Digital Reg of Texas, LLC v. Adobe Systems Incorporated et al

Filing 632

ORDER by Judge Claudia Wilken ON ( 587 , 592 ) MOTIONS IN LIMINE. (ndr, COURT STAFF) (Filed on 8/19/2014)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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DIGITAL REG OF TEXAS, LLC,

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Plaintiff,

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United States District Court
For the Northern District of California

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ORDER ON MOTIONS
IN LIMINE (Docket
Nos. 587, 592)

v.
ADOBE SYSTEMS, INC., et al.,

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No. C 12-1971 CW

Defendants.
________________________________/
In this patent infringement case, Plaintiff Digital Reg of

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Texas, LLC, and Defendant Adobe Systems, Inc., the only remaining

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Defendant, are set to go to trial on August 25, 2014.

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Court are the parties’ motions in limine; Adobe brings nine and

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Digital Reg brings twenty one.

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a pretrial conference.

Before the

On August 13, 2014, the Court held

Having considered the papers and the

16
arguments of counsel, the Court rules as follows on the motions in
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limine.
A.

Adobe’s motions in limine
1.

Exclude unreliable opinion of Plaintiff’s damages
expert, Robert Parr

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Adobe’s motion is GRANTED.
This is a Daubert1 motion, which requires the district court
to exercise its gatekeeping function in mandating that any

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1

Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 589
(1993) (“under the [Federal] Rules [of Evidence] the trial judge
must ensure that any and all scientific testimony or evidence
admitted is not only relevant, but reliable”).

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testimony grounded in scientific or technical expertise be

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relevant and reliable.

3

F.3d 1292, 1306 (Fed. Cir. 2011); Fed. R. Evid. 702.

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scrutinizing an expert’s principles and methodology, a court “may

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conclude that there is simply too great an analytical gap between

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Uniloc USA, Inc. v. Microsoft Corp., 632

the data and the opinion proffered.”

In

Gen. Elec. Co. v. Joiner,

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522 U.S. 136, 146 (1997).

A court may not, however, “evaluate the

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9

credibility of witnesses, resolve conflicts in testimony, or

United States District Court
For the Northern District of California

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evaluate the weight of the evidence.”

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Uniloc USA, Inc., 632 F.3d

at 1305-06.

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Adobe contends Mr. Parr used incomplete information to

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calculate the percentage of sales Adobe saved from piracy because

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of its use of the patented invention.

Mr. Parr arrived at this

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conclusion by subtracting from software piracy rates across the
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industry (twenty percent) the piracy rates experienced by Symantec
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(six to ten percent), which allegedly shows the benefit of using

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the claimed invention (ten to fourteen percent).

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1 (Parr Depo.) at 84:2-19; Ex. 2 (Parr Rep.) ¶ 174.

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did not consider piracy data specific to Adobe.

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on data spanning the entire software industry, regardless of the

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Beebe Decl., Ex.
Mr. Parr thus

He instead relied

type of software or whether the software uses some form of DRM or

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not, without explaining why this would be proper.

He also relied

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on Symantec data, even though Symantec settled and was not shown

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to be infringing.

He did not analyze how differences in the

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software might affect his calculation.
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Digital Reg responds that Mr. Parr used the evidence that was

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available to him.

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produce records regarding piracy rates specific to its products or

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the efficacy of its DRM strategy.”

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Adobe stated at the hearing that it provided Digital Reg with

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Digital Reg contends that Adobe “failed to

Digital Reg Response at 2.

piracy information, but did not have the statistic Digital Reg

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sought because it does not track that information.

But even if

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9

information tracking Adobe’s accused products was not available,

United States District Court
For the Northern District of California

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data tracking products shown to be sufficiently similar to the

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accused products would have been more relevant.

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LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 78-79

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(Fed. Cir. 2012) (permitting expert to use price information

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Cf.

tracking a similar product where price information of the accused

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product was unavailable).

Different types of software are likely

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to experience different rates of piracy, depending on the level of
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demand for the software, the importance of the software’s

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function, the price of the software, and the availability of

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alternatives, to name a few factors.

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regarding products that are similar to Adobe’s accused products,

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or attempt to demonstrate that Adobe would experience piracy rates

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equal to the average of the industry.

Mr. Parr did not use data

Mr. Parr did not even

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attempt to justify his assumption that Symantec and industry data
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26

are an accurate representation of what would occur with Adobe.

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See Parr Rep. ¶ 174.

He acknowledged in his deposition that

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Symantec and Adobe’s products are different and offer different
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functionalities.

Parr Depo. at 81:2-9, 82:23-83:9 (remarking

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that, although the products are different, Adobe and Symantec

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would experience the same gains from the DRM technology because

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they are large companies that “sell a large diversified portfolio

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of products to consumers and enterprises”).

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Moreover, Mr. Parr

did not consider whether other anti-piracy measures are taken by

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Symantec or the industry, and what effect those measures might
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have.

Symantec has not even been shown to employ the infringing

United States District Court
For the Northern District of California

10

DRM technology.

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Parr fails to address with his use of industry and Symantec data

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as a proxy for Adobe data.

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of DRM technology may vary widely across the industry, the inputs

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In short, there are many uncertainties that Mr.

Because piracy and the effectiveness

of Mr. Parr’s damages calculation are inherently unreliable.

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Adobe also attacks Mr. Parr’s methodology for calculating the
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yield of a hypothetical negotiation between Adobe and Digital Reg.
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“[T]he classic way to determine the reasonable royalty amount is

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to multiply the royalty base, which represents the revenue

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generated by the infringement, by the royalty rate, which

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represents the percentage of revenue owed to the patentee.”

22

Whitserve, LLC v. Computer Packages, Inc., 694 F.3d 10, 27 (Fed.

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Cir. 2012).

Adobe takes issue with both the royalty rate and

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royalty base used in Mr. Parr’s report.
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In calculating the royalty rate, Mr. Parr assumed the parties

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would begin their negotiation at an equal fifty-fifty share of

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saved profits.

Adobe contends this is contrary to established
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Federal Circuit case law.

In Uniloc, the Federal Circuit

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disapproved of arbitrary starting points for negotiations of a

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reasonable royalty rate.

