Phoenix Technologies Ltd. v. VMware, Inc.

Filing 326

ORDER by Judge Haywood S. Gilliam, Jr. Granting in Part and Denying in Part the Parties Respective ( 183 , 185 , 190 , 191 , 192 , 291 , 293 ) Motions in Limine and Filings Regarding Various Pretrial Issues. (granting 314 Administrative Motion to File Under Seal; and denying 321 Motion to Strike )(ndrS, COURT STAFF) (Filed on 5/11/2017)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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PHOENIX TECHNOLOGIES LTD.,

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Plaintiff,

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v.

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VMWARE, INC.,
Defendant.

United States District Court
Northern District of California

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Case No. 15-cv-01414-HSG
ORDER GRANTING IN PART AND
DENYING IN PART THE PARTIES’
RESPECTIVE MOTIONS IN LIMINE
AND FILINGS REGARDING VARIOUS
PRETRIAL ISSUES
Re: Dkt. Nos. 183, 185, 190, 191, 192, 226,
291, 293, 314, 321

Pending before the Court are the motions in limine filed by Plaintiff Phoenix Technologies,

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Ltd. (“Phoenix”) and Defendant VMware, Inc. (“VMware”), see Dkt. Nos. 183, 185, 190, 191,

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192, 291, 293, as well as several issues raised by the parties in their joint pretrial and charging

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conference statements and various other filings, see Dkt. Nos. 227,1 260, 261, 283, 300, 310, 311,

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315, 316, 321, 322, 323. Each motion and nearly every position on every issue is opposed.

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During the pretrial conference and specially-set charging conference, the Court heard

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arguments on some of the motions in limine and various other issues raised by the parties. See

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Dkt. Nos. 266, 307. After carefully considering the papers filed in connection with the motions in

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limine and other issues, as well as the oral arguments made by the parties, the Court GRANTS IN

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PART and DENIES IN PART the motions in limine and other requests as set forth below.

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Because of the sheer number of the parties’ disputes, the Court must rule here in a streamlined

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fashion without extensive elaboration.

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The clerk is directed to strike Dkt. No. 226, which is a duplicate of Dkt. No. 227.

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I.

MOTIONS IN LIMINE

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A.

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Phoenix has filed the following motions to exclude expert testimony: First Motion in

Motions in Limine to exclude expert testimony

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Limine, Dkt. No. 183 (seeking to exclude the expert testimony of Richard Harry comparing the

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quantity of source code in the BIOS to the quantity of source code in ESXi and offering Mr.

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Harry’s opinion as to the “overall value” of the Phoenix BIOS); and Third Motion in Limine, Dkt.

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No. 291 (seeking to exclude the expert testimony and opinions of Julie Davis regarding reasonable

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royalty damages as based on the wrong hypothetical negotiation date). For its part, VMware has

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filed the following motions to exclude expert testimony: Third Motion in Limine, Dkt. No. 294
(seeking to exclude the expert testimony and opinions of Matthew Lynde regarding actual

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United States District Court
Northern District of California

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damages as based on the wrong hypothetical negotiation date); Fourth Motion in Limine, Dkt. No.

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191 (seeking to exclude the expert testimony and opinions of Matthew Lynde regarding actual

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damages as unduly speculative); and Fifth Motion in Limine, Dkt. No. 192 (seeking to exclude the

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expert testimony and opinions of Matthew Lynde on infringer’s profits).

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Federal Rule of Evidence 702 governs the admission of testimony by expert witnesses. A

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witness who is qualified as an expert by knowledge, skill, experience, training, or education may

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testify in the form of an opinion or otherwise if (a) the expert’s scientific, technical, or other

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specialized knowledge will help the trier of fact to understand the evidence or to determine a fact

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in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of

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reliable principles and methods; and (d) the expert has reliably applied the principles and methods

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to the facts of the case. Fed. R. Evid. 702.

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For expert testimony to be admissible, the expert must be qualified, Hangarter v.

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Provident Life & Acc. Ins. Co., 373 F.3d 998, 1015 (9th Cir. 2004), and the expert’s testimony

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must be “both relevant and reliable,” Estate of Barabin v. AstenJohnson, Inc., 740 F.3d 457, 463

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(9th Cir. 2014) (en banc) (internal marks omitted); see also Daubert v. Merrell Dow Pharm., Inc.,

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509 U.S. 579, 589 (1993). Rule 702 “contemplates a broad conception of expert qualifications.”

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Hangarter, 373 F.3d at 1018 (emphasis in original). Courts consider a purported expert’s

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knowledge, skill, experience, training, and education in the subject matter of his asserted expertise.
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United States v. Hankey, 203 F.3d 1160, 1168 (9th Cir. 2000); see also Fed. R. Evid. 702.

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“Relevancy simply requires that the evidence logically advance a material aspect of the party’s

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case.” AstenJohnson, 740 F.3d at 463 (internal quotation marks omitted). Finally, reliability

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requires that an expert’s testimony have “a reliable basis in the knowledge and experience of the

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relevant discipline.” Kumho Tire Co. v. Carmichael, 526 U.S. 137, 149 (1999) (internal quotation

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marks and brackets omitted).
To determine whether an expert’s testimony is reliable, courts apply a “flexible” inquiry,

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considering such factors as (1) whether a theory or technique can be tested; (2) whether it has been

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subjected to peer review and publication; (3) the known or potential error rate of the theory or
technique; and (4) whether the theory or technique enjoys general acceptance within the relevant

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United States District Court
Northern District of California

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scientific community. However, whether these specific factors are reasonable measures of

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reliability in a particular case is a matter the law grants the trial judge broad latitude to determine.

