Waymo LLC v. Uber Technologies, Inc. et al

Filing 2176


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1 2 3 4 5 IN THE UNITED STATES DISTRICT COURT 6 FOR THE NORTHERN DISTRICT OF CALIFORNIA 7 8 9 WAYMO LLC, 11 For the Northern District of California United States District Court 10 12 13 Plaintiff, ORDER EXCLUDING MICHAEL WAGNER, RESTRICTING USE OF FINANCIAL EVIDENCE AT TRIAL, AND DENYING OTHER RELIEF v. UBER TECHNOLOGIES, INC.; OTTOMOTTO LLC; and OTTO TRUCKING LLC, 14 Defendants. / 15 16 17 No. C 17-00939 WHA (UNDER SEAL) INTRODUCTION In this action for trade secret misappropriation, defendants move to strike plaintiff’s 18 initial disclosures and to preclude its damages claims and certain witnesses. Defendants also 19 move to exclude plaintiff’s damages expert, and to exclude evidence of certain financial 20 information pertinent to plaintiff’s damages theory. Defendants’ motion to exclude Michael 21 Wagner is GRANTED. Their motion to exclude evidence of financial information is GRANTED 22 23 24 25 IN PART and DENIED IN PART as stated herein. Except to the extent stated herein, their motion to strike is DENIED. STATEMENT The factual and procedural background of this action has been detailed in prior orders 26 and need not be repeated here. In July of this year, defendants Uber Technologies, Inc., 27 Ottomotto LLC (collectively, “Uber”), and Otto Trucking LLC moved to strike plaintiff Waymo 28 LLC’s initial disclosures and to preclude its damages claims and certain witnesses (Dkt. Nos. 1 797, 942). A prior order held those motions in abeyance pending evaluation of Waymo’s 2 eventual damages theory (see Dkt. No. 1261 at 78:6–14).1 After discovery closed and the parties disclosed expert reports, defendants moved to 3 Nos. 1614-4, 1653). Wagner is not an economist but merely an inactive certified public 6 accountant and inactive California-licensed attorney. He currently works as managing director 7 at LitiNomics, Inc., “a financial and economic consulting firm specializing in the analysis of 8 economic issues that arise in commercial disputes.” He claims to have “specialized in the 9 computation of commercial damages over the last 40 years of [his] professional career” (Dkt. 10 No. 1615 ¶¶ 3–5). Defendants also moved in limine to exclude evidence of certain financial 11 For the Northern District of California exclude the testimony and opinions of Waymo’s hired damages expert Michael Wagner (Dkt. 5 United States District Court 4 information pertinent to Waymo’s damages theory (Dkt. No. 1557-4). Both motions were heard 12 at the first final pretrial conference on September 27. While those motions hung fire, Waymo voluntarily dismissed its patent claims (Dkt. 13 14 Nos. 841, 1593) and another order granted summary judgment of no liability in favor of Otto 15 Trucking (Dkt. No. 2151). Insofar as it pertains to Waymo’s patent claims, Uber’s motion to 16 strike (Dkt. No. 797) has therefore been mooted. Otto Trucking’s separate motion to strike 17 (Dkt. No. 942) has also been mooted. The issues remaining for adjudication pertain only to 18 Waymo’s damages theory against Uber for alleged trade secret misappropriation. With the full 19 benefit of multiple rounds of briefing and hearing, this order now resolves those issues. ANALYSIS 20 21 1. MOTION TO EXCLUDE MICHAEL WAGNER. 22 “A witness who is qualified as an expert by knowledge, skill, experience, training, or 23 education may testify in the form of an opinion or otherwise if: (a) the expert’s scientific, 24 technical, or other specialized knowledge will help the trier of fact to understand the evidence 25 or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the 26 testimony is the product of reliable principles and methods; and (d) the expert has reliably 27 28 1 For the benefit of the court of appeals and with apologies to the public, most record citations herein are to the unredacted versions of the documents cited. 2 1 applied the principles and methods to the facts of the case.” FED. R. EVID. 702; see Daubert v. 2 Merrell Dow Pharms., Inc., 509 U.S. 579, 592–94 (1993). District courts have a “gatekeeping 3 role” to ensure that expert testimony admitted into evidence is both reliable and relevant, and to 4 exclude “junk science.” Messick v. Novartis Pharms. Corp., 747 F.3d 1193, 1197 (9th Cir. 5 2014); Sundance, Inc. v. DeMonte Fabricating Ltd., 550 F.3d 1356, 1360 (Fed. Cir. 2008). 6 Wagner offered opinions labeled as both unjust enrichment and reasonable royalty. 