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Goldscheider’s “25 Percent Rule,”2 which assumes that the

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manufacturer would be willing to pay the patentee twenty-five

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In that case, the expert used Robert

percent of its expected profits for the product that incorporated

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the intellectual property at issue.

Uniloc USA, Inc., 632 F.3d at

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1312.

To arrive at a reasonable royalty rate under the 25 Percent

United States District Court
For the Northern District of California

10

Rule, the profits for the product embodying the invention are

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divided by the expected net sales yielding a profit rate, which is

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then multiplied by twenty-five percent to arrive at a running

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royalty rate.

14

Id.

Because the rule was “essentially arbitrary”

and did “not relate to any issue in the case,” the court held that

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it was “fundamentally flawed” and inadmissible as a matter of law
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under Daubert.

Id. at 1314.

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A court in this district recently applied Uniloc’s holding in

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a similar case, Dynetix Design Solutions, Inc. v. Synopsys, Inc.,

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2013 WL 4538210 (N.D. Cal. Aug. 23, 2013).

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began his royalty rate analysis at fifty percent of the gross

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profit margin of the accused products, adjusting the rate upwards

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In Dynetix, the expert

or downwards based on the application of the Georgia-Pacific

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factors.

Id. at *1.

Because “an arbitrary starting point is

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2

This rule was based on Robert Goldscheider’s studies of
commercial licensing negotiations generally. Id. at 1313.
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1
2

impermissible under Uniloc,” the court excluded the expert’s
damages testimony.

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Id. at *4.

Here, Mr. Parr decided to adopt a fifty-percent starting

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point based on his vague, undisclosed general experience.

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believe that a sharing of the saved profits would result in a 50%

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split of the saved profits.

“I

In my career I have seen instances

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where inventions that result in a savings to the licensee are
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priced at a 50% sharing of the savings.”

See Parr Report ¶¶ 176-

United States District Court
For the Northern District of California

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77.

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any evidence of either Adobe or Digital Reg commencing

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negotiations with a fifty-fifty profit split.

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106:25-107:16.

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During his deposition, Mr. Parr admitted that he had not seen

See Parr Depo. at

Mr. Parr’s starting point, based only on his

personal experience not limited to the DRM industry, is even more

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arbitrary than the rule rejected in Uniloc.

See Dynetix Design

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Solutions, Inc., 2013 WL 4538210, at *4.

To ensure damages

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figures are not conjectural or speculative,

a starting point

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should be tied to case-specific factors grounded in reliable data,

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such as the parties’ relative bargaining power, the relationship

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between the patented invention and the accused product, other

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licenses involving the same patent, and analogous licenses in the

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industry for patents covering component parts.

See id.

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Digital Reg contends that, unlike in Uniloc and Dynetix, Mr.
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Parr multiplied his fifty-fifty starting point by the amount of

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sales that would be saved from piracy by incorporating the

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patented invention in the accused product.
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This is not in

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substance distinct from Uniloc and Dynetix because, according to

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his own words, Mr. Parr started with “a 50% split of the saved

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profits.”

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calculation, even if Mr. Parr went on to adjust his initial

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determination with case-specific factors.

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This introduces an arbitrary element to the

The rate is still

tainted by its fifty/fifty starting point which is unsupported by

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any evidence.

Dynetix Design Solutions, Inc., 2013 WL 4538210, at

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United States District Court
For the Northern District of California

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*4 (an “arbitrary starting point is impermissible under Uniloc.”).
Adobe next criticizes Mr. Parr’s use of the entire value of

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the accused products as the royalty base.

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that a patentee may assess damages based on the entire value of

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the accused product “only where the patented feature creates the

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It is well-established

‘basis for customer demand’ or ‘substantially creates the value of

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the component parts.’”

Uniloc USA, Inc., 632 F.3d at 1318 (citing

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Garretson v. Clark, 111 U.S. 120, 121 (1884)).

Otherwise, the

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patentee must “apportion the defendant’s profits . . . between the
patented feature and the unpatented feature.”

Id.

Digital Reg suggests that it is free to use revenue of the

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entire product for its royalty base as long as it is “economically

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justified.”

23

Mondis Tech., Ltd. v. LG Electronics, Inc., 2011 WL

2417367, at *2 (E.D. Tex. June 14, 2011) (citing Lucent Techs.,

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Inc. v. Gateway, Inc., 580 F.3d 1301, 1336 (Fed. Cir. 2009)).
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Relying on the Federal Circuit’s language in Lucent, the Mondis

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court found that, because the only relevant prior licensing

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agreements available were based on the value of the entire
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product, the patentee was justified in using the entire market
See id.3

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value with a correspondingly lower royalty rate.

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focusing on this one Eastern District of Texas case, Digital Reg

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ignores more recent case law from the Federal Circuit and this

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district clarifying the same point.

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In

In Uniloc, the Federal

Circuit explained that the plaintiff misinterpreted the passage in

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Lucent that was relied upon by the Mondis court -- that “the base
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used in a running royalty calculation can always be the value of

United States District Court
For the Northern District of California

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the entire commercial embodiment, as long as the magnitude of the

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rate is within an acceptable range” -- because it was preceded by

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the qualification that the entire market value could not be used

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in that case because there was no evidence that the patented

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feature was the basis of consumer demand.

Uniloc USA, Inc., 632

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F.3d at 1319-20 (quoting Lucent Techs., Inc., 580 F.3d at 133916
39).

After clarifying that Lucent does not stand for the

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proposition that the entire market value can be used absent

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evidence that the patented feature drives demand, the Uniloc court

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went on expressly to disapprove of the plaintiff’s use of the

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entire market value, so long as the royalty rate is “low enough.”

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Id. at 1319.

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In 2012 the Federal Circuit again explained that the

language in Lucent was misinterpreted, and reaffirmed that “in any

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The Mondis court held that use of the entire market value
was “economically justified” because the previous comparable
licenses were calculated based on the entire market value. Mondis
Technology, Ltd., 2011 WL 2417367, at *2. Digital Reg does not
show that much.
8

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case involving multi-component products, patentees may not

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calculate damages based on sales of the entire product, as opposed

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to the smallest salable patent-practicing unit, without showing

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that the demand for the entire product is attributable to the

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patented feature.”

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LaserDynamics, Inc., 694 F.3d at 67-68.