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AstenJohnson, 740 F.3d at 463 (internal quotation marks and citation omitted). For example,

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courts may also consider whether the expert has unjustifiably extrapolated from an accepted

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premise to an unfounded conclusion, see General Elec. Co. v. Joiner, 522 U.S. 136, 146 (1997),

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and whether the expert has adequately accounted for obvious alternative explanations, see Claar v.

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Burlington N. R.R. Co., 29 F.3d 499, 502 (9th Cir. 1994). Ultimately, “judges are entitled to broad

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discretion when discharging their gatekeeping function . . . not only [in] decid[ing] whether to

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admit expert testimony . . . [but also] in deciding how to test an expert’s reliability.” Hankey, 203

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F.3d at 1168 (emphasis in original)). And the Court notes that some caution is warranted

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regarding the exclusion of expert evidence on motions in limine: courts should be cognizant that

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“[s]haky but admissible evidence is to be attacked by cross examination, contrary evidence, and

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attention to the burden of proof, not exclusion.” Primiano v. Cook, 598 F.3d 558, 564 (9th Cir.

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2010).

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Applying the standards described above to the five motions in limine seeking to exclude

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expert testimony, see Dkt. Nos. 183, 191, 192, 291, 294, the Court finds that experts Julie Davis,

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Matthew Lynde, and Richard Harry are qualified and that their testimony meets the reliability and

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relevance requirements of Rule 702, with two exceptions relating to the testimony of Richard
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Harry and Ms. Davis’ 2005 hypothetical negotiation date, discussed below.

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Specifically, with regard to VMware’s Fourth Motion in Limine, the Court finds exclusion

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of Dr. Lynde’s testimony to be unwarranted. While VMware’s arguments regarding the reliability

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of Dr. Lynde’s hypothetical license analysis may go to the weight of Dr. Lynde’s testimony, they

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do not constitute grounds for exclusion. VMware’s Fourth Motion in Limine is therefore denied.

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Similarly, with regard to VMware’s Fifth Motion in Limine, the Court finds that Dr.

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Lynde’s measure of apportionment, which was based in part on the hypothetical amount VMware

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should have paid for the additional allegedly infringing uses of the BIOS, enabled him to calculate

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a “reasonable approximation of apportionment of infringer’s profits.” Oracle Am., Inc. v. Google
Inc., No. C 10-03561 WHA, 2016 U.S. Dist. LEXIS 58302, at *16 (N.D. Cal. May 2, 2016).

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United States District Court
Northern District of California

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Given that Phoenix solely seeks damages for infringer’s profits attributable to VMware’s use of

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the BIOS in ESXi, for which the parties do not have any real-world license figures, Dr. Lynde

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necessarily relied in part on a hypothetical value. That hypothetical value was not based, as

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VMware suggests, on a “counterfactual scenario . . . using a[] [non-infringing] alternative,” see

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Dkt. No. 192 at 2, but on Dr. Lynde’s reasonable estimation of what VMware would have been

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required to pay for its allegedly infringing use. In addition, the Court finds that Dr. Lynde used an

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appropriate apportionment base. Dr. Lynde’s infringer’s profits analysis was thus reasonable, and

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VMware’s Fifth Motion in Limine is denied.2

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Finally, as noted above, there are two exceptions to the Court’s denial of the motions in

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limine relating to expert testimony. First, with regard to Phoenix’s First Motion in Limine, the

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Court finds that Mr. Harry, who has worked for VMware for approximately 10 years, Dkt. No.

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194-1 ¶1, is qualified to compare the quantity of source code comprising the BIOS to the quantity

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of code in ESXi. However, the Court does not find Mr. Harry qualified to opine as to the “relative

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lack of importance of [the Phoenix] BIOS” or its “overall value” to VMware, as he offers no

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reliable basis or foundation for reaching that conclusion. The Court will therefore allow Mr.

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On April 21, 2017 VMware submitted unsolicited supplemental arguments regarding its Fifth
Motion in Limine, to which Phoenix objects. See Dkt. Nos. 309, 310. The Court agrees with
Phoenix that these additional arguments were not permitted, and does not consider them here.
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Harry to testify regarding the source code quantity comparison, but not as to the “relative lack of

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importance” or the “overall value” of the code to VMware.

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Second, the parties’ Third Motions in Limine dispute the proper hypothetical negotiation

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damages date. See Dkt. Nos. 291, 294. While Phoenix’s expert Dr. Lynde “focus[ed] on market

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conditions at the time of a hypothetical negotiation that would have transpired in late 2007,” Dkt.

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No. 182-22 ¶ 16, VMware’s expert Julie Davis contemplated two different scenarios with

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hypothetical negotiations that would have taken place in 20053 and 2006, see Dkt. No. 181-7 at

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27. Ms. Davis first “opine[d] that damages may be determined by ascertaining Phoenix’s lost

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license revenue if the parties’ actual September 2005 license negotiations included an express
license for the accused products.” Dkt. No. 233 at 1; see also Dkt. No. 181-1 at 27-28. In

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Northern District of California

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contrast, Ms. Davis’ 2006 and Dr. Lynde’s 2007 hypothetical negotiation dates were based on the

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date each party alleged that VMware first infringed the copyright. See Dkt. Nos. 181-1 at 28, 182-

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Generally, “‘[a]ctual damages’ are the extent to which the market value of a copyrighted

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work has been injured or destroyed by an infringement,” which “can be awarded in the form of