7 Other than grade-school arithmetic, however, he did not apply any coherent principle, 8 methodology, theory, or technique, much less one possessing any discernible indicia of 9 reliability. Instead, he made the same arguments that the lawyers can make based on other evidence in the case that can speak for itself. As this order now explains, Wagner’s opinions 11 For the Northern District of California United States District Court 10 will be excluded both because they do not qualify as expert testimony under FRE 702 and 12 because they are substantially more prejudicial than probative under FRE 403. 13 A. 14 Unjust Enrichment. Wagner opined that, as to eight of the nine asserted trade secrets Waymo selected for 15 trial, Uber’s alleged unjust enrichment could be measured in terms of either incremental future 16 profits or saved development costs as a result of accelerated autonomous-vehicle development. 17 As to asserted trade secret number 90, he took a different approach, as explained below. He 18 also described a host of “other ways in which Defendants have been unjustly enriched that [he 19 was] unable to quantify” (see Dkt. No. 1615 ¶¶ 264–65).2 1. 20 Incremental Future Profits. 21 To quantify incremental future profits from accelerated autonomous-vehicle 22 development, Wagner relied on an internal presentation slide that had been created by Uber 23 executive Nina Qi prior to the Ottomotto acquisition to summarize her analysis of how the 24 acquisition could potentially benefit Uber. The Qi slide estimated that the entire Ottomotto 25 acquisition could potentially accelerate Uber’s autonomous-vehicle development timeline by 26 one to two years. Based on this estimated acceleration and Uber’s own internal “Rubicon” 27 2 28 A prior order deleted asserted trade secret number 96 from the original list of nine selected for trial (see Dkt. No. 2151 at 13–18). Number 96 is nevertheless mentioned in this order only to faithfully reproduce the relevant sections of Wagner’s report discussed below. 3 1 business model, the Qi slide estimated that the present value of incremental future profits to 2 Uber as a result of the Ottomotto acquisition ranged from $836 million (one year) to $1.69 3 billion (two years) given a “baseline” assumption (thirteen cities covered by 2022), and from 4 $1.585 billion (one year) to $2.61 billion (two years) given an “optimistic” assumption (thirty 5 cities covered by 2022) (id. ¶¶ 271–81). 6 The Qi slide will come into evidence and Waymo can try to hold Uber to those sky-high 7 numbers. But Waymo seeks to transmogrify this slide into proof that a single trade secret alone 8 should top out at the highest number in the slide. This is a fantastic leap. Here is a summary of 9 how Wagner made it. Assuming that the Qi slide reliably estimated incremental future profits based on 11 For the Northern District of California United States District Court 10 accelerated autonomous-vehicle development, Wagner then purported to estimate how much 12 time Uber had allegedly saved by misappropriating eight of the nine asserted trade secrets 13 Waymo had selected for trial. He had no independent opinion about this. Instead, he relied on 14 the opinion of Lambertus Hesselink, another Waymo-hired expert, that Uber had saved two 15 years just by misappropriating asserted trade secret number 25 and one year just by 16 misappropriating asserted trade secret number 111. For asserted trade secret numbers 9, 96, 2, 17 13, 14, and 7, Wagner cherry-picked from Uber’s interrogatory responses, which estimated how 18 long it would take an independent contractor to redesign the accused features in its LiDAR 19 system. Wagner claimed those estimates represented the amounts of time by which each 20 asserted trade secret accelerated Uber’s entire autonomous-vehicle development timeline, 21 despite Uber’s clarification in the very same interrogatory responses that its redesign estimates 22 “would not significantly or materially impact” its overall development timeline. For asserted 23 trade secret number 90, Wagner took a different approach, as explained below (see id. ¶ 284, 24 Dkt. No. 1786-3 at 46:18–47:15). 25 Wagner then simply multiplied the dollar amounts from the Qi slide with the units of 26 saved time taken from other evidence in the case to arrive at his unjust enrichment conclusion, 27 as quoted now from his report (Dkt. No. 1615 ¶ 285): 28 4 1 2 3 4 5 6 7 8 9 11 For the Northern District of California United States District Court 10 12 13 14 15 16 Of course, if each of those asserted trade secrets independently accelerated Uber’s development 17 timeline as much as Wagner concluded it did, then Uber would have saved nearly four years’ 18 worth of development time and over $5.5 billion (given the “optimistic” assumption) for just 19 eight specific trade secrets — remarkable figures by any measure, but particularly in 20 comparison with the Qi slide’s estimate of one to two years and $836 million to $2.61 billion 21 for the entire Ottomotto acquisition. (Uber would have saved three years with just numbers 25 22 and 111, according to Wagner.) 