Because there is no evidence that the patented feature drives
demand here,4 Mr. Parr’s use of the entire market value of the

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9

United States District Court
For the Northern District of California

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products cannot be justified.
Mr. Parr provides an alternative calculation that apportions

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the royalty base to be thirty percent of the profit.

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increased the rate proportionally to arrive at the same ultimate

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damages figure.

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215:11-16.

But he

Parr Depo. at 212:20-24, 213:10-18, 214:15-23,

This analysis contravenes Federal Circuit precedent

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and does not serve the purpose of the rule, which is to award only
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damages which are fairly attributable to the patented feature.
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See Lucent Techs., Inc., 580 F.3d at 1338 (“Being precluded from

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using the computer as the royalty base, he used the price of the

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software, but inflated the royalty rate accordingly.

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be an acceptable way” to conduct the reasonable royalty analysis).

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Due to the multiple flaws in Mr. Parr’s inputs and analysis, his

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This cannot

damages testimony must be excluded in full.

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4

In fact, Mr. Parr recognizes the opposite: he states, “The
patented invention is not a product that consumers seek-out and
are only aware of when they wish to begin using the products they
have purchased.” Parr Rep. ¶ 152.
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Because upon a finding of infringement, Digital Reg is

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entitled to “in no event less than a reasonable royalty for the

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use made by the invention by the infringer,” the Court will permit

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Mr. Parr to submit a revised damages report5 curing only the

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problems identified in this order, to be filed no later than the

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close of business on August 21, 2014.

He may not include any

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additional information on any points, and may not rely on
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additional settlement agreements.6

Mr. Parr must be made

United States District Court
For the Northern District of California

10

available for a deposition of up to two hours no later than the

11

close of business on August 28, 2014.

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again deficient, the Court will preclude him from testifying and

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only Adobe’s damages expert will be permitted to testify.7

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If Mr. Parr’s report is

See

ePlus, Inc. v. Lawson Software, Inc., 700 F.3d 509, 523 (Fed. Cir.

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16
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5

Although the Court did not ask for additional briefing,
both parties submitted “letters” to further argue their points.
Dockets Nos. 615, 618. Although the Court need not consider the
substance of these letters, see Civil Local Rule 7-3(d), it notes
that Digital Reg offers to remove its profit-sharing analysis
included in Georgia-Pacific factor eleven and rely instead on
other settlement agreements such as ones involving EA and Symantec
to compute a royalty rate. While this might solve two of the
problems raised above, it would not solve the problem of using an
improper royalty base. To be admissible, any revised expert
report must address all of the problems identified in this order.
6

The claims against EA and Symantec were dismissed on
December 20, 2013 and July 9, 2014, respectively. It is presumed
that Digital Reg settled its claims with these parties some time
before those dates. If Digital Reg wished to supplement its
expert report, it should have sought leave from the Court
diligently.
7

Adobe now confirms its offer at the pretrial conference to
have its expert testify. Docket No. 615 at 1.
10

1

2012) (affirming trial court’s decision, in its discretion, to

2

preclude the plaintiff from presenting expert testimony on a

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reasonable royalty because a “last-minute addition” would “disrupt

4

the proceedings and cause unacceptable delay”); Golden Bridge

5

Technology v. Apple Inc., Case No. 12-cv-04882-PSG, Docket No. 494

6

(N.D. Cal. June 1, 2014), Docket No. 494 (after finding

7
plaintiff’s damages expert used an unreliable methodology,
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permitting him to file an amended report before trial; after

United States District Court
For the Northern District of California

10

finding plaintiff’s expert again erred, excluding the expert from

11

trial entirely, allowing only defendant’s expert and plaintiff’s

12

fact witnesses to testify); NetAirus Technologies, LLC v. Apple,

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Inc., Case No. 10-cv-03257-JAK, Docket No. 619 (C.D. Cal. Nov. 11,

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2013) (after striking plaintiffs’ damages expert, allowing

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plaintiffs to call defendant’s expert).
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2.

Exclude the RPX license

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Adobe’s motion is DENIED.
Adobe moves to exclude all evidence of the licensing

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agreements between Digital Reg and RPX.

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aggregator, or an entity that licenses patents from patentees and

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then sublicenses those patents to its members.

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RPX is a patent

Around December

12, 2008, RPX took a license from Digital Reg and has since

24
sublicensed it to at least 120 companies.

Because RPX’s business

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26

model is unique, Adobe argues its license is of limited relevance

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to Adobe’s hypothetical licensing posture and should be excluded.

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See Fed. R. Evid. 403.
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Digital Reg contends that the license is relevant to

2

calculation of a reasonable royalty here.

3

RPX license in his report, although he did not ultimately factor

4

it in to the royalty rate.

5

Parr reviewed involved licensees (such as Zynga, Intuit, AVG, and

6

Mr. Parr discussed the

Some of the license agreements Mr.

Symantec) that already had a license to the ‘541 patent through

7
their membership with RPX.

These licensees would have

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9

contemplated the effect of their existing license and paid a lower

United States District Court
For the Northern District of California

10

rate to settle claims with Digital Reg.

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agreement would leave the jury with the mistaken impression that

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the license agreements included the ‘541 patent.

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agreement is therefore relevant to a reasonable royalty.

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Ignoring the RPX

The RPX

Adobe argues that even though the RPX license is relevant,

15
its $8.5 million figure will skew the jury’s perception of a
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reasonable royalty, causing unfair prejudice to Adobe.
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19

Accordingly, Digital Reg may describe the circumstances of the RPX
license, but not the actual amount.

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3.

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Adobe’s motion is GRANTED.

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Adobe seeks to exclude portions of Digital Reg’s infringement

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Exclude evidence of Adobe’s AMT product

expert’s report which alleges infringement by Adobe’s AMT product.

24
See Docket No. 523-10 (Devanbu Report App’x A-3) at 2.

While both

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parties agree that AMT as a whole is not an accused product,

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Digital Reg’s expert Premkumar Devanbu argues that ALM, which is

28

an accused product, is a component of AMT.
12

1

Adobe responds that this is contrary to Magistrate Judge

2

Westmore’s ruling on a discovery motion.

3

that while ALM is an accused product, AMT is not, nor is a

4

component of AMT that is similar to ALM.