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lost profits, [or] hypothetical-license damages.” Oracle Corp. v. SAP AG, 765 F.3d 1081, 1087

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(9th Cir. 2014). “To calculate the ‘market value’ of the injury to the plaintiff based on a

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hypothetical-license theory, we look to ‘the amount a willing buyer would have been reasonably

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required to pay a willing seller at the time of the infringement for the actual use made by [the

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infringer] of the plaintiff’s work.’” Id. (quoting Wall Data Inc. v. L.A. Cnty. Sheriff’s Dep’t, 447

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F.3d 769, 786 (9th Cir. 2006) (internal quotation marks omitted)). In addition, “there is nothing to

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suggest that [a court] should tie a hypothetical negotiation to a prior infringement no longer at

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issue.” Applied Med. Res. Corp. v. U.S. Surgical Corp., 435 F.3d 1356, 1364 (Fed. Cir. 2006)

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(holding that the hypothetical negotiation date for a surgical was device properly based on the

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To the extent VMware contends that Ms. Davis’ 2005 analysis does not constitute a hypothetical
negotiation because it merely “tweak[s]” the parties’ actual 2005 MLA negotiations in order to
account for VMware’s additional allegedly infringing use of the BIOS, see Dkt. No. 307 at 10:1-5,
10:15-17, the Court disagrees. Insofar as the analysis purports to determine what terms the parties
would have negotiated for a license incorporating all of the allegedly infringing uses, that exercise
is necessarily hypothetical.
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infringement by that device, rather than the past infringement by an earlier iteration of the device).

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The proper hypothetical negotiation date here is thus VMware’s alleged date of first

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infringement with regard to ESXi4—an event VMware contends occurred in June 2006 and

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Phoenix contends occurred in December 2007 “at the earliest.” 5 See Dkt. No. 291 at 2.

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Accordingly, while Ms. Davis’ 2005 hypothetical license theory is based on an incorrect

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hypothetical negotiation date such that it will be excluded,6 Ms. Davis’ 2006 and Dr. Lynde’s

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2007 hypothetical dates are properly tied to the alleged dates of first infringement and are

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therefore admissible. To the extent the parties’ Third Motions in Limine dispute VMware’s actual

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date of first infringement, that is a question of fact to be decided by the jury. See Micro Chem.,

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Inc. v. Lextron, Inc., 317 F.3d 1387, 1392 (Fed. Cir. 2003) (“When, as here, the parties’ experts

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United States District Court
Northern District of California

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rely on conflicting sets of facts, it is not the role of the trial court to evaluate the correctness of

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facts underlying one expert’s testimony.”). The Court therefore denies VMware’s Third Motion in

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Limine, and grants Phoenix’s Third Motion in Limine only insofar as it relates to Ms. Davis’ 2005

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hypothetical negotiation date.

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B.

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Two other motions in limine are before the Court. Phoenix’s Second Motion in Limine

Motions in Limine to exclude other evidence

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Given the Federal Circuit’s holding in Applied Medical, 435 F.3d 1356, and the fact that Phoenix
will only seek damages with regard to ESXi’s infringements at trial, the Court rejects VMware’s
contention that Phoenix’s failure to file an amended complaint eliminating their claims regarding
VMware’s use of GSX and ESX effectively ties the date of first infringement back to the first date
that either of those earlier products infringed the copyright. See Dkt. No. 307 at 34:19-25; cf.
Fahmy v. Jay-Z, CV 07-5715 CAS (PJWx), 2013 U.S. Dist. LEXIS 119817, at *15 (C.D. Cal.
Aug. 15, 2013) (holding that when determining the period of delay with regard to laches, “the
determinative fact is the release date for the initial infringing work in a series of works embodying
that infringing conduct.”).
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Phoenix contends that the date of first infringement here should be tied to the date that VMware
first “sublicensed, sold, or otherwise distributed” the BIOS program in its ESXi product, which it
alleges occurred in December 2007 “at the earliest.” See Dkt. No. 291 at 2. However, VMware
contends that the date of first infringement “extend[s] to pre-sale activities, including
modification, compiling source code, and reproduction in a manner that allegedly violates the
MLA.” See Dkt. No. 233 at 4 (quoting Oracle Am., Inc. v. Google Inc., 798 F. Supp. 2d 1111,
1116 (N.D. Cal. 2011) (“Where an accused product is developed and tested here in the United
States . . . ‘use’ and therefore infringement will almost always begin well before the first sale.”)).
VMware contends that the proper hypothetical negotiation date is thus “no later than June 2006,”
when “ESXi entered beta testing . . . .” Id.
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To the extent VMware seeks to rely on the parties’ actual 2005 negotiations as objective
evidence of the fair market value of the hypothetical license, it may properly do so. See Oracle
Corp. v. SAP, 765 F.3d at 1088, 1091-93.
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seeks to exclude a 2015 agreement between VMware and a third-party corporation, in which

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VMware licensed a “purported [BIOS] replacement” (the “Agreement”). See Dkt. No. 183-13 at

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1. Phoenix argues that (1) the Agreement is irrelevant to a damages determination because it

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postdates the date of infringement and is not “sufficiently comparable to a hypothetical license for

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Phoenix’s BIOS”; (2) VMware’s corporate representative was unaware of the Agreement; and

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(3) the Agreement is unfairly prejudicial and confusing. Id. at 3 (internal quotation marks

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omitted). In response, VMware contends that the Agreement “is relevant to multiple disputed

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issues, including the jury’s evaluation of . . . non-accused alternatives to the Phoenix BIOS, . . .

