Disney Imagineering, and was responsible for the complete design of Disney theme park facilities from concept through construction. He also performed feasibility studies to determine the likelihood of success of new facilities and rides, including roller coasters.
After his employment with Disney, Pribonic started a consulting business, which provides services related to amusement rides and devices. These services include engineering design, project management, design reviews, feasibility studies, facility evaluations, ride safety inspections, and the development of ride maintenance programs. In 2000, he founded Magnetar, which focuses on design, fabrication, sale, and installation of magnetic brakes. Magnetar has also developed materials for friction brakes.
In 2006, Pribonic believed Magnetar's magnetic braking system infringed claim 3 of the '125 patent. Therefore, he sought a license to claim 3 of the '125 patent to prevent the risk of litigation or an injunction. However, his testimony and expertise do not include whether Magnetar's brakes actually infringed the '125 patent at any time.
Defendants deposed Pribonic on August 2 and 3, 2011, as the 30(b)(6) designee for Magnetar. On June 1, 2012, plaintiffs served their Rule 26(a)(2)(C) disclosures of testimony, which contained a summary of Pribonic's proposed testimony. On September 25, 2012, plaintiffs served a supplemental Rule 26(a)(2)(C) disclosure regarding Pribonic's testimony, which listed fourteen possible subject areas of his proposed testimony.
III. STANDARD FOR RELEVANCE: GEORGIA-PACIFIC FACTORS
"Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court." The Georgia-Pacific factors are widely accepted to calculate a reasonable royalty rate and have been affirmed by the Federal Circuit. A reasonable royalty is an amount which a person would be willing to pay to use a particular patent in the market to make a profit. "In the absence of an established royalty, reasonable royalty is calculated based upon hypothetical negotiations between a willing licensor and a willing licensee on the date infringement began."
As characterized by the Federal Circuit, the hypothetical negotiations model produces the result "more of the character of a forced settlement where neither party gets all it would wish." In analyzing the hypothetical negotiation, the court applies the factors of Georgia-Pacific, which provides a "list of evidentiary facts relevant, in general, to the determination of the amount of a reasonable royalty for a patent license . . ., ""[T]here is no formula by which these factors can be rated precisely in the order of their relative importance or by which their economic significance can be automatically transduced into their pecuniary equivalent." Thus, in the court's analysis of the hypothetical negotiation under the Georgia-Pacific factors, some "factors may be of minimal or no relevance to a particular case and other factors may have to be molded by the Court to fit the facts of the case at hand."
IV. RELEVANCE ANALYSIS: PRIBONIC'S TESTIMONY
Defendants dispute four categories of Pribonic's proffered testimony: (1) relationship of Magnetar's brakes to claim 3 of the '125 patent; (2) advantages of magnetic brakes over other types of brakes, including friction brakes; (3) importance of roller coasters to amusement park rides; and, (4) importance of magnetic brakes in the construction of roller coasters. The following analysis examines whether the four categories are relevant to a hypothetical negotiation under the Georgia-Pacific factors.
A. Relationship of Magnetar's brakes to claim 3 of the '125 patent
1. Factor One
The first Georgia-Pacific factor is "[t]he royalties received by the patentee for the licensing of the patent in suit, proving or tending to prove an established royalty.""Courts and commentators alike have recognized that the royalties received by the patentee for the licensing of the patents in suit is the 'most influential factor' in determining a reasonable royalty."
Here, the '125 patent in suit is licensed to Magnetar by G&T for a six percent royalty rate of all products sold with a limit of up to $3 million during a given accounting year. As the founder and president of Magnetar, Pribonic negotiated this royalty rate with G&T. Pribonic has personal knowledge from the perspective of a licensee to the '125 patent. Therefore, presuming plaintiffs demonstrate infringement, Pribonic's testimony of why he sought a license, including his understanding that claim 3 of the '125 patent covers Magnetar's brakes,  is relevant to the hypothetical negotiation of the royalty rate in calculating damages under Georgia-Pacific factor one.
2. Factor Two
The second Georgia-Pacific factor is "[t]he rates paid by the licensee for the use of other patents comparable to the patent in suit." "This factor examines whether the licenses relied on by the patentee in proving damages are sufficiently comparable to the hypothetical license at issue in suit." "This factor focuses on the licensing customs of the industry and has been interpreted broadly, encompassing even those licenses to which the licensee is not a party."
In the present matter, the '125 patent is the subject of the license agreement between Magnetar and G&T. Joseph Gemini, plaintiffs' damages expert, relies on the license between Magnetar and G&T as one of the two licenses in his damages report.In analyzing the license between Magnetar and G&T, Gemini relies on Pribonic's testimony that he acquired the license to sell magnetic braking systems to avoid infringement of the '125 patent. In relation to that license, Pribonic is personally familiar with when "he learned of the '125 patent around 2006, believed his Magnetar brakes, when installed on a ride, infringed the patent, and sought a license to the patent because he did not want to risk litigation or an injunction."
Defendants contend Pribonic's testimony regarding the license between Magnetar and G&T is irrelevant because he fails to connect Magnetar's brakes with any product accused of infringement in this case. Defendants further argue whether Magnetar's brakes infringe is meaningless, unless there is some corresponding evidence that these brakes are the same as the patents in suit. Indeed, if such evidence was supplied by plaintiffs, Pribonic cannot provide such testimony because he is not permitted to opine regarding infringement. However, Pribonic's testimony is advanced for use in a damages analysis as part of a hypothetical negotiation to establish a reasonable royalty rate-not whether the accused products or systems infringe claim 3 of the '125 patent. Therefore, Pribonic's testimony regarding the royalty rate between Magnetar and G&T is relevant to the hypothetical negotiation of the royalty rate in calculating damages under Georgia-Pacific factor two.
3. Factor Three
The third Georgia-Pacific factor is "[t]he nature and scope of the license, as exclusive or non-exclusive; or as restricted or non-restricted in terms of territory or with respect to whom the manufactured product may be sold." "Non-exclusive licenses generally command lower royalties."
Here, Magnetar holds a non-exclusive license from G&T of the '125 patent.Similarly in the present matter, this patent would involve a non-exclusive license in the hypothetical negotiation because there are multiple alleged infringers. Therefore, Pribonic's testimony regarding the royalty rate between Magnetar and G&T is relevant to the hypothetical ...