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Roche Diagnostics Corp. v. Meso Scale Diagnostics, LLC

United States District Court, D. Delaware

October 21, 2019

ROCHE DIAGNOSTICS CORP., Plaintiff,
v.
MESO SCALE DIAGNOSTICS, LLC, Defendants. MESO SCALE DIAGNOSTICS, LLC, Counterclaim Plaintiff
v.
ROCHE DIAGNOSTICS CORP. and BIOVERIS CORPORATION Counterclaim Defendants

          MEMORANDUM ORDER

          HONORABLE LEONARD P. STARK JUDGE.

         Pending before the Court are the parties' Daubert motions. (D.I. 166, 168, 170) Plaintiff Roche Diagnostic Corp. ("Roche" or "Plaintiff') moves to exclude certain opinions of Drs. Quentin Mimms and James Wilbur. (D.I. 170) Defendant Meso Scale Diagnostics, LLC ("Meso" or "Defendant") moves to exclude certain opinions from Drs. Richard Crooks and Rene Befurt. (D.I. 166, 168)

         Having considered the parties' briefing (D.I. 167, 169, 171, 186, 189, 192, 202-04) and related materials, and having heard oral argument on July 23 ("Tr."), IT IS HEREBY ORDERED that Roche's motion (D.I. 170) is GRANTED IN PART and DENIED IN PART, Meso's motion to exclude certain opinions of Dr. Crooks (D.I. 166) is GRANTED, and Meso's motion to exclude certain opinions of Dr. Befurt (D.I. 168) is DENIED.[1]

         1. Roche's motion (D.I. 170) is granted to the extent it is directed to Dr. Mimms' opinions on apportionment.

         The Court agrees with Roche that Meso cannot rely on Roche's valuation of BioVeris to prove damages because the disputes in this litigation involve just 10 of the more than 100 patents involved in Roche's acquisition of BioVeris.[2] (D.I. 171 at 32-36) Meso contends the Roche valuation is an appropriate basis from which to calculate damages because the 10 asserted patents are core (or essential) to the ECL technology to which Roche sought to acquire full rights. (D.I. 192 at 27-28) In essence, Meso argues apportionment is not required because ownership of rights in any of the 10 essential patents would have permitted BioVeris (or any party with exclusionary rights in the essential patents) to engage in a "hold-up" of Roche. (D.I. 192 at 28-29)

         Meso fails to cite any case that supports its view of the BioVeris valuation or recognizes an exception in these circumstances to the requirement that patent damages must be apportioned and awarded on only the patented features.[3] Even accepting that a reasonable faultfinder could find that Roche may have been willing to pay a premium to acquire the patents subject to Meso's exclusive license, that premium can be accounted for using the appropriate, required apportionment/reasonable royalty analysis.[4]

         "The burden of proving damages falls on the patentee." Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir. 2009). Given the legal requirement of apportionment, and the lack of any cases supporting Meso's view, the Court concludes that Meso cannot rely on Roche's valuation of the entire BioVeris company (including all intellectual property). Therefore, Dr. Mimms' analysis is not based on a reliable, legally-supported methodology that fits the facts of the case and must be precluded.

         2. Roche's motion is granted to the extent it is directed at the date of the hypothetical negotiation.

         "[T]he correct determination of the hypothetical negotiation date is essential for properly assessing damages." Laser Dynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 75 (Fed. Cir. 2012) (internal quotation marks omitted). "The key element in setting a reasonable royalty ... is the necessity for return to the date when the infringement began," Wang Labs., Inc. v. Toshiba Corp., 993 F.2d 858, 870 (Fed. Cir. 1993) (internal quotation marks omitted), in order to "ascertain the royalty upon which the parties would have agreed had they successfully negotiated an agreement" at that time, Prism Techs. LLC v. Sprint Spectrum L.P., 849 F.3d 1360, 1376 (Fed. Cir. 2017) (internal quotation marks omitted).

         The Court agrees with Roche that the appropriate hypothetical negotiation date here is 2003-04, when Roche first made an out-of-field sale, constituting the date of first alleged infringement. (D.I. 171 at 40-41) (citing D.I. 175 Ex. 36) (showing out-of-field sales at least as early as Feb. 7, 2004) Meso's proposed date of June 2007 - when Roche allegedly first actively induced infringement (D.I. 192 at 35) - is not the date of first infringement; it is not, therefore, a date which can be used for a reliable, legally proper hypothetical negotiation analysis.

         Neither the Book of Wisdom (which, in certain circumstances, permits a damages analysis to take into account value that accrued at a date subsequent to the date of hypothetical negotiation, see, e.g., Comcast IP Holdings I LLC v. Sprint Commc'n. Co., L.P., 850 F.3d 1302, 1314 (Fed. Cir. 2017)), nor Dr. Mimms' declaration that his valuation opinion would be the same regardless of whether the hypothetical negotiation were in 2003 or 2007, render Dr. Mimms' analysis legally acceptable. As Meso acknowledges, the parties' relationship changed in a highly material, substantial way between 2003 - when Meso was not the only party with rights that Roche wished to acquire - and 2007, when Meso exclusively held such rights and could (at least in theory) have "held out" for a premium pay out. Given these undisputed facts, Dr. Mimms' analysis, with a hypothetical negotiation date of 2003 and an unsupported assumption that there was no relevant change in circumstances through 2007, does not "fit" the facts of the case or result from a sufficiently reliable methodology. His opinion will be precluded.

         3. Roche's motion is granted to the extent it is directed to Dr. Wilbur's opinions on core patents and infringement.

         Dr. Wilbur is a General Manager at Meso with extensive experience in ECL; he is also a named inventor on many patents. (D.I. 174 Ex. 64 at at 2027-28) Meso seeks to have him testify that Roche's ECL technology cannot be practiced without the asserted Patents, and that the asserted Patents cover all pertinent Roche products. (D.I. 192 at 41)

         Meso offers Dr. Wilbur as an expert pursuant to Federal Rule of Civil Procedure 26(a)(2)(C), which relates to witnesses who are not required to provide a report. Roche contends, however, that Dr. Wilbur's opinions are not based on his own knowledge and experience, which is required by Rule 26(a)(2)(C). (D.I. 171 at 40-42) (citing D.I. 174 Ex. 71 at A-2281-82) The Court agrees - as even Dr. Wilbur himself has admitted that he did not determine which patents are core but, instead, received that information from others. (D.I. 174 Ex. 73 at 72-74) Nor does Dr. ...


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