23 Amazingly, these figures, taken together, far exceed the highest numbers anywhere in 24 the Qi slide and leave no room for the possibility that the real value of the Ottomotto acquisition 25 came from legitimate benefits as opposed to the misappropriation of eight specific trade secrets 26 selected for trial after discovery. 27 28 To blur the avaricious optics of overreaching, Wagner added two conclusory sentences that stated, “If multiple trade secrets are found to be infringed, I have conservatively assumed 5 1 that the accelerated AV development is not additive. Therefore, only the corresponding unjust 2 enrichment for the trade secret with the longest period of accelerated AV development should 3 be awarded” (id. ¶ 286). Wagner’s report offered no explanation for this assumption, although 4 Waymo (in briefing) and Wagner (in deposition) subsequently explained that he had assumed 5 different aspects of LiDAR development could proceed concurrently (see Dkt. Nos. 1777-3 at 6 12, 1786-3 at 96:5–17). (That explanation raised other problems, as explained below.) The 7 litigation tactic of the assumption, however, is apparent. Wagner’s emphasis on his supposed 8 “conservatism,” both in the aforementioned paragraph and throughout his report, was an effort 9 to appear reasonable despite the astronomical valuations assigned to each of Waymo’s asserted trade secrets. Put differently, it was a transparent attempt to skew the damages horizon and 11 For the Northern District of California United States District Court 10 desensitize the jury to the enormity of what Waymo is seeking by contrast with what it 12 supposedly could have sought. In short, Wagner’s phony cloak of conservatism was a mere 13 trial gimmick — a factor that further undercuts the reliability of his opinion. 14 Wagner’s report left ambiguous whether, in his opinion, the Qi slide actually included 15 Waymo’s trade secrets as part of its estimation of Ottomotto’s value (which would be consistent 16 with Waymo’s theory that Uber knowingly misappropriated its trade secrets through Ottomotto) 17 or whether the Qi slide was useful only as a general formula for converting accelerated 18 autonomous-vehicle development into incremental future profits (which would undermine 19 Waymo’s theory that Uber knowingly misappropriated its trade secrets through Ottomotto). 20 Either way, however, raises serious problems with the reliability of Wagner’s opinion. 21 Possibly, Wagner’s (and Waymo’s) theory was that the Qi slide included the value of 22 Waymo’s trade secrets in its estimation of Ottomotto’s value. Wagner and Waymo have both 23 suggested as much, frequently construing evidence in the case to conflate Uber’s expressed 24 desire for LiDAR technology in general during the Ottomotto acquisition with Uber’s alleged 25 intent to misappropriate Waymo’s specific trade secrets (see, e.g., Dkt. Nos. 1615 ¶¶ 309–11, 26 409; 1777-3 at 4 (“Uber was evaluating whether to acquire Otto (and thus, Waymo’s trade 27 secrets).”), 9 (“Evaluating Waymo’s trade secrets as part of the Otto acquisition, Uber estimated 28 that Otto could advance these efforts by one to two years.”); 1834-4 at 1 (“[Wagner] is 6 1 calculating Defendants’ unjust enrichment based on how Uber expected the trade secrets to 2 accelerate its own AV timeline at the time of misappropriation.”), 2 (“As Defendants were 3 misappropriating Waymo’s trade secrets (i.e., as they were acquiring Otto), Uber calculated the 4 potential enrichment to itself as of that date.”) (emphasis in original)). 