5

arguing that motion, Digital Reg submitted the same user logs of

6

Judge Westmore found

Docket No. 431 at 7.

In

AMT, which it claims shows continued use of ALM in conjunction

7
with AMT.

Docket No. 371 at 8.

Adobe disagreed, explaining that

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9

AMT is composed of entirely new source code.

Adobe further

United States District Court
For the Northern District of California

10

pointed out that Digital Reg’s infringement contentions only

11

accused the version of ALM “sold through volume licensing plans.”

12

Id. at 9 (citing Digital Reg’s Infringement Contentions at 3).

13

Judge Westmore agreed with Adobe, finding that Digital Reg’s

14

infringement contentions accused the version of ALM related to

15
Adobe’s volume licensing services, and that version of ALM was
16
discontinued.

Docket No. 431 at 7.

Because Digital Reg’s

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18

infringement contentions failed specifically to accuse AMT and a

19

feature of it that appears similar to ALM but is actually “new

20

code” and a “new system,” Digital Reg was not entitled to

21

discovery on that product.

22

order, but the undersigned denied the objection.

23

Id.

Digital Reg objected to the
Docket No. 452.

Digital Reg now reasserts the same arguments.

But Judge

24
Westmore did not err in finding that Digital Reg’s infringement
25
26

contentions accused only the volume licensing version of ALM.

The

27

Patent Local Rules of this district require the plaintiff to be

28

“as specific as possible” in identifying every accused “product,
13

1

device, and apparatus,” by name if possible.

Patent L.R. 3-1(b).

2

Digital Reg failed to do so with respect to AMT and its ALM-like

3

component.

4

(“Adobe License Manager is an embedded e-license management system

5

that enables automated license management . . . It will be

6

See Digital Reg’s Infringement Contentions at 3

integrated into all of Adobe’s best-selling desktop applications

7
and suites sold through volume licensing plans . . .”) (emphasis
8
9

added).

See also Docket No. 431 at 6-7.

At that point, Digital

United States District Court
For the Northern District of California

10

Reg could have sought leave to amend its infringement contentions

11

to allege with specificity that it sought to accuse AMT, along

12

with its ALM-like component.

13

Reg did not do so, Adobe had no timely notice of a theory accusing

14

Patent L.R. 3-6.

Because Digital

AMT and its ALM-like component and relied upon Judge Westmore’s

15
order.

Accordingly, AMT and its ALM-like component cannot be

16
inserted into the case at this late stage.
17
18
19

4.

Exclude mention of Adobe’s total revenues, revenues not
tied to accused features, market capitalization, company
valuation, or overall financial success

20

Adobe’s motion is GRANTED in part.

21

Adobe next moves to exclude any mention of global figures

22
23

such as its company’s total revenues which include products not at
issue, the overall valuation of its company, and its financial

24
success, because it would be unfairly prejudicial to Adobe.

Fed.

25
26

R. Evid. 403.

Digital Reg states that it does not intend to refer

27

to any of this information, except to the extent that it wishes to

28

introduce exhibits containing global figures that were used to
14

1

calculate gross profit margins.

Digital Reg needs to introduce

2

these documents to establish the foundation for its damages

3

calculation.

4

practicable should redact any global figures unrelated to the case

5

and may not draw attention to these figures.

6

Digital Reg may use these documents, but if

See Uniloc USA,

Inc., 632 F.3d at 1318-20 (finding that presentation of

7
Microsoft’s total revenue “cannot help but skew the damages
8
9

horizon for the jury” and that “the $19 billion cat was never put

United States District Court
For the Northern District of California

10

back into the bag” even though there was “a final instruction that

11

the jury may not award damages based on Microsoft's entire revenue

12

from all the accused products in the case”).

13
14

5.

Preclude any reference or evidence regarding willfulness

Adobe’s motion is DENIED.

15
Adobe seeks to exclude Digital Reg’s willfulness case.
16
Willfulness is a two part inquiry.

First, the objective prong

17
18

requires that a patentee “show by clear and convincing evidence

19

that the infringer acted despite an objectively high likelihood

20

that its actions constituted infringement of a valid patent.”

21

re Seagate, 497 F.3d 1360, 1371 (Fed. Cir. 2007).

22

subjective prong concerns whether a patentee can prove that the

23

Second, the

objectively high risk was either known by the alleged infringer,

24
or so obvious that it should have known of the risk.

Id.

The

25
26

In

objective prong is a threshold legal inquiry that must be

27

satisfied before the subjective prong is considered.

28

Peripheral Vascular, Inc. v. W.L. Gore & Associates, Inc., 682
15

Bard

1

F.3d 1003, 1005-07 (Fed. Cir. 2012) (even where the objective

2

prong is predicated on underlying mixed questions of law and fact,

3

it is nevertheless best decided by the judge because the judge is

4

best positioned to determine which legal defenses are objectively

5

reasonable).

6

Although some courts ultimately send the entire

willfulness question to the jury, it is appropriate for the court

7
to evaluate whether the objective prong is met before allowing the
8
9

jury to consider the subjective prong.

See Powell v. Home Depot

United States District Court
For the Northern District of California

10

U.S.A., Inc., 663 F.3d 1221, 1236 (Fed. Cir. 2011) (“Should the

11

court determine that the infringer's reliance on a defense was not

12

objectively reckless, it cannot send the question of willfulness

13

to the jury, since proving the objective prong is a predicate to

14

consideration of the subjective prong.”)

15
There is some debate over the appropriate time for a court to
16
make the objective reasonableness determination.

The summary

17
18

judgment and judgment as a matter of law (JMOL) stages are

19

equipped with substantive and procedural safeguards that enable

20

the Court to make a well-reasoned decision on objective

21

reasonableness.

22

trial and is designed “to narrow the evidentiary issues for trial

23

By contrast, a motion in limine occurs close to

and to eliminate unnecessary trial interruptions.”

Bowers v.

24
Nat'l Collegiate Athletic Ass'n, 563 F. Supp. 2d 508, 532 (D.N.J.
25
26

2008).

A motion in limine is therefore not the “proper vehicle

27

for a party to ask the Court to weigh the sufficiency of the

28

evidence to support a particular claim or defense.”
16

Id.; see also

1

Kobie v. Fifthian, 2014 WL 1652421, at *2 (M.D. Fla. Apr. 23,

2

2014); Graves v. D.C., 850 F. Supp. 2d 6, 11 (D.D.C. 2011).

