United States District Court, D. Delaware
S.C. Stover and Regina S.E. Murphy, BARNES & THORNBURG
LLP, Wilmington, DE Robert C. Mattson, Eric W. Schweibenz,
Frank J. West, Vincent K. Shier, Christopher Ricciuti, Sasha
S. Rao, and Michael D. West, OBLON, MCCLELLAND, MAIER &
NEUSTADT, L.L.P., Alexandria, VA Attorneys for Plaintiff.
A. Rovner and Jonathan A. Choa, POTTER ANDERSON & CORROON
LLP, Wilmington, DE Alyssa Caridis and Andrew J. Kim, ORRICK.
HERRINGTON & SUTCLIFFE LLP, Los Angeles, CA Vickie
Feeman, ORRICK, HERRINGTON & SUTCLIFFE LLP, Menlo Park,
CA Nicholas H. Lam, ORRICK, HERRINGTON & SUTCLIFFE LLP,
New York, NY Attorneys for Defendants.
U.S. DISTRICT JUDGE
before the Court in this patent infringement action are
Defendants Donghee America, Inc. and Donghee Alabama,
LLC's ("Donghee'* or "Defendants")
Daubert Motion to Exclude the Testimony of David A.
Haas (D.I. 219) and Donghee's Motion for Summary Judgment
Plastic Omnium Advanced Innovation and Research
("Plastic" or "Plaintiff) filed suit against
Donghee on March 23, 2016, alleging infringement of seven
U.S. patents. (See D.I. 1) On August 24, 2016,
Plastic amended its complaint to assert infringement of eight
U.S. patents: U.S. Patent Nos. 6.814, 921 (the "'921
patent"), 6, 866, 812 (the "'812 patent"),
7, 166, 253 (the '"253 patent"), 8, 122, 604
(the '"604 patent"), 8, 163, 228 (the
'"228 patent"), 9, 079, 490 (the '"490
patent"), 9, 399, 326 (the '"326 patent"),
and 9, 399, 327 (the '"327 patent").
(See D.I. 14) On October 23, 2017, the parties
stipulated to dismissal of the '604 patent. (See
D.I. 195) The parties filed the pending motions on February
2, 2018. A hearing on the motions was held on April 3. 2018.
(See D.I. 298 ("Tr.")) At the April 3
hearing, the parties informed the Court that Plastic has
withdrawn its infringement allegations for the '228
patent. (See Tr. at 4-5, 70) The parties stipulated
to dismissal of the '228 patent on April 17, 2017.
(See D.I. 297) Therefore, the Court will not
consider motions directed to that patent, as they are moot.
Daubert v. MerrellDow Pharm., Inc., 509 U.S. 579,
597 (1993), the Supreme Court explained that Federal Rule of
Evidence 702 creates "a gatekeeping role for the [trial]
judge" in order to "ensur[e] that an expert's
testimony both rests on a reliable foundation and is relevant
to the task at hand." The rule requires that expert
testimony "help the trier of fact to understand the
evidence or to determine a fact in issue." Fed.R.Evid.
702(a). Expert testimony is admissible only if "the
testimony is based on sufficient facts or data, "
"the testimony is the product of reliable principles and
methods, " and "the expert has reliably applied the
principles and methods to the facts of the case."
are three distinct requirements for admissible expert
testimony: (1) the expert must be qualified; (2) the opinion
must be reliable; and (3) the expert's opinion must
relate to the facts. See generally Elcockv. Kmart
Corp., 233 F.3d 734, 741-46 (3d Cir. 2000). Rule 702
embodies a "liberal policy of admissibility."
Pineda v. Ford Motor Co., 520 F.3d 237, 243 (3d Cir.
2008). Motions to exclude evidence are committed to the
Court's discretion. See In re PaoliR.R. YardPCB
Litig., 35 F.3d 717, 749 (3d Cir. 1994).