5 Under this interpretation, however, the Qi slide would actually contradict Wagner’s 6 conclusion because it estimated incremental future profits attributable to the entire Ottomotto 7 acquisition, including legitimate assets like an entire team of engineers with knowledge, skill, 8 and experience in a highly specialized and in-demand field, as well as legitimate anticipated 9 benefits for Uber, like the potential to disrupt and slow down the development efforts of competitors. Indeed, Wagner himself admitted later in his report that “any gain to Uber from 11 For the Northern District of California United States District Court 10 recruiting engineers and reducing the engineer ranks at Google is unrelated to the 12 misappropriation of trade secrets” and should therefore not be included in calculating unjust 13 enrichment (Dkt. No. 1615 ¶¶ 309–11). Thus, the estimated incremental future profits actually 14 attributable to trade secret misappropriation would have been far less than the full amounts 15 stated in the Qi slide and copied by Wagner. Under this interpretation, Wagner’s reliance on 16 the Qi slide’s estimates with no apportionment for the legitimate elements of the Ottomotto 17 acquisition encompassed therein would render his opinion unreliable under FRE 702. 18 Alternatively, perhaps Wagner (and Waymo) assumed the Qi slide never contemplated 19 Waymo’s trade secrets in its estimation of Ottomotto’s value, and they relied on the slide only 20 as a general formula to calculate incremental future profits from saved development time (e.g., 21 one year equals $836 million and two years equals $1.69 billion). Waymo gave an explanation 22 to this effect when asked why Wagner never apportioned the Qi slide’s estimates between trade 23 secret misappropriation and the legitimate benefits of acquisition (see Dkt. No. 1863 at 24 12:21–15:11). This interpretation would avoid the aforementioned apportionment problem but 25 still run headlong into other flaws in Wagner’s report. 26 With respect to asserted trade secret numbers 9, 96, 2, 13, 14, and 7, Wagner purported 27 to rely on Uber’s interrogatory responses about redesign times but selectively excised parts of 28 those responses unfavorable to his cause. Uber specifically noted in its interrogatory responses 7 1 that “schedule times identified for the redesigns . . . would not significantly or materially impact 2 the timeline for commercialization and rollout of Uber’s fully-autonomous self-driving 3 technology to the general public” (Dkt. No. 1617-2 at 4 (emphasis added)). Significantly, 4 Uber’s caveat actually remains consistent with both Waymo and Wagner’s after-the-fact 5 explanation that different aspects of LiDAR development could indeed proceed concurrently 6 (see Dkt. Nos. 1777-3 at 12, 1786-3 at 96:5–17). Wagner, however, rejected this caveat; in 7 other words, he seized on the part of the answer he liked and tossed aside the part he disliked. 8 9 Wagner attempted to justify this cherry-picking by quoting Hesselink’s opinion that Uber’s redesign estimates did not adequately capture its unjust enrichment. Wagner also pointed out in his deposition and reply report that LiDAR is important to Uber’s development 11 For the Northern District of California United States District Court 10 (see Dkt. Nos. 1615 ¶ 284, 1777-10 ¶ 74, 1786-3 at 92:18–93:22). First, it was inconsistent of 12 Wagner to simultaneously rely on both selective fragments of Uber’s interrogatory responses 13 and Hesselink’s opinion that those very same interrogatory responses were an unreliable metric 14 of unjust enrichment. Wagner’s willingness to stitch together strategic fragments of 15 contradictory evidence further indicates that he picked facts to suit his conclusions instead of 16 drawing conclusions from reliable analysis of the facts. Second, the general proposition that 17 LiDAR is important to Uber in no way justifies Wagner’s decision to selectively rely on Uber’s 18 redesign estimates while ignoring its accompanying commentary about the impact of redesign 19 on its overall development timeline. Nor does it explain away the tension between Wagner’s 20 (and Waymo’s) assumptions that (1) each asserted trade secret would bottleneck Uber’s entire 21 development timeline, yet (2) Waymo’s damages are not additive because different aspects of 22 LiDAR development could proceed in parallel (see, e.g., Dkt. Nos. 1777-3 at 8, 12; 1786-3 at 23 96:5–17, 111:14–112:2). 24 A separate problem is that Wagner brings no specialized knowledge to the table. To 25 repeat, he is not an economist but merely an inactive CPA and inactive lawyer. Here, for 26 example, Wagner simply adopted the opinions of others and performed grade-school arithmetic 27 counsel can do on an easel. Where is any specialized knowledge? There is none. The absence 28 of any real expertise is a pervasive problem in Wagner’s incremental future profits “analysis,” 8 1 though it is clearer with respect to asserted trade secret numbers 25 and 111 because they are 2 not further complicated by the aforementioned cherry-picking problem. The rub is that the 3 evidence Wagner relied on can speak for itself, and his only contribution would be to pile on a 4 misleading facade of expertise. His opinion should therefore be excluded under both FRE 702 5 and FRE 403. See Daubert, 509 U.S. at 595 (“Expert evidence can be both powerful and quite 6 misleading because of the difficulty in evaluating it.”); United States v. Gadson, 763 F.3d 1189, 7 1212 (9th Cir. 2014) (expert witnesses may receive “unmerited credibility” for lay testimony 8 because their testimony is “likely to carry special weight with the jury”). 