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Phoenix’s damages claims, and . . . VMware’s estoppel and laches defenses.” Dkt. No. 232 at 2.

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Aside from the requirement that hypothetical negotiation dates must be determined based

United States District Court
Northern District of California

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on the date of first infringement, the Court is unaware of any Ninth Circuit precedent directly

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addressing whether courts may otherwise consider post-negotiation information when determining

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a reasonable royalty. However, the Federal Circuit has held that while courts are “not require[d]”

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to exclude post-infringement evidence when determining a reasonable royalty, post-dated

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evidence “certainly” may be excluded. Odetics, Inc. v. Storage Tech. Corp., 185 F.3d 1259, 1276-

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77 (Fed. Cir. 1999). This position has been adopted by at least one court in this Circuit. See

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Memry Corp. v. Kentucky Oil Tech. N.V., No. C-04-03843 RMW, 2007 WL 4208317, at *11

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(N.D. Cal. Nov. 27 2007) (stating that “courts have the discretion to permit consideration of post-

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negotiation information when formulating a reasonable royalty”). While the Court has some

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skepticism about the extent to which an agreement from 2015 is indicative of what a hypothetical

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negotiation would have looked like in 2006 or 2007, such questions go to the weight of that

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evidence rather than its admissibility. Because the Agreement may be relevant to the parties’

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damages theories, the Court will not exclude evidence of the Agreement at this stage.

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For its part, VMware’s First Motion in Limine seeks to prevent Phoenix from presenting

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evidence at trial that was not disclosed during discovery, including for example, (1) evidence of

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“projections”; (2) Phoenix’s employees’ knowledge of VMware’s use of the BIOS; and (3) what

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Phoenix would have charged for a fully-paid up license in 2005. See Dkt. No. 293. The Court

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denies this motion without prejudice, and will defer consideration of these potential issues until
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the objections are tied to particular pieces of evidence.
II.

ADDITIONAL ISSUES RAISED BY THE PARTIES

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The parties raise numerous other pretrial issues, each of which the Court addresses below.

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A.

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Phoenix seeks to preclude VMware from introducing its complaint as an exhibit at trial.

Admissibility of complaint

See Dkt. No. 227 at 11. Phoenix contends that because it has “narrow[ed] the claims asserted in

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its Complaint for purposes of trial . . . by streamlining the trial to the infringing ESXi products,”

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“[t]he Court should bar VMware from introducing Phoenix’s Complaint as evidence or referring

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to legal theories or legal conclusions in the Complaint that Phoenix does not assert at trial.” Id. at

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11-12. In response, VMware argues that “[t]he allegations in the Phoenix complaint are relevant

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United States District Court
Northern District of California

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to motive, credibility, and to VMware’s defenses, including estoppel and the statute of

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limitations,” and amount to judicial admissions. Id. at 14.

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As an initial matter, the Court finds that the allegations contained in Phoenix’s complaint

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do not constitute judicial admissions, as only factual—as opposed to legal—assertions constitute

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judicial admissions. See Foley v. JetBlue Airways, Corp., No. C10-3882 JCS, 2011 WL 3359730,

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at *9 (N.D. Cal. Aug. 3, 2011) (“in order to constitute a judicial admission, the party against

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whom the admission is sought must have admitted a fact.”) (emphasis in original). Second, this

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issue is closely related to VMware’s Second Motion in Limine, which seeks to preclude Phoenix

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from asserting contentions not disclosed during discovery. See Dkt. No. 187; see also Dkt. No.

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227 at 15 (VMware arguing that Phoenix’s factual assertions “regarding how certain products

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infringed” “inform the meaning of certain contractual terms as applied to ESXi, not the least of

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which is whether ESX and ESXi operate in a different manner for purposes of the contracts.”).

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However, given the Court’s recent order on that motion in limine, see Dkt. No. 325, the Court

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finds the relevance of Phoenix’s complaint to be low. Motive is not an element of any claim or

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defense in this action. To the extent the complaint may be marginally relevant as to credibility,

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the Court finds that the potential to confuse the jury and waste time by referring to claims Phoenix

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does not intend to assert at trial substantially outweighs any such relevance. See Duarte v.

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Catalina Foothill Sch. Dist. No. 16, CV-12-00844-TUC-JAS, 2014 WL 5094128, at *2 (D. Ariz.
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Oct. 10, 2014) (denying admission of complaint under Fed. R. Evid. 403 because Plaintiff had

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voluntarily dismissed one discrimination claim, and “any reference to this dismissed claim at trial

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is outweighed by Rule 403 considerations.”). The Court will therefore exclude the complaint

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under Rule 403.

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B.

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The parties dispute the admissibility of twenty-three VMware product manuals “on the

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grounds that they purportedly refer to the Linux Console Operating System (the “Linux OS”).”

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See Dkt. Nos. 283 at 7, 323 at 1. However, the parties have stipulated to the admissibility of five

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of these documents. Dkt. No. 323 at 1, 2. The parties are instructed to submit to the Court any of

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the remaining eighteen documents Phoenix wishes to admit and to which VMware objects by 4pm

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United States District Court
Northern District of California

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the day before Phoenix intends to introduce them at trial, and the Court will review them on a

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case-by-case basis. See Dkt. No. 307 at 47. However, the Court cautions the parties that (1) it is

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not inclined to exclude relevant documents based solely on one party’s willingness to stipulate to

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facts contained therein; and (2) it will not permit the introduction of needlessly cumulative

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evidence.

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C.

