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)

Download PDF
1 IN THE UNITED STATES DISTRICT COURT 2 FOR THE NORTHERN DISTRICT OF CALIFORNIA 3 4 DIGITAL REG OF TEXAS, LLC, 5 Plaintiff, 6 7 United States District Court For the Northern District of California 10 ORDER ON MOTIONS IN LIMINE (Docket Nos. 587, 592) v. ADOBE SYSTEMS, INC., et al., 8 9 No. C 12-1971 CW Defendants. ________________________________/ In this patent infringement case, Plaintiff Digital Reg of 11 Texas, LLC, and Defendant Adobe Systems, Inc., the only remaining 12 Defendant, are set to go to trial on August 25, 2014. 13 Court are the parties’ motions in limine; Adobe brings nine and 14 Digital Reg brings twenty one. 15 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 17 18 19 20 limine. A. Adobe’s motions in limine 1. Exclude unreliable opinion of Plaintiff’s damages expert, Robert Parr 21 22 23 24 Adobe’s motion is GRANTED. This is a Daubert1 motion, which requires the district court to exercise its gatekeeping function in mandating that any 25 26 27 28 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”). 1 testimony grounded in scientific or technical expertise be 2 relevant and reliable. 3 F.3d 1292, 1306 (Fed. Cir. 2011); Fed. R. Evid. 702. 4 scrutinizing an expert’s principles and methodology, a court “may 5 conclude that there is simply too great an analytical gap between 6 Uniloc USA, Inc. v. Microsoft Corp., 632 the data and the opinion proffered.” In Gen. Elec. Co. v. Joiner, 7 522 U.S. 136, 146 (1997). A court may not, however, “evaluate the 8 9 credibility of witnesses, resolve conflicts in testimony, or United States District Court For the Northern District of California 10 evaluate the weight of the evidence.” 11 Uniloc USA, Inc., 632 F.3d at 1305-06. 12 Adobe contends Mr. Parr used incomplete information to 13 calculate the percentage of sales Adobe saved from piracy because 14 of its use of the patented invention. Mr. Parr arrived at this 15 conclusion by subtracting from software piracy rates across the 16 industry (twenty percent) the piracy rates experienced by Symantec 17 18 (six to ten percent), which allegedly shows the benefit of using 19 the claimed invention (ten to fourteen percent). 20 1 (Parr Depo.) at 84:2-19; Ex. 2 (Parr Rep.) ¶ 174. 21 did not consider piracy data specific to Adobe. 22 on data spanning the entire software industry, regardless of the 23 Beebe Decl., Ex. Mr. Parr thus He instead relied type of software or whether the software uses some form of DRM or 24 not, without explaining why this would be proper. He also relied 25 26 on Symantec data, even though Symantec settled and was not shown 27 to be infringing. He did not analyze how differences in the 28 software might affect his calculation. 2 1 Digital Reg responds that Mr. Parr used the evidence that was 2 available to him. 3 produce records regarding piracy rates specific to its products or 4 the efficacy of its DRM strategy.” 5 Adobe stated at the hearing that it provided Digital Reg with 6 Digital Reg contends that Adobe “failed to Digital Reg Response at 2. piracy information, but did not have the statistic Digital Reg 7 sought because it does not track that information. But even if 8 9 information tracking Adobe’s accused products was not available, United States District Court For the Northern District of California 10 data tracking products shown to be sufficiently similar to the 11 accused products would have been more relevant. 12 LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 78-79 13 (Fed. Cir. 2012) (permitting expert to use price information 14 Cf. tracking a similar product where price information of the accused 15 product was unavailable). Different types of software are likely 16 to experience different rates of piracy, depending on the level of 17 18 demand for the software, the importance of the software’s 19 function, the price of the software, and the availability of 20 alternatives, to name a few factors. 21 regarding products that are similar to Adobe’s accused products, 22 or attempt to demonstrate that Adobe would experience piracy rates 23 equal to the average of the industry. Mr. Parr did not use data Mr. Parr did not even 24 attempt to justify his assumption that Symantec and industry data 25 26 are an accurate representation of what would occur with Adobe. 27 See Parr Rep. ¶ 174. He acknowledged in his deposition that 28 Symantec and Adobe’s products are different and offer different 3 1 functionalities. Parr Depo. at 81:2-9, 82:23-83:9 (remarking 2 that, although the products are different, Adobe and Symantec 3 would experience the same gains from the DRM technology because 4 they are large companies that “sell a large diversified portfolio 5 of products to consumers and enterprises”). 6 Moreover, Mr. Parr did not consider whether other anti-piracy measures are taken by 7 Symantec or the industry, and what effect those measures might 8 9 have. Symantec has not even been shown to employ the infringing United States District Court For the Northern District of California 10 DRM technology. 11 Parr fails to address with his use of industry and Symantec data 12 as a proxy for Adobe data. 13 of DRM technology may vary widely across the industry, the inputs 14 In short, there are many uncertainties that Mr. Because piracy and the effectiveness of Mr. Parr’s damages calculation are inherently unreliable. 