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Princeton Digital Image Corp. v. Ubisoft Entertainment SA

United States District Court, D. Delaware

December 11, 2018

PRINCETON DIGITAL IMAGE CORP., Plaintiff,
v.
UBISOFT ENTERTAINMENT SA and UBISOFT, INC., Defendants.

          REPORT AND RECOMMENDATION

          CHRISTOPHER J. BURKE UNITED STATES MAGISTRATE JUDGE

         Presently before the Court in this patent infringement action is Defendant Ubisoft Inc.'s ("Ubisoft" or "Defendant") Daubert motion, filed pursuant to Federal Rule of Evidence 702, which seeks to strike the expert report of Plaintiff Princeton Digital Image Corp.'s ("Plaintiff or "PDI") expert Mr. David Yurkerwich and to exclude Mr. Yurkerwich's testimony (the "Motion"). (D.I. 239) For the reasons that follow, the Court recommends that Ubisoft's Motion be GRANTED.[1]

         I. BACKGROUND

         PDI filed the instant case on February 27, 2013. (D.I. 1) On July 17, 2013, Chief Judge Leonard P. Stark referred this case to the Court to hear and resolve all pretrial matters, up to and including the resolution of case-dispositive motions. (D.I. 10)

         Briefing on the instant Motion was completed on October 26, 2018, (D.I. 316), and the Court held oral argument on the Motion (as well as another motion) on December 7, 2018. A 5-day trial is set to begin on April 8, 2019. (D.I. I4\;see also D.I. 15 at 11)

         II. DISCUSSION

         A. Legal Standard

         The Court hereby incorporates by reference its discussion of the legal standard applicable to review of Daubert motions that are filed pursuant to Rule 702, which was set out in a prior November 7, 2018 Report and Recommendation ("the November 7 R&R") in this matter. (D.I. 336) The November 7 R&R's discussion of the standard of review focused in particular on the reliability and relevance prongs of Daubert, which are the two prongs at issue in the instant Motion. (D.I. 240 at 1)

         B. Analysis

         In its Motion, Ubisoft makes three arguments as to why all or portions of Mr. Yurkerwich's expert report should be stricken. The Court will address these in turn.

         1. Sony/Immersion Jury Verdict

         First, Ubisoft asserts that: (1) the "anchor of Mr. Yurkerwich's reasonably royalty damages analysis" is his reliance in his initial expert report (the "initial report") on "an $82 million jury verdict in a case between unrelated parties (Sony [Computer Entertainment America, Inc. ("Sony") and] Immersion [Corporation ("Immersion")]) relating to unrelated patents" and (2) this renders Mr. Yurkerwich's reasonable royalty conclusions unreliable. (D.I. 240 at 2-3; see also D.I. 247, ex. 1 at ¶ 40) Some courts have appeared to conclude that it is per se unreliable for a damages expert, when attempting to establish a reasonable royalty for infringement of the patent-in-suit, to rely on a jury verdict from a different case involving entirely unrelated parties and different patents. See, e.g., Acceleration Bay LLC v. Activision Blizzard, Inc., 324 F.Supp.3d 470, 489 (D. Del. 2018) (finding, in a case where the plaintiffs expert sought to rely on a jury verdict in another litigation involving unrelated parties and different patents in order to establish a reasonable royalty for infringement of the patents-in-suit, that "OJury determined damages are not evidence of arm's-length negotiations between parties, and will not help the trier of fact determine a royalty"); Atlas IP, LLC v. Medtronic, Inc., No. 13-CIV-23309, 2014 WL 5741870, at *6 (S.D. Fla. Oct. 6, 2014) ("[I]t is self-evident jury-determined damages are not evidence of arm's-length negotiations between parties."). For example, in Acceleration Bay LLC v. Activision Blizzard, Inc., 324 F.Supp.3d 470 (D. Del. 2018), a case from this Court, Judge Andrews suggested that this type of jury verdict could never be a helpful data point in the reasonable royalty calculus, in part because: (1) it simply amounts to the "judgment of twelve (or maybe fewer) random non-experts" or "at best, an informed lay opinion" on the subject; and (2) it relates to different technology than what is at issue in the present case. 324 F.Supp.3d at 489.

         The Court is not prepared to say a patent damages expert may never, under any circumstances, rely on a jury verdict from a case involving different parties and different patents in order to help frame what is a reasonable royalty in a given case.[2] Cf. 2-Way Computing, Inc. v. Sprint Sols., Inc., No. 2:11-CV-12 JCM (PAL), 2015 WL 2365648, at *5 (D. Nev. May 18, 2015) ("[T]he court has found no rule that prohibits an expert from considering a jury verdict in his royalty rate calculations if that jury verdict pertains to a matter that is sufficiently comparable to the instant matter."); In re Innovatio IP Ventures, LLC Patent Litig., MDL Docket No. 2303, No. 11 C 9308, 2013 WL 5593609, at *33 (N.D. 111. Oct. 3, 2013) (stating in a patent case that "jury verdicts can be data points providing a comparable license rate[] for use in hypothetical negotiations"). But under the facts here, reliance on the Sony/Immersion verdict amounts to an unreliable method of analysis.

         That is so not only due to the inherent limitations involved in relying on any such verdict, as described in Acceleration Bay LLC-though those limitations are definitely a factor in the Court's calculus. It is also due to another reason that is relevant to this particular jury verdict: the Sony/Immersion verdict form did not indicate what royalty rate the jury actually applied to controllers and games (i.e., the types of accused products at issue in this case). (D.I. 247, ex. 2 at 15) This was because the Sony/Immersion case involved accused products including not just controllers and games, but also consoles. Even though the Sony/Immersion verdict form shows that the jury returned a verdict (of "$82 million"), (id.), and even though the revenue base for all of the different accused products combined could be discerned, the verdict form did not indicate what amount of the damages was associated with each of the various accused products at issue (such that one would not know what the jury's chosen royalty rate was only as to controllers, or only as to games, or only as to consoles), (id., ex. 3 at 208-09, 214-16). As a result, Mr. Yurkerwich was required to speculate or guess about what rate the Sony/Immersion jury might have been allocating to controllers (he chose 2%) and games (he chose 5%) as opposed to consoles (he chose 0.99%); once Mr. Yurkerwich did that, he then blended his chosen rate for controllers and games (to get a rate of 3.5%). (Id., ex. 1 at ex. 4.2; see also id., ex. 1 at ¶ 50 (Mr. Yurkerwich noting that by reviewing the Sony/Immersion verdict and a related court order, he was able to ascertain how "the jury potentially calculated the damages amount" there and how the jury "may have obtained their damages award") (emphasis added); id. at ΒΆ 51 (Mr. ...


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