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VMware contends that three limitations in the MLA constitute contractual covenants rather

Admissibility of VMware product manuals

Contractual covenants versus license conditions

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than license conditions, such that any claim that these terms were violated is time-barred pursuant

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to the Court’s January 6, 2017 order: “(i) the use of the Phoenix BIOS in VMware products

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supporting more than two processors; (ii) the use of the BIOS in virtual machines that have virtual

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chipset capabilities beyond those found in the 440BX chipset; and (iii) the storage of the Phoenix

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BIOS in source code locations other than those defined in the contract.” See Dkt. Nos. 227 at 31,

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281 at 5-6; see also Dkt. No. 222 at 14 (holding that Phoenix’s “breach of contract claims are

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time-barred”). Phoenix contends that the limitations are license conditions that are tied to their

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copyright infringement claims, and that these claims therefore are not time-barred. See Dkt. No.

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227 at 32-33.

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“We refer to contractual terms that limit a license’s scope as ‘conditions,’ the breach of

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which constitute copyright infringement. We refer to all other license terms as ‘covenants,’ the
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breach of which is actionable only under contract law.” MDY Indus. v. Blizzard Entm’t, Inc., 629

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F.3d 928, 939 (9th Cir. 2011) (citing Foad Consulting Group v. Musil Govan Azzalino, 270 F.3d

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821, 827 (9th Cir. 2001)). “A covenant is a contractual promise, i.e., a manifestation of intention

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to act or refrain from acting in a particular way, such that the promisee is justified in

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understanding that the promisor has made a commitment,” while “[a] condition precedent is an act

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or event that must occur before a duty to perform a promise arises.” Id. The Ninth Circuit has

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held that “[t]o recover for copyright infringement based on breach of a license agreement, (1) the

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copying must exceed the scope of the defendant’s license and (2) the copyright owner’s complaint

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must be grounded in an exclusive right of copyright.” Id. at 940. “Wherever possible, equity

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construes ambiguous contract provisions as covenants rather than conditions.” Id. at 939.

United States District Court
Northern District of California

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Applying these principles, the Court finds that the three limitations are license conditions

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rather than contractual covenants, as the express language of the MLA and its amendments make

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clear.7 First, both the two-processor and location limitations are set forth in the MLA under the

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section titled “LICENSE GRANT/CONDITIONS.” See Dkt. No. 120, Ex. 15 § 2.0. Those

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provisions statw that “[u]nless specifically provided otherwise in its Specification, each copy of a

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Program is provided for use on a single central processing unit,” and “Licensee will use the Source

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Code only at the site(s) designated either in Exhibit A hereto or in another written document

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signed by Phoenix.” Id. §§ 2.1, 2.5. Exhibit A to the MLA lists a specific address that is

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“COVERED BY [the] SOURCE CODE LICENSE,” and states that “Licensee shall not distribute

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Source Code to additional sites without first executing an agreement to do so, and paying

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additional Source Code license fees.” Id., Ex. A § III. Exhibit A also refers to the provisions

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contained in § 2.0 as “conditions” limiting the scope of the license. See id. (“Said license shall be

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subject to the conditions set forth in Section 2 of this Agreement.”). Similarly, the parties’ 2000

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MLA amendment makes clear that the 440BX chipset restriction is a license condition, stating that

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the license is subject to “applicable restrictions set forth in the [MLA] and in Exhibit A to this

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Plainly, VMware should have raised these issues at the dispositive motion stage rather than on
the eve of trial. Nevertheless, because these are threshold issues that will impact several aspects of
the trial presentation, the Court considers the merits of the parties’ arguments.
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Amendment.” Id. § 1. Exhibit A to the 2000 amendment provides that “Licensee is granted a

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license” for the “PhoenixPICO BIOS.” See Dkt. No. 127-3, Ex. A. It further states that the

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PhoenixPICO BIOS “is licensed for use only in systems based on the . . . Intel 440BX Chipset.”

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Id. These provisions thus constitute license conditions that “must occur before a duty to perform a

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promise arises.” MDY, 629 F.3d at 939.
Further, these conditions are tied to two of Phoenix’s exclusive copyright rights: namely,

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its rights to copy and to use the BIOS. See Netbula, LLC v. Storage Tech. Corp., No. C06-07391

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MJJ, 2008 WL 228036, at *5 (N.D. Cal. Jan. 18, 2008) (holding that license language requiring

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the licensee to use the product only on certain types of operating systems “appear[ed] to limit the

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scope of the license itself” and was therefore “not a separate contractual covenant”); Reinsdorf v.

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United States District Court
Northern District of California

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Skechers U.S.A., 922 F. Supp. 2d 866, 876 (C.D. Cal. Feb. 6, 2013) (holding that a licensee’s

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copying “beyond the temporal, geographical, and media limitations of the licenses” “would

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encroach upon [plaintiff’s] exclusive right to copy his works, conferred upon him by the

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Copyright Act, and would therefore violate a condition of the license rather than a covenant”).

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The Court thus finds that the three provisions at issue here are license conditions rather than

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contractual covenants, and are properly tied to Phoenix’s copyright infringement claims.8

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Accordingly, claims that VMware violated these conditions are not time-barred, and Phoenix may

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pursue them at trial.

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D.