15 Adobe also attacks Mr. Parr’s methodology for calculating the 16 yield of a hypothetical negotiation between Adobe and Digital Reg. 17 18 “[T]he classic way to determine the reasonable royalty amount is 19 to multiply the royalty base, which represents the revenue 20 generated by the infringement, by the royalty rate, which 21 represents the percentage of revenue owed to the patentee.” 22 Whitserve, LLC v. Computer Packages, Inc., 694 F.3d 10, 27 (Fed. 23 Cir. 2012). Adobe takes issue with both the royalty rate and 24 royalty base used in Mr. Parr’s report. 25 26 In calculating the royalty rate, Mr. Parr assumed the parties 27 would begin their negotiation at an equal fifty-fifty share of 28 saved profits. Adobe contends this is contrary to established 4 1 Federal Circuit case law. In Uniloc, the Federal Circuit 2 disapproved of arbitrary starting points for negotiations of a 3 reasonable royalty rate. 4 Goldscheider’s “25 Percent Rule,”2 which assumes that the 5 manufacturer would be willing to pay the patentee twenty-five 6 In that case, the expert used Robert percent of its expected profits for the product that incorporated 7 the intellectual property at issue. Uniloc USA, Inc., 632 F.3d at 8 9 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 11 divided by the expected net sales yielding a profit rate, which is 12 then multiplied by twenty-five percent to arrive at a running 13 royalty rate. 14 Id. Because the rule was “essentially arbitrary” and did “not relate to any issue in the case,” the court held that 15 it was “fundamentally flawed” and inadmissible as a matter of law 16 under Daubert. Id. at 1314. 17 18 A court in this district recently applied Uniloc’s holding in 19 a similar case, Dynetix Design Solutions, Inc. v. Synopsys, Inc., 20 2013 WL 4538210 (N.D. Cal. Aug. 23, 2013). 21 began his royalty rate analysis at fifty percent of the gross 22 profit margin of the accused products, adjusting the rate upwards 23 In Dynetix, the expert or downwards based on the application of the Georgia-Pacific 24 factors. Id. at *1. Because “an arbitrary starting point is 25 26 27 28 2 This rule was based on Robert Goldscheider’s studies of commercial licensing negotiations generally. Id. at 1313. 5 1 2 impermissible under Uniloc,” the court excluded the expert’s damages testimony. 3 Id. at *4. Here, Mr. Parr decided to adopt a fifty-percent starting 4 point based on his vague, undisclosed general experience. 5 believe that a sharing of the saved profits would result in a 50% 6 split of the saved profits. “I In my career I have seen instances 7 where inventions that result in a savings to the licensee are 8 9 priced at a 50% sharing of the savings.” See Parr Report ¶¶ 176- United States District Court For the Northern District of California 10 77. 11 any evidence of either Adobe or Digital Reg commencing 12 negotiations with a fifty-fifty profit split. 13 106:25-107:16. 14 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 15 arbitrary than the rule rejected in Uniloc. See Dynetix Design 16 Solutions, Inc., 2013 WL 4538210, at *4. To ensure damages 17 18 figures are not conjectural or speculative, a starting point 19 should be tied to case-specific factors grounded in reliable data, 20 such as the parties’ relative bargaining power, the relationship 21 between the patented invention and the accused product, other 22 licenses involving the same patent, and analogous licenses in the 23 industry for patents covering component parts. See id. 24 Digital Reg contends that, unlike in Uniloc and Dynetix, Mr. 25 26 Parr multiplied his fifty-fifty starting point by the amount of 27 sales that would be saved from piracy by incorporating the 28 patented invention in the accused product. 6 This is not in 1 substance distinct from Uniloc and Dynetix because, according to 2 his own words, Mr. Parr started with “a 50% split of the saved 3 profits.” 4 calculation, even if Mr. Parr went on to adjust his initial 5 determination with case-specific factors. 6 This introduces an arbitrary element to the The rate is still tainted by its fifty/fifty starting point which is unsupported by 7 any evidence. Dynetix Design Solutions, Inc., 2013 WL 4538210, at 8 9 United States District Court For the Northern District of California 10 *4 (an “arbitrary starting point is impermissible under Uniloc.”). Adobe next criticizes Mr. Parr’s use of the entire value of 11 the accused products as the royalty base. 12 that a patentee may assess damages based on the entire value of 13 the accused product “only where the patented feature creates the 14 It is well-established ‘basis for customer demand’ or ‘substantially creates the value of 15 the component parts.’” Uniloc USA, Inc., 632 F.3d at 1318 (citing 16 Garretson v. Clark, 111 U.S. 120, 121 (1884)). Otherwise, the 17 18 19 20 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 21 entire product for its royalty base as long as it is “economically 22 justified.” 23 Mondis Tech., Ltd. v. LG Electronics, Inc., 2011 WL 2417367, at *2 (E.D. Tex. June 14, 2011) (citing Lucent Techs., 24 Inc. v. Gateway, Inc., 580 F.3d 1301, 1336 (Fed. Cir. 2009)). 25 26 Relying on the Federal Circuit’s language in Lucent, the Mondis 27 court found that, because the only relevant prior licensing 28 agreements available were based on the value of the entire 7 1 product, the patentee was justified in using the entire market See id.3 2 value with a correspondingly lower royalty rate. 3 focusing on this one Eastern District of Texas case, Digital Reg 4 ignores more recent case law from the Federal Circuit and this 5 district clarifying the same point. 