3

even if objective willfulness is purely a legal question, a motion

4

in limine is not the appropriate vehicle to seek a ruling that

5

Digital Reg’s willfulness claims are unsupported as a matter of

6

Thus,

law.

7
The substance of Adobe’s motion further demonstrates this
8
9

principle.

Adobe first argues that the non-infringement and

United States District Court
For the Northern District of California

10

invalidity defenses contained in its summary judgment motions

11

foreclose any finding of objective recklessness.

12

18.

13

invalidity and non-infringement regarding a substantial portion of

14

Adobe’s MILs at

The Court denied Adobe’s motions for summary judgment of

the patent claims asserted against Adobe, including the ones that

15
are to be tried.

Adobe has not established that its defenses are

16
objectively reasonable as a matter of law.
17
18

Adobe next claims that Digital Reg lacks sufficient evidence

19

to prove the subjective prong.

20

sufficiency of Digital Reg’s evidence, which is inappropriate at

21

this juncture.

22

argument lacks merit.

23

Adobe again attacks the

Even if it were not procedurally improper, Adobe’s
Digital Reg contends (and Adobe does not

dispute) that Digital Reg has disclosed at least seven occasions

24
where Adobe was made aware of the existence of the patents-in-suit
25
26

or the potential infringement, starting with meetings in 2004.

27

See Docket No. 607, Ex. N.

Yet Adobe did not seek the advice of

28

counsel until at least 2011.

Where the defendant “made little-to17

1

no effort to assess whether it infringed or whether the patent was

2

invalid after receiving notice of the patent,” a reasonable

3

factfinder could reasonably conclude that the defendant was

4

willful.

5

1354, 1369 (Fed. Cir. 2006).

6

Golden Blount, Inc. v. Robert H. Peterson Co., 438 F.3d
Accordingly, both the objective and

subjective prong will be sent to the jury.

After the jury

7
verdict, the Court will first consider “based on the record
8
9

ultimately made in the infringement proceedings, whether a

United States District Court
For the Northern District of California

10

reasonable litigant could reasonably expect those defenses to

11

succeed.”

12

the Court determines that the asserted defenses were not

13

reasonable, “only then can the jury's subjective willfulness

14

Bard Peripheral Vascular, Inc., 682 F.3d at 1008.

finding be reviewed for substantial evidence.”

If

Id.

15
6.
16

Preclude certain infringement theories not timely
disclosed in discovery

17

Adobe’s motion is DENIED.

18

Adobe moves to exclude Digital Reg’s joint infringement and

19

indirect infringement theories on the premise that they were not

20
properly disclosed during discovery.

See Fed. R. Civ. P. 26(e)

21
22

and 37(c)(1).

Of course, neither side should discuss infringement

23

theories not properly disclosed.

24

infringement and indirect infringement theories were properly

25

disclosed in its complaint and October 28, 2011 infringement

26

contentions.

27

Id.

But Digital Reg’s joint

Docket No. 607, Ex. U, S.

Further, the theories

were discussed at length at summary judgment, showing that Adobe

28
18

1

was aware of Digital Reg’s theory that Adobe’s user agreements and

2

software direct and maintain control over users.

3

to Digital Reg’s initial disclosure were either waived or were

4

substantially harmless.

5

Outdoor Corp., 259 F.3d 1101, 1106 (9th Cir. 2001) (“Two express

6

Any objections

See Yeti by Molly, Ltd. v. Deckers

exceptions ameliorate the harshness of Rule 37(c)(1): The

7
information may be introduced if the parties' failure to disclose
8
9

United States District Court
For the Northern District of California

10

the required information is substantially justified or harmless”).
7.

Preclude Digital Reg’s experts from offering opinions
not disclosed during expert discovery

11
Adobe’s motion is GRANTED.
12
13

Adobe is correct in asserting that Digital Reg’s experts

14

cannot offer opinions not presented in their expert reports.

15

Adobe points out that in at least some instances, Digital Reg’s

16

experts did not opine on infringement under the claim construction

17

ultimately adopted by the Court.

18

Reg may offer the disclosed opinions of its experts, but not their

19

For these constructions, Digital

discussion of now-defunct claim construction proposals, and argue

20
that the underlying opinions show infringement under the Court’s
21
22

claim construction.

This approach may be successful if Digital

23

Reg can persuade the jury that the differences between its

24

proposed claim construction and the Court’s claim construction are

25

not significant for purposes of its infringement analysis.

26

scienter and noninfringing alternatives, Digital Reg has pointed

27

As for

to portions of its expert’s report addressing these issues, which

28
19

1
2

may be presented to the jury.

Again, neither side may offer

evidence regarding these theories that has not been disclosed.
8.

3

Preclude any suggestion or argument relating to alleged
discovery deficiencies

4
Adobe’s motion is GRANTED.
5
Adobe requests that Digital Reg be precluded from arguing or

6
7

suggesting that Adobe failed to produce evidence, because it is

8

irrelevant and would be highly prejudicial.

9

403.

Fed. R. Evid. 402,

Digital Reg responds that it should be allowed to explain to

United States District Court
For the Northern District of California

10

the jury why, in compiling its damages report, it relied upon

11

public documents such as SEC filings rather than Adobe’s internal

12

documents.

Digital Reg may explain that internal information is

13
unavailable, but may not blame Adobe.

Neither may Adobe allude to

14
15

any discovery deficiencies on Digital Reg’s part.

16

9.

17

Adobe’s motion is DENIED.

18

Adobe urges the Court to prevent Digital Reg from presenting

19
20

Preclude allegations of copying

evidence showing that Adobe copied Digital Reg’s patent because
there is no evidence that Adobe did so.

Digital Reg contends that

21
it has evidence that the allegedly infringing products were
22
23

released and/or modified after Adobe learned of the patent, which

24

tends to show copying.

While the issue of copying is not relevant

25

to the question of whether Adobe infringed the claims of the

26

patent, this evidence is relevant to whether Adobe knew or should

27

have that it infringed, i.e., the subjective prong of the

28
20

1

willfulness inquiry.