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The parties agree that estoppel and laches are equitable defenses that the Court must

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resolve. Dkt. No. 227 at 18. However, Phoenix requests an advisory opinion from the jury on the

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issue of estoppel, and VMware “believes the issue of laches should be resolved by the Court at a

23

separate hearing or trial . . . [because] [i]n making its showing that delay should bar Phoenix’s

Estoppel & laches

24
25
26
27
28

8

While VMware argues that Phoenix only pled these issues in its breach of contract claims rather
than in its copyright infringement claims, such that the provisions must be interpreted as
contractual covenants, see Dkt. No. 227 at 32, the Court disagrees. Provisions in the MLA and its
amendments could not be affected by the way that Phoenix structured its complaint, or by
Phoenix’s attempt to shift its theories of infringement prior to trial. Rather, the provisions either
are or are not license conditions, and the Court is persuaded by the plain language of the MLA and
its amendments that they are.
11

1

claim for infringer’s profits, VMware will show both evidentiary and substantive prejudice

2

flowing from Phoenix’s long delay in filing suit.” Id. As indicated at the February 2, 2017 and

3

April 17, 2017 hearings, the Court agrees that both issues are equitable and, given the numerous

4

other issues that will be submitted to the jury, will not request advisory opinions on either issue.

5

See Dkt. Nos. 266 at 30; 307 at 57, 58, 59. The Court also will defer consideration of these issues

6

to post-trial proceedings.

7

E.

8

The parties dispute (1) whether infringer’s profits is an equitable or legal remedy, and

9

Infringer’s profits

(2) whether Phoenix’s recovery of infringer’s profits would constitute a double recovery.9 See
Dkt. Nos. 227 at 19-20, 300 at 1-3. With regard to the first issue, while the Ninth Circuit has held

11
United States District Court
Northern District of California

10

that the award of infringer’s profits under the Lanham Trademark Act “is equitable, not legal,”

12

Fifty-Six Hope Road Music, Ltd. v. A.V.E.L.A., Inc., 778 F.3d 1059, 1075-75 (9th Cir. 2015), the

13

Ninth Circuit has affirmed jury awards of infringer’s profits in copyright infringement cases under

14

17 U.S.C. 504(b), see Three Boys Music Corp. v. Bolton, 212 F.3d 477, 487 (9th Cir. 2000); Lucky

15

Break Wishbone Corp. v. Sears Roebuck and Co., 373 Fed. App’x 752, 757-58 (9th Cir. 2010).

16

The Court therefore is not persuaded that the award of infringer’s profits is an equitable remedy in

17

the copyright context, and will submit this issue to the jury.

18

With regard to the second issue, Federal Rule of Civil Procedure 504 states that “an

19

infringer of copyright is liable for either (1) the copyright owner’s actual damages and any

20

additional profits of the infringer . . . or (2) statutory damages.” Fed. R. Civ. P. § 504(a).

21

Specifically, “[t]he copyright owner is entitled to recover the actual damages suffered by him or

22

her as a result of the infringement, and any profits of the infringer that are attributable to the

23

infringement and are not taken into account in computing the actual damages.” Id. § 504(b); see

24

also Polar Bear Prods., Inc. v. Timex Corp., 384 F.3d 700, 707-08 (9th Cir. 2004) (“Congress

25

explicitly provides for two distinct monetary remedies—actual damages and recovery of wrongful

26

profits. These remedies are two sides of the damages coin—the copyright holder’s losses and the

27
9

28

The parties agreed at the April 17, 2017 hearing that “both actual losses and infringer’s profits as
types of recovery are permitted.” See Dkt. No. 307 at 36.
12

1

infringer’s gains.”). Phoenix may therefore seek both actual damages and infringer’s profits.

2

Furthermore, because Phoenix seeks only to recover for (1) ”VMware’s infringing use of BIOS

3

without a license, and (2) partial disgorgement of profits that VMware received from the sale of

4

the infringing ESXi products,” and does not also seek to recover for any lost sales of the Phoenix

5

BIOS, the Court finds that there is no risk of double recovery here. See Eales v. Envtl. Lifestyles,

6

Inc., 958 F.2d 876, 881 n.4 (9th Cir. 1992) (holding that § 504(b) “bars a plaintiff from recovering

7

in the form of damages the profits it could have made from selling the infringing item in

8

competition with the infringer and the profits gained by the infringer from its use of the

9

copyrighted item. Because [plaintiff] is not in the business of selling her services as a
homebuilder, defendants cannot complain about the profit award to [plaintiff] on the basis that it

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United States District Court
Northern District of California

10

constitutes forbidden double damages.”).

12

F.

13

VMware seeks to admit deposition testimony of Peter Chung, an employee of Phoenix’s

Testimony of Peter Chung

14

equity owner, Marlin Equity, which VMware contends is relevant to establishing Phoenix’s

15

alleged motive in bringing this lawsuit. See Dkt. No. 281 at 8 (arguing that Mr. Chung’s

16

testimony “explains why, after saying nothing for years—in spite of the fact that so many

17

members of its management team knew that VMware was using its BIOS—Phoenix decided to

18

bring this action.”); see also Dkt. No. 311 at 1-2. Phoenix seeks to exclude those portions of Mr.

19

Chung’s testimony relating to “(1) the amount that Marlin paid to acquire Phoenix, (2) Marlin’s

20

projections of Phoenix’s financial performance, and (3) Phoenix’s performance relative to

21

Marlin’s projections” under Federal Rules of Evidence 401, 402, and 403, as “irrelevant and

22

unduly prejudicial.” Dkt. No. 283 at 9.

23

The Court agrees with Phoenix. Motive is not an element of any claim or defense in this

24

action, and the Court will decide two of the main issues as to which Mr. Chung’s testimony on

25

Phoenix’s motive may be probative—estoppel and laches. The only remaining issue on which

26

such testimony may be probative is VMware’s affirmative statute of limitations defense.