Summary Judgment Motion
Rule 56(a) of the Federal Rules of Civil Procedure,
"[t]he court shall grant summary judgment if the movant
shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of
law." The moving party bears the burden of demonstrating
the absence of a genuine issue of material fact. See
Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp.,
475 U.S. 574. 585-86 (1986). An assertion that a fact cannot
be - or, alternatively, is - genuinely disputed must be
supported either by "citing to particular parts of
materials in the record, including depositions, documents,
electronically stored information, affidavits or
declarations, stipulations (including those made for purposes
of the motion only), admissions, interrogatory answers, or
other materials, " or by "showing that the
materials cited do not establish the absence or presence of a
genuine dispute, or that an adverse party cannot produce
admissible evidence to support the fact." Fed.R.Civ.P.
56(c)(1)(A) & (B). If the moving party has carried its
burden, the nonmovant must then "come forward with
specific facts showing that there is a genuine issue for
trial." Matsushita, 475 U.S. at 587 (internal
quotation marks omitted). The Court will "draw all
reasonable inferences in favor of the nonmoving party, and it
may not make credibility determinations or weigh the
evidence." Reeves v. Sanderson Plumbing Prods.,
Inc., 530 U.S. 133, 150 (2000).
defeat a motion for summary judgment, the nonmoving party
must "do more than simply show that there is some
metaphysical doubt as to the material facts."
Matsushita, 475 U.S. at 586; see also Podobnik
v. U.S. Postal Sen'., 409 F.3d 584, 594 (3d Cir.
2005) (stating party opposing summary judgment "must
present more than just bare assertions, conclusory
allegations or suspicions to show the existence of a genuine
issue") (internal quotation marks omitted). The
"mere existence of some alleged factual dispute between
the parties will not defeat an otherwise properly supported
motion for summary judgment;" a factual dispute is
genuine only where "the evidence is such that a
reasonable jury could return a verdict for the nonmoving
party." Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 247-48 (1986). "If the evidence is merely
colorable, or is not significantly probative, summary
judgment may be granted." Id. at 249-50
(internal citations omitted): see also Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986) (stating entry of
summary judgment is mandated "against a party who fails
to make a showing sufficient to establish the existence of an
element essential to that party's case, and on which that
party will bear the burden of proof at trial"). Thus,
the "mere existence of a scintilla of evidence" in
support of the nonmoving party's position is insufficient
to defeat a motion for summary judgment; there must be
"evidence on which the jury could reasonably find"
for the nonmoving party. Anderson, 477 U.S. at 252.
Donghee's Daubert Motion
moves to exclude Plastic's damages expert's opinion
in its entirety, based on several grounds. Plastic's
damages expert, David Haas, ''concluded that the
appropriate compensation for [Donghee's] infringement of
all of the Patents-in-Suit would be a total reasonable
royalty of $9" per fuel tank. (D.I. 221 Ex. A at 6) In
reaching this conclusion, Mr. Haas "categorized the
asserted patents into three technology groupings" - Core
TSBM Technology, Deformable Pipe Technology, and Rivet
Snapping Technology - and applied the 15
Georgia-Pacific factors to determine what reasonable
royalty rate the parties would have agreed to at the time of
the hypothetical negotiation for each group. (Id. at
6, 24) The hypothetical negotiation construct "attempts
to ascertain the royalty upon which the parties would have
agreed had they successfully negotiated an agreement just
before infringement began, " by presuming that the
parties are both willing to enter into a license with each
other and that the patents are valid, enforceable, and
infringed. Lucent Techs., Inc. v. Gateway, Inc., 580
F.3d 1301. 1324-25 (Fed. Cir. 2009).
Haas determined that the hypothetical negotiation would have
occurred as early as 2012 or as late as January 2014, and
that the reasonable royalty rate and total damages would be
the same regardless of which date within this period is
selected. (D.I. 221 Ex. A at 24-25) Based on his analysis,
Mr. Haas concluded that reasonable royalties would be $5 per
unit for the Core TSBM Technology (the '921, '812,
and '253 patents), $2 per unit for the Deformable Pipe
Technology (the '228 patent), and $2 per unit for the
Rivet Snapping Technology (the '490, '326, and
'327 patents). (Id. at 7)
identifies several issues with Mr. Haas's opinions. The
Court will consider each in turn.