6 In In Uniloc, the Federal Circuit explained that the plaintiff misinterpreted the passage in 7 Lucent that was relied upon by the Mondis court -- that “the base 8 9 used in a running royalty calculation can always be the value of United States District Court For the Northern District of California 10 the entire commercial embodiment, as long as the magnitude of the 11 rate is within an acceptable range” -- because it was preceded by 12 the qualification that the entire market value could not be used 13 in that case because there was no evidence that the patented 14 feature was the basis of consumer demand. Uniloc USA, Inc., 632 15 F.3d at 1319-20 (quoting Lucent Techs., Inc., 580 F.3d at 133916 39). After clarifying that Lucent does not stand for the 17 18 proposition that the entire market value can be used absent 19 evidence that the patented feature drives demand, the Uniloc court 20 went on expressly to disapprove of the plaintiff’s use of the 21 entire market value, so long as the royalty rate is “low enough.” 22 Id. at 1319. 23 In 2012 the Federal Circuit again explained that the language in Lucent was misinterpreted, and reaffirmed that “in any 24 25 26 27 28 3 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 1 case involving multi-component products, patentees may not 2 calculate damages based on sales of the entire product, as opposed 3 to the smallest salable patent-practicing unit, without showing 4 that the demand for the entire product is attributable to the 5 patented feature.” 6 7 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 8 9 United States District Court For the Northern District of California 10 products cannot be justified. Mr. Parr provides an alternative calculation that apportions 11 the royalty base to be thirty percent of the profit. 12 increased the rate proportionally to arrive at the same ultimate 13 damages figure. 14 215:11-16. But he Parr Depo. at 212:20-24, 213:10-18, 214:15-23, This analysis contravenes Federal Circuit precedent 15 and does not serve the purpose of the rule, which is to award only 16 damages which are fairly attributable to the patented feature. 17 18 See Lucent Techs., Inc., 580 F.3d at 1338 (“Being precluded from 19 using the computer as the royalty base, he used the price of the 20 software, but inflated the royalty rate accordingly. 21 be an acceptable way” to conduct the reasonable royalty analysis). 22 Due to the multiple flaws in Mr. Parr’s inputs and analysis, his 23 This cannot damages testimony must be excluded in full. 24 25 26 27 28 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. 9 1 Because upon a finding of infringement, Digital Reg is 2 entitled to “in no event less than a reasonable royalty for the 3 use made by the invention by the infringer,” the Court will permit 4 Mr. Parr to submit a revised damages report5 curing only the 5 problems identified in this order, to be filed no later than the 6 close of business on August 21, 2014. He may not include any 7 additional information on any points, and may not rely on 8 9 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. 12 again deficient, the Court will preclude him from testifying and 13 only Adobe’s damages expert will be permitted to testify.7 14 If Mr. Parr’s report is See ePlus, Inc. v. Lawson Software, Inc., 700 F.3d 509, 523 (Fed. Cir. 15 16 17 18 19 20 21 22 23 24 25 26 27 28 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 3 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, 8 9 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, 13 Inc., Case No. 10-cv-03257-JAK, Docket No. 619 (C.D. Cal. Nov. 11, 14 2013) (after striking plaintiffs’ damages expert, allowing 15 plaintiffs to call defendant’s expert). 16 2. Exclude the RPX license 17 18 19 Adobe’s motion is DENIED. Adobe moves to exclude all evidence of the licensing 20 agreements between Digital Reg and RPX. 21 aggregator, or an entity that licenses patents from patentees and 22 then sublicenses those patents to its members. 23 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 25 26 model is unique, Adobe argues its license is of limited relevance 27 to Adobe’s hypothetical licensing posture and should be excluded. 28 See Fed. R. Evid. 403. 11 1 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 8 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. 11 agreement would leave the jury with the mistaken impression that 12 the license agreements included the ‘541 patent. 13 agreement is therefore relevant to a reasonable royalty. 14 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 16 reasonable royalty, causing unfair prejudice to Adobe. 17 18 19 Accordingly, Digital Reg may describe the circumstances of the RPX license, but not the actual amount. 20 3. 21 Adobe’s motion is GRANTED. 22 Adobe seeks to exclude portions of Digital Reg’s infringement 23 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 25 26 parties agree that AMT as a whole is not an accused product, 27 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 8 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 17 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

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.

Why Is My Information Online?