9 To take the examples of asserted trade secret numbers 25 and 111, Wagner essentially parroted Hesselink’s opinions that they saved Uber two years and one year of development 11 For the Northern District of California United States District Court 10 time, respectively (see Dkt. No. 1615 ¶ 284). Assuming for the sake of argument that 12 Hesselink’s opinions regarding saved development time were reliable in the first instance, 13 Wagner applied no “specialized knowledge” by simply multiplying the units of time espoused 14 by Hesselink with dollar amounts lifted from the Qi slide (see Dkt. Nos. 1777-3 at 4, 1786-3 at 15 46:6–47:15). Straightforward application of grade-school arithmetic to uncomplicated numbers 16 is well within the ken of the average juror. There is no reason for Wagner to serve as a 17 mouthpiece for arguments that Waymo’s lawyers can make. See, e.g., United States v. Morales, 18 108 F.3d 1031, 1038 (9th Cir. 1997) (expert witness testimony is admissible under FRE 702 if 19 the subject matter at issue is “beyond the common knowledge of the average layman”). 20 Insofar as the Qi slide and other evidence in this case may turn out to be good 21 barometers of Uber’s expectations going into the Ottomotto acquisition, that evidence can stand 22 on its own for the jury’s consideration. Wagner’s ipse dixit and pseudo-“analysis” are nothing 23 more than lawyer argument dressed up as expert opinion. His opinion will therefore also be 24 excluded under FRE 403 because its danger of confusing the issues, misleading the jury, and 25 causing unfair prejudice substantially outweighs the probative value of its lawyer argument. 26 27 28 2. Saved Development Costs. To quantify the development costs allegedly saved by Uber, Wagner relied on another internal Uber document about the Ottomotto acquisition that forecasted saving “months” of 9 1 development, wherein each month of development saved translated to $20 million (Dkt. No. 2 1615 ¶ 292). Wagner took this internal estimate and, using the same units of time supposedly 3 saved (discussed above), multiplied the $20 million figure by months supposedly saved to 4 produce the following results, quoted from his report verbatim (id. ¶ 293): 5 6 7 8 9 11 For the Northern District of California United States District Court 10 12 13 14 Wagner then repeated, again in conclusory fashion, that he “conservatively assumed that the 15 saved development time is not additive,” so “only the corresponding unjust enrichment for the 16 trade secret with the longest period of saved development time should be awarded” (id. ¶ 295). 17 As stated, this assumption was highly suspect, a way to deflect attention from the stratospheric 18 figures Wagner would assign to each asserted trade secret so as to avoid the absurd result of an 19 even higher total while preserving high numbers in case the jury finds liability only as to one or 20 a few asserted trade secrets. This assumption, the reference to Uber’s internal $20 million 21 figure, and the basic arithmetic required to produce the foregoing chart represented the totality 22 of Wagner’s “analysis” regarding saved development costs. 23 Again, the documents cited by Wagner can independently come into evidence and 24 counsel can make the argument as well as Wagner, who adds nothing by way of expertise. The 25 jury can do the grade-school arithmetic and follow counsel’s closing argument on an easel. 26 Wagner’s “analysis” regarding saved development costs should be excluded under FRE 702 27 because it amounted to nothing more than uncritical acceptance of other evidence in the case, 28 which can speak for itself, plus some basic arithmetic using a straightforward $20 million figure 10 1 from Uber’s internal documents. This is not “specialized knowledge” that will help the jury 2 understand the evidence or determine a fact in issue. See, e.g., Morales, 108 F.3d at 1038. 3 Indeed, Wagner’s “analysis” would not only fail to improve on the probative value of the 4 evidence he cited but also actually muddy the uncomplicated facts with his facade of expertise. 