Sufficiency of Facts and Data Underlying Opinions
first argues that "Mr. Haas'[s] royalty rate
opinions are not justified by, nor based on, sufficient facts
or data, " referring particularly to two pieces of
evidence on which Mr. Haas relies. (D.I. 220 at 4)
asserts that Mr. Haas's $9 total royalty (including the
$2 royalty for the Rivet Snapping Technology) is not
justified by his reliance on a license for one foreign patent
having a royalty rate of $1. (See Id. at 5) This
relates to the Georgia-Pacific factor of "[t]he
royalties received by the patentee for the licensing of the
patent in suit, proving or tending to prove an established
royalty." Georgia-Pacific Corp. v. U.S. Plywood
Corp., 318 F.Supp. 1116, 1120 (S.D.N.Y. 1970),
modified sub nom. Georgia-Pac. Corp. v. U.S.
Plywood-Champion Papers, Inc., 446 F.2d 295 (2d Cir.
1971). "Actual licenses to the patented technology are
highly probative as to what constitutes a reasonable royalty
for those patent rights because such actual licenses most
clearly reflect the economic value of the patented technology
in the marketplace." LaserDynamics, Inc. v. Quanta
Comput., Inc., 694 F.3d 51, 79 (Fed. Cir. 2012).
there were no actual licenses to any of the seven asserted
patents, Mr. Haas reviewed the next best thing: a license for
a European patent that is the foreign equivalent to a U.S.
patent from which the asserted "326 and "327
patents are continuations. (See D.I. 221 Ex. A at
30) That license, dated July 1, 2013, was executed between
Plastic's predecessor, Inergy Automotive Systems
("Inergy"), and Kautex Textron GmbH & Co KG
("Kautex"), and licensed a European patent related
to rivet snapping for 0.75 euros (then equivalent to $0.98)
per product manufactured, sold, or delivered. (See
Id. at 30-31) Recognizing that the license has some
limited comparability, as it is for one non-asserted patent,
Mr. Haas opined that "a reasonable royalty rate for the
asserted Rivet Snapping Technology patents would need to be
higher than the approximately $1 per unit royalty'"
agreed to in the Kautex license, because (1) that license
granted rights to one patent not in suit but related to Rivet
Snapping Technology, (2) that license benefitted Plastic by
validating the technology, and (3) Plastic invested deeply in
the technology whereas Donghee did "not have similar
R&D costs." (Id. at 32-33, 35, 45)
Court finds Mr. Haas's opinions with respect to the
Kautex license, together with the rest of his analysis under
the Georgia-Pacific factors, are sufficiently
related to the facts of the case. Donghee's reliance on
ePlus, Inc. v. Lawson Software, Inc.. 764 F.Supp.2d
807 (E.D. Va. 2011), for its argument that Mr. Haas
arbitrarily "doubles" the $1 Kautex license royalty
rate "with absolutely no explanation, '" is
unpersuasive. (D.I. 220 at 5-6) In ePlus, the expert
first determined a baseline royalty rate under factor 1 based
on an improper review of minimally probative settlement
licenses that involved improperly converting lump sum
royalties into per unit royalties and using an inappropriate
royalty base, and then arbitrarily doubling that baseline
royalty rate. See ePlus, 764 F.Supp.2d at 814-15.