DePuy Spine, Inc. v. Medtronic Sofamor

2

Danek, Inc., 567 F.3d 1314, 1336 (Fed. Cir. 2009).

3

supporting an inference of copying may also be relevant to proving

4

induced infringement, enhanced damages, and nonobviousness.

5

has not shown that any of the claimed copying evidence has

6

Evidence

Adobe

prejudicial effect that would substantially outweigh its probative

7
value.
8
9

United States District Court
For the Northern District of California

10

B.

Digital Reg’s motions in limine
1.

Exclude evidence or testimony from prior art inventors
regarding printed references

11
Digital Reg’s motion is GRANTED in part.
12
13

Digital Reg argues that Jonathan Schull, inventor of the

14

Softlock system and related patents, should not be allowed to

15

testify.

16

Adobe intends to call him to discuss the Softlock system as a

17

prior art reference demonstrating invalidity of the ‘541 and ‘670

18

patents.

19

Although Mr. Schull has not submitted an expert report,

Because he is not a properly disclosed expert witness,

he may not opine on what a hypothetical person skilled in the art

20
would know or what is disclosed by the claims of the patent.
21
22

Those opinions fall within the purview of expert testimony, which

23

must be disclosed by a qualified expert in an expert report,

24

subject to review and expert discovery by Digital Reg.

25

Innogenetics, N.V. v. Abbott Labs., 512 F.3d 1363, 1375 (Fed. Cir.

26

2008) (affirming district court’s decision to exclude a prior art

27

inventor who did not provide an expert report because “any

28
21

1

information he might have to offer beyond the words of the Cha PCT

2

application would be irrelevant to the issue before the jury” of

3

whether the prior art reference disclosed a certain element).

4

However, as Adobe points out, Mr. Schull can speak to topics

5

within his personal knowledge, such as the process of obtaining

6

the Softlock patents, research of which he was personally aware,

7
and the authenticity, if disputed, of documents related to the
8
9

United States District Court
For the Northern District of California

10
11
12
13
14

Softlock system.

His testimony as to the bounds of the Softlock

system as a device is also admissible.
2.

Exclude all prior art references and invalidity defenses
not included in Adobe’s designated three prior art
reference combinations for each asserted claim

Digital Reg’s motion is GRANTED in part.
Digital Reg contends that Adobe should not be allowed to

15
present the prior art references included in Adobe’s trial
16
exhibits which were not chosen in Adobe’s election of prior art
17
18

references.

Previously, the Court required Defendants to limit

19

their prior art references to “three references or combinations

20

per patent claim with respect to the invalidity contentions of

21

Defendants.”

22

served its “Disclosure of Prior Art References and Prior Art

23

Docket No. 587-6 at 6.

On May 16, 2013, Adobe

Reference Combinations,” choosing the prior art upon which it

24
intended to rely.

See Docket No. 587-3 (Prior Art Election).

25
26

Digital Reg complains that Adobe improperly included in its

27

trial exhibits at least forty patents, thirteen applications or

28

publications, and forty-two articles or other related documents.
22

1

Adobe argues that “background and development” of the systems,

2

“contemporaneous articles, inventor testimony, and corroborating

3

documents” should be allowed.

4

Court agrees.

5

documents to explain further how the chosen prior art references

6

Adobe’s Response to MILs at 5.

The

To the extent that these documents are supporting

disclose required limitations, they will be allowed.

But Adobe

7
also asks to present additional documents which disclose other
8
9

required limitations not covered by the chosen prior art

United States District Court
For the Northern District of California

10

references.

11

system does not disclose local creation of a permission,” Adobe’s

12

expert could include an additional document to show that one of

13

the ordinary skill in the art would have recognized the local

14

For example, Adobe argues that because “the Softlock

creation of a permission as an obvious design choice.

Id.

Adobe

15
contends this is appropriate because the document shows “the scope
16
of the prior art generally and the knowledge held by one of
17
18

ordinary skill in the art.”

Id.

But such a document,

19

demonstrating a separate limitation is disclosed in the prior art,

20

constitutes another prior art reference that should have been

21

disclosed in its Prior Art Election.

22

to the Court-mandated Prior Art Election; holding otherwise would

23

There is no such exception

allow Adobe to completely circumvent the limits of that Election

24
and add unlimited extra references.

This would defeat the purpose

25
26
27

of limiting the number of prior art references that each side must
review.

28
23

1

Digital Reg additionally argues that Adobe should not be

2

allowed to argue anticipation because that theory was not

3

disclosed in the Prior Art Election.

4

anticipation regarding the ‘670 patent, it stated, “depending on

5

the court’s claim construction, Defendants reserve the right to

6

Although Adobe did not claim

rely on a subset of the references disclosed in combinations.”

7
Docket No. 587-3 at 2-4.

Because Adobe argues that the Court’s

8
9

claim construction permits Adobe to rely on the disclosed Griswold

United States District Court
For the Northern District of California

10

reference standing alone, rather than in conjunction with the

11

Softlock system, Adobe may do so.

12

prejudiced, because the Griswold system was properly disclosed.

13
14

3.

Digital Reg will not be

Exclude untimely designated witnesses or untimely
produced documents

15

Digital Reg’s motion is DENIED.

16

Digital Reg complains that, on March 29, 2013, the last day

17

of fact discovery, Adobe produced 89,838 pages of documents.

18

weeks earlier, on March 12, 2013, Adobe identified seven new

19

witnesses that it had not previously disclosed.

Two

Digital Reg

20
argues that, although these disclosures occurred before the cut21
22

off of fact discovery, they were unduly prejudicial because they

23

were timed so late as to prevent Digital Reg from properly

24

investigating them.

25
26
27

This complaint should have been raised at the time the
productions occurred, not now.

Digital Reg could have requested

additional time to review the documents and to depose the later-

28
24

1

disclosed witnesses, but instead chose to wait until over a year

2

later, when any wrong could not be remedied, to ask the Court to

3

exclude Adobe’s evidence entirely.

4

truly untimely disclosed evidence, this motion is denied.

5

4.

6

While neither side may use

Exclude evidence of Plaintiff’s fee arrangement with
counsel

7

Digital Reg’s motion is GRANTED.