27

However, the Court finds that even if Mr. Chung’s testimony were relevant as to that issue, the

28

danger that such testimony would waste time, confuse the issues, and mislead the jury
13

1

“substantially outweigh[s]” any possible probative value. Fed. R. Evid. 403. The Court will

2

therefore exclude all testimony by Mr. Chung relating to the three topics identified above.

3

G.

4

VMware seeks to preclude Phoenix from introducing the following deposition testimony

5

Testimony of Tom Jurewicz

from former VMware Chief Financial Officer, Tom Jurewicz:
Q. When you negotiated the 2005 agreement, did you think that
VMware would ever have to pay another dime for using the Phoenix
BIOS in any of the products that VMware was selling at that time?

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7

A. No, I did not think that we would have to pay any more money to
Phoenix for shipping the products that we were shipping then.

8
9

See Dkt Nos. 311 at 2-3, 315, Ex. A at 2.10 VMware contends that “at the time that Mr.

10

United States District Court
Northern District of California

11

Jurewicz was deposed, Phoenix was arguing that the 2005 [amendment to the MLA] only allowed

12

use of its BIOS in desktop (and not server) products.” Dkt. No. 311 at 2. However, VMware

13

argues that because Phoenix now seeks to limit its claims to the specific server product ESXi, as

14

opposed to ESX, this testimony is “arguably not as helpful to VMware,” and will instead be used

15

to improperly “suggest that Mr. Jurewicz believed that VMware could only use the BIOS for the

16

products that it was selling in 2005,” which would not include the ESXi product, and which

17

VMware contends is “not what [Mr. Jurewicz] believes.” Id. at 2-3.11 At the April 17, 2017

18

hearing, Phoenix admitted that such an inference “could be drawn” from the testimony. Dkt. No.

19

307 at 64:9-20.
Given the Court’s ruling on VMware’s Second Motion in Limine, see Dkt. No. 325, the

20
21

Court will not exclude this testimony under Rule 403, because Mr. Jurewicz’s statement is

22

relevant, and any potentially prejudicial effect of the statement does not substantially outweigh

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24
25
26
27
28

10

As discussed infra in section II(J)(iii), aside from this specific deposition designation, any
additional objections to Mr. Jurewicz’s deposition designations should be filed with the Court by
4pm the day before a party intends to introduce them.
11
VMware has submitted a new declaration from Mr. Jurewicz, purportedly “to show that the
designation of the [above-referenced question and answer] by Phoenix is misleading because
Phoenix wants to use it to have the jury draw an improper inference.” Dkt. No. 323 at 14; see also
Dkt. No. 313. The Court declines to consider that declaration, as it is inappropriate to supplement
Mr. Jurewicz’s past sworn testimony in this manner at this stage.
14

1

that relevance.12 What Mr. Jurewicz meant by his answer is a matter for trial.

2

H.

3

VMware seeks to preclude in-house VMware attorney Krystia Przepiorski from being

Testimony of Krystia Przepiorski

4

called to testify at trial regarding “VMware audits and any investigations or inquiries pertaining to

5

the Phoenix BIOS.” See Dkt. No. 227 at 24. VMware contends that (1) “[Przepiorski’s]

6

testimony established that there were no audits or investigations of the Phoenix contract performed

7

by accountants,” a fact to which VMware is willing to stipulate; (2) “[t]he only arguable

8

“investigation” was done by VMware lawyers and is privileged”; and (3) her testimony may

9

confuse the jury and prejudice VMware. Id. In response, Phoenix argues that it “is entitled to call
Ms. Przepiorski as a witness to establish the fact (if not the content) of any audits that VMware

11
United States District Court
Northern District of California

10

claims to be privileged, and the steps that VMware did or did not take in assessing its use of BIOS

12

is VMware’s products.” Id. at 27. Phoenix further contends that VMware’s offer to stipulate “that

13

there were no audits performed by ‘accountants’ does nothing to address the numerous other

14

topics for which VMware decide[d] to designate Ms. Przepiorski as its 30(b)(6) witness as well as

15

matters for which she has personal knowledge . . . .” Id.
Because VMware’s offer to stipulate to certain facts may not completely address Phoenix’s

16
17

questions regarding “any and all analyses, investigations, or inquiries by VMware regarding [the]

18

Phoenix BIOS,” id. at 24, 27, Ms. Przepiorski likely will be allowed to testify as to the existence

19

(but not the content of) the audits, as well as the topics on which she was designated as a 30(b)(6)

20

witness, to the extent that testimony is not privileged. But based on the information presented by

21

the parties to date, the Court does not have enough facts to evaluate the parties’ dueling claims.

22

To avoid the prospect of having Ms. Przepiorski assert privilege on the stand, Phoenix is

23

instructed to file a detailed offer of proof describing the specific testimony it seeks to elicit by 4pm

24

two days before it wishes to call Ms. Przepiorski to testify.
Finally, Phoenix objects to Ms. Przepiorski’s attendance at trial prior to her testimony,

25
26
27
28

12

The Court grants Phoenix’s administrative motion to file under seal portions of Exhibit A to
their offer of proof concerning the testimony of Mr. Jurewicz, as the specified portions of that
document constitute confidential business information. See Dkt. Nos. 314, 315, Ex. A.
15

1

unless she is designated VMware’s corporate representative under Federal Rule of Evidence 615,

2

instead of VMware’s currently designated representative, Ray O’Farrell. See Dkt. No. 227 at 30.