Here, Mr. Haas appropriately considered the totality of the
evidence in connection with all 15 Georgia-Pacific
factors in determining a $2 rate for the Rivet Snapping
Donghee argues it is inappropriate for Mr. Haas to rely on
Inergy's "unaccepted proposal" to Kautex
"for a worldwide cross license of dozens of patents,
" particularly as there is no evidence that this
proposal was ever communicated to Kautex. (D.I. 220 at 6) As
part of his factor 1 analysis, Mr. Haas considered an April
30, 2009 Inergy slide deck regarding the status of
discussions between Inergy and Kautex with respect to their
patent portfolios. (See D.I. 221 Ex. A at 33-36)
(citing Ex. D) The deck demonstrates that Plastic
"contemplated a balancing royalty rate of 2.5% of
revenue" for its TSBM patent portfolio "in addition
to a royalty-free license to Kautex's NGFS patents,
'' because Plastic believed its TSBM portfolio was
stronger than Kautex's NGFS portfolio. (Id. at
33-34) Mr. Haas discussed several additional distinguishing
characteristics between the contemplated cross-license and
the hypothetical license, including that the cross-license
was never executed, the negotiation was for a worldwide
license, design-around costs, and the possible collaboration
between the parties. (See Id. at 34-35) Thus, Mr.
Haas concluded that a hypothetical license to the TSBM
technology would have a royalty rate higher than 2.5%.
(See Id. at 36) Donghee argues that Mr. Haas's
opinions regarding this contemplated royalty offer should be
excluded, because offers - particularly if never conveyed -
have little value. (See D.I. 220 at 7-9) Further,
the contemplated offering was a cross-license for worldwide
rights to a large number of technologies and patents, and the
source of the information is biased. (See id.)
Court is not persuaded by Donghee's position.
Donghee's reliance on MiiCs & Partners, Inc. v.
Funai Elec. Co., Ltd., 2017 WL 6268072, at *4 (D. Del.
Dec. 7, 2017), is misplaced because in that case there was
evidence a rejected offer may have been artificially
inflated, particularly because it was made in anticipation of
litigation. See also Whitserve, LLC v. Comput. Packages,
Inc., 694 F.3d 10, 29-30 (Fed. Cir. 2012) (noting
"proposed licenses may have some value for determining a
reasonable royalty in certain situations, " but
"[t]heir evidentiary value is limited" because
"patentees could artificially inflate the royalty rate
by making outrageous offers"). In 2009, at the time of
this offer, Inergy and Kautex were discussing a cooperation
agreement, a situation quite distinct from anticipation of
litigation. Donghee's criticisms can be adequately
addressed through cross-examination and the presentation of
competing evidence. See i4i Ltd. P 'ship v. Microsoft
Corp., 598 F.3d 831, 852 (Fed. Cir. 2010) ("When
the methodology is sound, and the evidence relied upon
sufficiently related to the case at hand, disputes about the
degree of relevance or accuracy (above this minimum
threshold) may go to the testimony's weight, but not its
admissibility.*'). "These disagreements go to the
weight to be afforded the testimony and not its
admissibility." ActiveVideo Networks, Inc. v.
Verizon Commc'ns, Inc., 694 F.3d 1312, 1333 (Fed.
Relevance of Expected Damages from Litigation
further argues that Mr. Haas's opinion - that doubling
the 2.5% unconsummated royalty rate to 5% is supported by the
2009 Inergy slide deck, which states that damages from
litigation would be "~ twice a negotiated royalty
rate?" (D.I. 221 Ex. D at ¶ 00185935; D.I. 242 Ex.
B at 210) - should be excluded because "the premise of
the hypothetical negotiation is to determine what the parties
would have agreed to outside the threat of
litigation." (D.I. 220 at 9-10) (emphasis
in original) The Court agrees with Donghee.
Mr. Haas purports to use the hypothetical negotiation
framework, which presumes that the asserted patents are valid
and infringed and that the licensor and licensee are willing
to enter into a license agreement, it is improper for Mr.
Haas to inflate (let alone double) a royalty rate on the
basis that damages may be larger in litigation. See
ResQNet.com, Inc. v. Lansa, Inc.,594 F.3d 860, 872
(Fed. Cir. 2010) (acknowledging that "hypothetical
reasonable royalty ...