5 See Daubert, 509 U.S. at 595; Gadson, 763 F.3d at 1212. It is “junk science” that should be 6 excluded under FRE 702, see Messick, 747 F.3d at 1197, and should further be excluded as 7 substantially more prejudicial and misleading than probative under FRE 403.3 8 3. Asserted Trade Secret Number 90. Uber’s alleged unjust enrichment with respect to asserted trade secret number 90, Wagner again 11 For the Northern District of California Asserted trade secret number 90 received Wagner’s separate consideration. To quantify 10 United States District Court 9 adopted wholesale Hesselink’s opinion that (1) Tyto, another autonomous-vehicle company that 12 Waymo claims was surreptitiously owned by Levandowski, spent two years and five months 13 using asserted trade secret number 90 to develop its product, and (2) Uber acquired Tyto in 14 2016, so (3) defendants saved two years and five months by misappropriating asserted trade 15 secret number 90 (Dkt. No. 1615 ¶¶ 298–99). Wagner then noted that Uber paid a total of 16 in consideration for Tyto (id. ¶¶ 301, 304, 306). From this he 17 concluded that “the 18 enrichment of Defendants related to Trade Secret No. 90” (id. ¶¶ 307–08). cash consideration is a reasonable number to use for the unjust 19 It will suffice to simply point out one glaring problem in Wagner’s “analysis,” namely 20 that he made no attempt to apportion the alleged acceleration of Uber’s development timeline 21 between legitimate benefits and trade secret misappropriation. Indeed, Wagner agreed in 22 deposition that the 23 including Tyto’s employees, certain legitimate forms of intellectual property, and some tangible 24 property, yet he did no work whatsoever to account for the value of those legitimate benefits 25 (see Dkt. No. 1786-3 at 114:4–117:19). The closest Wagner came to acknowledging this 26 critical distinction in his report was when he stated, “I recognized that in addition to the dollars of consideration accounted for “a number of benefits,” 27 3 28 If Uber also plans on using an “expert” who is little more than a mouthpiece for presenting the argument of counsel based on uncomplicated evidence already in the case, then fair play will require exclusion of that expert too. Either both sides can do it, or neither can. 11 1 technology, Defendants were also acquiring five employees from Tyto. However, Defendants 2 also paid additional consideration beyond the 3 Ottomotto” (Dkt. No. 1615 ¶ 307). He never bothered to explain the significance of that equity 4 but perhaps meant to suggest that it fully accounted for any value Tyto’s employees might have 5 contributed at any point in time. If so, this suggestion was wholly inadequate because it (1) did 6 not even state Wagner’s conclusion but merely left it to implication, (2) flatly contradicted his 7 deposition testimony that the 8 employees, (3) made no attempt to explain how the equity corresponded even approximately to 9 the legitimate benefits acquired, and (4) still did not account for other legitimate benefits on the cash in the form of equity in dollars of consideration also accounted for Tyto’s table in the Tyto acquisition, including legitimate forms of intellectual and tangible property. 11 For the Northern District of California United States District Court 10 It was absurd for Wagner to simply attribute Tyto’s full sticker price to the value of a 12 single asserted trade secret. His “analysis” as to asserted trade secret number 90 failed to 13 account for commonsensical factors vital to any reliable computation of unjust enrichment from 14 trade secret misappropriation in this case. The analytical chasm between the data he cited and 15 the opinion he proffered warrants his exclusion under FRE 702. See Gen. Elec. Co. v. Joiner, 16 522 U.S. 136, 146 (1997). Moreover, as with his other opinions, this opinion would be no more 17 probative than the evidence it cited and would likely distort that evidence with the facade of 18 expertise. It, too, should be excluded under both FRE 702 and FRE 403. 