8

Digital Reg requests that Adobe refrain from introducing

9

United States District Court
For the Northern District of California

10

evidence of Digital Reg’s fee arrangement with counsel.

Adobe

agrees not to raise the issue, so long as Digital Reg does not

11
open the door.

Adobe must seek a ruling from the Court before

12
13
14

doing so.
5.

This prohibition applies to both sides.
Preclude mention of Digital Reg’s decision to drop
claims and streamline litigation

15
Digital Reg’s motion is GRANTED.
16
Digital Reg’s decision to drop claims during litigation is
17
18

not relevant to the issues to be tried.

Contrary to Adobe’s

19

assertion, Digital Reg’s decision to drop claims is not probative

20

of Adobe’s state of mind with respect to its alleged willful or

21

indirect infringement of the separate claims that remain.

22
23

6.

Preclude mention of Digital Reg’s decision to file in
Eastern District of Texas

24

Digital Reg’s motion is GRANTED.

25

This fact is not relevant to the issues to be tried.

26

asserts that it intends to present evidence that this case was

27

Adobe

originally filed in the Eastern District of Texas to provide

28
25

1

“background” and to show Digital Reg is an “entity that does not

2

compete with Adobe in the marketplace.”

3

Reg is from Texas and does not compete in the product market are

4

admissible, but that is not the subject of Digital Reg’s motion.

5

Adobe may not insinuate that Digital Reg is engaged in “forum

6

The facts that Digital

shopping.”

7
7.

Preclude negative or derogatory comments about the USPTO

8
9

United States District Court
For the Northern District of California

10

Digital Reg’s motion is GRANTED.
Neither party may discuss the quality of the USPTO’s

11

examination process, which is irrelevant and may be unfairly

12

prejudicial or distracting from the relevant standard.

13

Applied Material, Inc. v. Advanced Semiconductor Materials Am.,

14

See

Inc., 1995 WL 261507, at *3 (N.D. Cal. Apr. 25, 1995) (finding

15
irrelevant and inappropriate testimony about “overwork, quotas,
16
awards or promotions at the Patent Office . . . or insinuat[ions]
17
18

that the Patent Office does not do its job properly”).

The law

19

mandates that patents are presumed valid, but may be found invalid

20

if proved by clear and convincing evidence.

21

Newell Cos., Inc. v. Kenney Mfg. Co., 864 F.2d 757, 782 (Fed. Cir.

22

1988).

23

35 U.S.C. § 282;

The parties have agreed to show the Federal Judicial

Center’s video about the process of obtaining a patent, which will

24
give the jury the necessary background.
25
26
27

8.

Exclude comparisons of the accused devices to prior art
or to an alleged commercial embodiment of the invention

Digital Reg’s motion is GRANTED in part.

28
26

1

Digital Reg seeks to prevent Adobe from comparing the accused

2

products to the prior art.

3

argue that the accused product does not infringe merely because it

4

practices the prior art.

5

Architectural Res., Inc., 279 F.3d 1357, 1366 (Fed. Cir. 2002) (no

6

It would be improper for Adobe to

Tate Access Floors, Inc. v. Interface

“practicing the prior art” defense to literal infringement).

7
Comparisons of the prior art and the accused products for purposes
8
9

of infringement are thus inapposite.

However, Adobe is correct

United States District Court
For the Northern District of California

10

that the same claim scope must be applied to infringement and

11

invalidity.

12

is clearly practicing only that which was in the prior art, and

13

nothing more, and the patentee’s proffered construction reads on

14

See id. at 1367 (noting that if “an accused infringer

the accused device, meeting this burden of proof should not prove

15
difficult.”).

Id.

Accordingly, Adobe may argue that the same

16
claim scope ought to be applied to the patent for infringement and
17
18

invalidity.

Adobe may also analyze the similarities between the

19

prior art and the accused products to show that Digital Reg’s

20

patents describe obvious modifications to the prior art, so long

21

as that evidence is otherwise admissible and relevant.

22
23

Digital Reg additionally requests that Adobe be prohibited
from comparing the accused product to an alleged commercial

24
embodiment of the patented invention.

Adobe responds that it is

25
26
27

not aware of any commercial embodiments of Digital Reg’s
invention.

This part of the motion is therefore denied as moot.

28
27

1
2

9.

Exclude opinions of counsel regarding non-infringement
or invalidity

Digital Reg’s motion is DENIED as moot.

3
Adobe has stipulated that it will not rely on any opinion
4
5
6
7

letter regarding non-infringement or invalidity.

Docket No. 593

at 12.
10.

Exclude opinion testimony from individuals not
designated as experts

8
9

United States District Court
For the Northern District of California

10

Digital Reg’s motion is GRANTED.
Digital Reg seeks to preclude Adobe from offering expert

11

opinion testimony by percipient fact witnesses.

12

Evidence 701 prohibits opinion testimony by lay witnesses if it is

13

“based on scientific, technical, or other specialized knowledge

14

within the scope of Rule 702.”

Federal Rule of

Adobe does not oppose this

15
motion, but notes that percipient witnesses may testify as to
16
their personal knowledge.

For prior art inventors, the line

17
18

between expert and fact testimony may be thin.

As discussed

19

above, they may testify about the process of developing their

20

invention and the context in which they invented it, but not the

21

legal scope of their invention.

22
23

11.

Preclude suggestion that damages awards may drive up the
price of products, put any manufacturers out of
business, or cause jobs to be lost

24
Digital Reg’s motion is DENIED as moot.
25
26

Adobe has stipulated that it will not suggest that a damages

27

award would drive up product prices, put Adobe out of business, or

28

cause jobs to be lost.

Docket No. 593 at 12.
28

1
2

12.

Exclude personal characteristics and financial status of
counsel and their firms

Digital Reg’s motion is GRANTED.

3
Neither party will address the personal characteristics and
4
5
6
7

financial status of counsel or their firms.

Such evidence would

be irrelevant and unfairly prejudicial.
13.

Exclude evidence of any legal proceedings involving
either party other than the present suit

8
9

United States District Court
For the Northern District of California

10

Digital Reg’s motion is GRANTED in part.
Digital Reg seeks to exclude mention of all other lawsuits

11

involving either party.