19 20 21 22 23 24 25 26 27 28 4. Unquantifiable Unjust Enrichment. The final section of Wagner’s unjust enrichment opinion also fails to pass muster under FRE 702. To give just one example, Wagner opined (Dkt. No. 1615 ¶ 319 (emphasis added)): There is evidence that Uber is likely to achieve significant cost savings over the next several years on its LiDAR sensors, and this will result in substantial cost savings given the number of vehicles that it expects to roll out. Just as an example calculation, if Uber expects to purchase vehicles per year, and is developing its own LiDAR results in volume purchase savings for LiDAR from the expected in 2018 down to the expected in 2020 for savings of per vehicle, the cost savings would be $1,895.5 billion per year. Therefore, depending on the expected cost of third-party LiDAR at volume, the expected cost savings could be dramatic. At this time, I have not found enough evidence to reliably estimate the cost savings that Uber will achieve based on developing its own LiDAR, let alone the cost savings attributable to the misappropriation of the trade secrets. 12 1 Therefore, I have not performed a specific quantification for the value to Uber related to cost savings based on lower costs of LiDAR at this time. 2 3 This is just another attempt to surround astronomical numbers with a facade of conservatism. 4 In effect, this leaves the impression, “The numbers could go even higher but being conservative 5 and faithful to reliable data, I will not go there.” Wagner will not get the opportunity to play 6 this card and invite the jury to speculate about “significant,” “substantial,” or “dramatic” cost 7 savings, because his actual opinions will be excluded under both FRE 702 and FRE 403. 8 B. 9 Reasonable Royalty. To quantify a reasonable royalty that defendants would have paid for Waymo’s allegedly misappropriated trade secrets, Wagner began with a hypothetical negotiation in the 11 For the Northern District of California United States District Court 10 December 2015 to August 2016 period and a “baseline royalty” equal to the unjust enrichment 12 (measured by incremental future profits) that he had calculated earlier (id. ¶¶ 383–85). He ran 13 through the Georgia-Pacific factors, concluding that fourteen were either “neutral” or would 14 tend to increase the reasonable royalty by some unspecified amount while the fifteenth “in 15 essence synthesizes the fourteen” other factors (id. ¶¶ 386–438). See generally Georgia-Pacific 16 Corp. v. United States Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970) (listing fifteen 17 factors pertinent to reasonable royalty calculations for a patent license). After summing up 18 these “neutral” or “increase” factors, Wagner then simply concluded, “In my opinion, based on 19 all the considerations described above, the reasonable royalty that would be agreed to by the 20 parties is a ten percent (10%) increase over the Baseline Royalty” (Dkt. No. 1615 ¶ 439). 21 Mind you, this comes to a total royalty more than ten times greater than a “ten percent” 22 royalty. Wagner calls it “ten percent,” evidently to masquerade as more reasonable. His 23 reasonable royalty “analysis” is summed up as follows (see id. ¶ 440):4 24 25 26 27 4 28 In a reasonable royalty analysis, you don’t get both the “base” and the “royalty.” Plus, neither CUTSA nor DTSA permits an award of damages measured by both unjust enrichment and a reasonable royalty. See 18 U.S.C. 1836(b)(3)(B)(ii); CAL. CIV. CODE § 3426.3(b). 13 1 2 3 4 5 6 7 8 9 Wagner’s reasonable royalty calculation is premised on his unjust enrichment (measured by incremental future profits) opinion, so it suffers from the same problems discussed above and 11 For the Northern District of California United States District Court 10 should be excluded on this basis alone. It should also be excluded because he made no attempt 12 whatsoever to bridge the analytical gap between his discussion of unquantified “neutral” and 13 “increase” factors in a hypothetical licensing negotiation and his decision to simply raise his 14 unjust enrichment numbers by ten percent across the board. See Joiner, 552 U.S. at 146. 15 In summary, Wagner’s opinions fail to pass muster under FRE 702 and Daubert. They 16 are also substantially more prejudicial than probative and therefore subject to exclusion under 17 FRE 403. Defendants’ motion to exclude Wagner’s opinions and testimony is GRANTED.5 18 2. 19 Defendants move to exclude evidence of (1) Waymo’s estimates of its own investments MOTION TO EXCLUDE EVIDENCE OF FINANCIAL INFORMATION. 20 in trade secret development relating to autonomous-vehicle technology, (2) Waymo’s future 21 revenue forecasts and estimated lost profits, and (3) Uber’s financial condition or resources. 22 Much of defendants’ motion is actually dedicated to arguments about the inadequacies in 23 Wagner’s damages opinions and therefore mooted in light of his exclusion. Similarly, insofar 24 as Waymo insists that the aforementioned evidence is relevant to Wagner’s damages opinions, 25 26 27 28 5 Defendants’ other stated objections to Wagner’s opinions may well have merit, but this order need not reach them because the foregoing problems are already more than sufficient to warrant Wagner’s exclusion from our upcoming trial this year. This order states no opinion as to the admissibility of Wagner’s proposed supplemental report regarding damages attributable to Waymo’s proposed new software misappropriation claims (see Dkt. No. 2062 at 20–21). 14 1 that argument no longer carries any weight. This order focuses only on the parties’ arguments 2 about the actual evidence proffered by Waymo separate and aside from Wagner’s opinions. 3 First, defendants contend Waymo’s estimates of its own investments are “conclusory,” 4 improperly calculated, irrelevant to Wagner’s damages theory, and likely to skew the damages 5 horizon because of their high figures (see Dkt. No. 1557-4 at 2). Waymo responds that its own 6 investments — supposedly “between $50 million and $1 billion to develop the individual 7 asserted trade secrets (over the course of 2–7 years)” — are relevant to corroborate the 8 reasonableness of Uber’s estimate that each month of saved development time would translate 9 to $20 million saved (Dkt. No. 1557-12 at 2–3). It seems unlikely that this type of simple comparison between two very different corporations’ expenses could add much probative value 11 For the Northern District of California United States District Court 10 to Uber’s internal document containing the $20 million figure, which could speak for itself, 12 especially given the vast universe of variables that would be swept under the rug. At this point, 13 however, it is not clear that this evidence should be excluded outright. This order therefore 14 concludes only that Waymo must seek the Court’s advance permission via a written offer of 15 proof before introducing evidence of Waymo’s estimated investments at trial. 16 Second, and in a similar vein, defendants contend Waymo’s own future revenue 17 forecasts and estimated lost profits are irrelevant to its damages theory and likely to skew the 18 damages horizon for the jury (Dkt. No. 1557-4 at 2–4). Waymo responds that, like its estimated 19 investments, its own future revenue forecasts and estimated lost profits are relevant as “checks” 20 on the reasonableness of Uber’s corresponding figures (Dkt. No. 1557-12 at 3–4). Again, it 21 seems unlikely that this proposed comparison would add much probative value to the 22 straightforward evidence of Uber’s own internal estimates, but conceivably Waymo could still 23 propose a suitable use for this evidence at trial. This order therefore concludes Waymo must 24 also seek the Court’s advance permission via a written offer of proof before introducing 25 evidence of its future revenue forecasts and estimated lost profits at trial. 26 Third, defendants assert in conclusory fashion that “Waymo should be precluded from 27 offering any evidence about Uber’s current revenues, profitability, or other financial resources 28 because such information is irrelevant and poses a risk of biasing the jury’s award” (Dkt. No. 15 1 1557-4 at 4). This is not sufficient to justify outright exclusion of such broad swaths of 2 evidence. Even without Wagner, it is conceivable that Waymo could present a damages theory 3 under which Uber’s revenues, profitability, or financial resources may be relevant. Defendants’ 4 motion as to this evidence is therefore DENIED without prejudice to targeted objections to 5 specific items of evidence at trial. As stated herein, their motion to exclude evidence of 6 financial information is GRANTED IN PART and DENIED IN PART. 7 3. REMAINDER OF UBER’S MOTION TO STRIKE. 8 With the benefit of Waymo’s full damages theory and the foregoing rulings, this order Waymo’s initial disclosures. Insofar as the remainder of Uber’s motion to strike seeks relief 11 For the Northern District of California finds that no further relief is necessary under these circumstances to remedy any shortfalls in 10 United States District Court 9 above and beyond what has already been granted herein, it is DENIED. CONCLUSION 12 13 For the foregoing reasons, defendants’ motion to exclude Michael Wagner is GRANTED. 14 Their motion to exclude evidence of financial information is GRANTED IN PART and DENIED IN 15 PART as stated herein. Except to the extent stated herein, their motion to strike is DENIED. 16 17 IT IS SO ORDERED. 18 19 Dated: November 2, 2017. WILLIAM ALSUP UNITED STATES DISTRICT JUDGE 20 21 22 23 24 25 26 27 28 16

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