12

prior lawsuit asserting the ‘541 patent involving Microsoft, Sony,

13

Apple, and others; and (2) Digital Reg’s prior patent litigation

14

Adobe wishes to present (1) Digital Reg’s

lawsuits that are the subject of the settlement agreements

15
considered by the parties’ damages experts.

The ‘541 patent

16
lawsuit is not relevant.

However, the patent litigation lawsuits

17
18

underlying the settlement agreements provide relevant context to

19

the settlement amounts.

20

of those lawsuits, but not others.

21
22
23

14.

Accordingly, Adobe may present evidence

Exclude interpretations or application of claim
limitations contrary to this Court’s claims construction
order

Digital Reg’s motion is DENIED as moot.

24
The parties stipulated not to offer any evidence or argument
25
26
27

suggesting claim constructions or applying claim limitations in a
way that would be contrary to the Court’s Order Regarding Claim

28
29

1
2
3

Construction and Motions for Summary Judgment.

Docket No. 593 at

12.
15.

Preclude derogatory, disparaging, and/or pejorative
references to Digital Reg

4
5
6

Digital Reg’s motion is GRANTED in part.
Digital Reg seeks to prevent Adobe from using a wide array of

7

terms to describe Digital Reg’s status.

8

pejorative terms, such as “patent troll,” “pirate,” “bounty

9

hunter,” “paper patent,” “playing the lawsuit lottery,” and “shell

United States District Court
For the Northern District of California

10

Adobe may not use

corporation,” which have negative connotations.

Adobe may,

11
however, describe the nature of Digital Reg’s business with
12
13

neutral, strictly factual terms, such as “patent assertion

14

entity,” a “company that does not make anything,” a “company that

15

does not sell anything,” or “licensing entity.”

16

status as a non-practicing entity is relevant to damages and the

17

Georgia-Pacific factors.

A neutral description of Digital Reg’s

18

status is thus permitted.

See HTC Corp. v. Tech. Props. Ltd.,

19

Digital Reg’s

2013 WL 4782598, at *4 (N.D. Cal. Sept. 6, 2013) (allowing terms

20
such as “non-practicing entity,” “patent assertion entity,” and
21
22
23

related terms).
16.

Preclude Dr. Wicker from testifying about source code to
prove non-infringement

24
Digital Reg’s motion is GRANTED in part.
25
26

Digital Reg asserts that Adobe’s expert witness, Dr. Wicker,

27

admitted he did not review source code to reach his conclusions of

28

non-infringement regarding Adobe’s accused products, and thus
30

1

should not be allowed to discuss source code.

Adobe agrees that

2

Dr. Wicker did not cite to source code in his affirmative report,

3

but points out that in his rebuttal expert report, Dr. Wicker

4

considered and cited to certain portions of Adobe’s source code.

5

Docket No. 523-15 at ¶¶ 45, 85.

6

Both parties’ experts may testify

only to the source code they actually reviewed and cited in their

7
respective reports.
8
9

17.

United States District Court
For the Northern District of California

10

Preclude discussion of lease on a townhome rented by,
for, or behalf of Deskgate, Inc. and/or Patrick
Patterson

11

Digital Reg’s motion is GRANTED.

12

Digital Reg moves to exclude evidence related to a collateral

13
14

controversy about a townhouse lease agreement for Deskgate, Inc.
The Court fails to see the relevancy of this information, the

15
introduction of which would spawn time-consuming satellite
16
disputes.
17
18
19

18.

Exclude marking as an affirmative defense or limitation
on damages

Digital Reg’s motion is DENIED as moot.

20
Adobe stipulated not to assert a marking defense.

Docket No.

21
22
23
24

593 at 13.
19.

Exclude evidence of parallel or related patent
prosecution in foreign countries of the invention
disclosed in the ‘541 patent and ‘670 patent

25

Digital Reg’s motion is GRANTED.

26

Adobe seeks to introduce evidence of statements made by

27

Digital Reg when it attempted to extend its rights under the ‘541

28
31

1

patent before the European Union Patent Office.

Adobe asserts

2

that the European Patent Office rejected Digital Reg’s attempt to

3

assert that a “token” and a “permission” are the same structure.

4

See Docket No. 604-9.

5

claim scope, which was resolved at the claim construction stage.

6

This evidence would only be probative of

Allowing Adobe to present this evidence at trial would be

7
unnecessarily confusing, cumulative, and potentially prejudicial.
8
9

20.

Exclude mention of the Court’s prior rulings

United States District Court
For the Northern District of California

10

Digital Reg’s motion is GRANTED in part.

11

Digital Reg seeks to exclude as potentially prejudicial any

12

of the Court’s rulings on dispositive, evidentiary, or procedural

13

motions, except to disclose the Court’s claim construction

14

rulings.

While Adobe is not barred from presenting pre-suit

15
communications between the parties that mention claims no longer
16
in the case, Adobe should not discuss the reasons why the claims
17
18

are now absent.

Again, evidence of previously asserted claims

19

that are no longer in the case is not relevant to Adobe’s alleged

20

willful and induced infringement of the separate claims that are

21

still in the case.

22
23

At the hearing, Adobe expressed that it wished to present
passages of the Court’s claim construction order to rebut some of

24
Digital Reg’s infringement arguments.

This would confuse the

25
26

jury; one object of claim construction is to simplify the

27

definitions of these terms for the jury.

28

Digital Reg may not present interpretations of the claim
32

At the same time,

1

constructions that would clearly be contrary to the reasoning of

2

the Court’s order.

3

explained in the jury instructions.

4

21.

5

If it does, the Court’s construction will be

Exclude mention to connections to California (or lack
thereof)

6

Digital Reg’s motion is DENIED.

7

The parties are permitted to provide the jury with basic

8

background facts, such as that Adobe is located in California and

9

Digital Reg is located in Texas.

United States District Court
For the Northern District of California

10

Digital Reg has not shown that

this basic background information presents a risk of unfair

11
prejudice or bias that substantially outweighs its probative
12
13

value.

Fed. R. Evid. 403.

Adobe has nevertheless agreed it will

14

not suggest that the parties’ connections to California, or lack

15

thereof, are somehow probative of the merits of the parties’

16

dispute.

17
IT IS SO ORDERED.
18
Dated:
19

8/19/2014
CLAUDIA WILKEN
United States District Judge

20
21
22
23
24
25
26
27
28
33