3

The Court agrees that VMware may only designate one corporate representative under Rule 615,

4

and orders VMware to choose one representative. See Fed. R. Evid. 615 (a court must not exclude

5

“an officer or employee of a party that is not a natural person, after being designated as the party’s

6

representative.”).

7

I.

8

VMware objects to Phoenix’s request to admit “two internal Phoenix documents that

“Projections” documents

contain inconsistent ‘projections’ that Phoenix contends were provided by VMware.” Dkt. No.

10

227 at 23. VMware contends that it did not provide Phoenix with the documents, that nobody at

11
United States District Court
Northern District of California

9

Phoenix has personal knowledge that the projections came from VMware, and that the documents

12

are thus “unreliable hearsay that should not be admitted or referred to.” Id. at 24. In response,

13

Phoenix argues that “[t]estimony from multiple witnesses will be offered at trial to establish the

14

appropriate foundation for these documents, which are highly relevant, non-hearsay evidence.” Id.

15

at 26.

16

The Court finds VMware’s contentions inappropriate for resolution at this stage, as each of

17

these documents’ admissibility will depend on whether Phoenix is able to establish an appropriate

18

foundation. The Court will thus defer consideration of VMware’s arguments until Phoenix

19

attempts to admit them at trial.

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J.

21

Deposition objections
i.

Transcripts

The parties request that they either be allowed to (1) provide transcripts of any video

22
23

depositions presented at trial to the court reporter; or (2) file any such transcripts on ECF so that

24

they may become part of the trial record. See Dkt. No. 277 at 29-30. In lieu of either of the

25

above, the parties are ordered to create a flashdrive containing all videotaped deposition excerpts

26

presented at trial. The flashdrive should then be given an exhibit number, identified on the exhibit

27

lists, and submitted to the Court. See Dkt. No. 266 at 46-47.

28

//
16

1

ii.

Deposition videos

2

To the extent the rule of completeness requires the parties to play designated and counter-

3

designated deposition videos simultaneously, the parties are ordered to do so. See Fed. R. Civ. P.

4

32(a)(6) (“If a party offers in evidence only part of a deposition, an adverse party may require the

5

offeror to introduce other parts that in fairness should be considered with the part introduced, and

6

any party may itself introduce any other parts.”); Fed. R. Evid. 106. The burden of establishing

7

the applicability of the rule of completeness falls on the party seeking to have a counter-

8

designation played in the other party’s case.

9

iii.

Disputes regarding the parties’ deposition designations

Each party objects to several of the opposing party’s deposition designations. See Dkt.

11
United States District Court
Northern District of California

10

Nos. 323 & Exs. A, B. Aside from the designations already discussed herein, the Court denies

12

each of these objections without prejudice. The parties are instructed to submit to the Court any

13

objections to deposition designations by 4pm the day before they are scheduled to be introduced at

14

trial, and the Court will review them on a case-by-case basis.

15

K.

16

Phoenix has indicated that it will not pursue a claim made in its complaint that ESXi

Pentium processor testimony

17

infringes because it “support[s] processors other than the Intel Pentium processor.” See Dkt Nos.

18

1 ¶ 68(c), 130-1 at 10-11 (“Phoenix does not intend to assert at trial that the ESXi products are

19

unauthorized and infringing products on the basis that those products ‘support processors other

20

than the Intel Pentium processor’”); Dkt. No. 1 ¶ 68(c). Nevertheless, Phoenix has designated

21

certain pieces of deposition testimony regarding that claim. Because Phoenix has abandoned its

22

Pentium processor claim, any relevance of such testimony is substantially outweighed by the

23

danger that it may confuse the issues, waste time, and mislead the jury. The Court therefore

24

excludes such testimony.
Use of the term “hacking” in trial exhibits

25

L.

26

VMware objects to Phoenix’s use of trial exhibits that refer to the terms “hack” or

27

“hacking,” as being prejudicial and confusing. Dkt. No. 260 at 3. The Court previously held that

28

while VMware may “explain the context” for the documents, they “are relevant and not
17

1

excludable under Rule 403.” See Dkt. No. 266 at 48.

2

M.

Courtroom technology

The parties “request that they be permitted to use certain technology during the trial.” Dkt.

3
4

No. 227 at 30. The parties are instructed to submit to the Court a proposed order allowing their

5

requested equipment to be brought into the courthouse by May 25, 2017.

6

N.

Demonstratives

The parties indicate that “[a]fter demonstratives have been used during trial, [they] may

7
8

‘lodge’ them in the case docket in order for them to become part of the official record of the case.

9

They will not be admitted as exhibits.” Id. at 33. The Court finds this acceptable. Any such

10

demonstratives should be marked for identification.

United States District Court
Northern District of California

11

O.

12

VMware moves to strike portions of Phoenix’s supplemental authority on Jury Instruction

Motion to strike

13

No. 27, as being outside the scope of the Court’s April 18, 2017 order directing the parties to

14

“provide supplemental authority on whether to give Disputed Instruction No. 27 before the jury is

15

deadlocked.” See Dkt. Nos. 306, 316, 322. The Court agrees with VMware that Phoenix’s

16

supplemental authority goes beyond the scope of the Court’s order. However, rather than striking

17

portions of Phoenix’s supplemental authority, the Court will not consider those portions of the

18

authority that are unresponsive to the Court’s order in its analysis of that instruction. For that

19

reason, the Court also declines to allow VMware to file supplemental responsive authority.

20

III.

RESIDUAL ISSUES RAISED BY THE PARTIES

21

Finally, the parties have at one point or another raised the following additional litany of

22

issues: (1) VMware’s objection to Phoenix’s production of the “entire deposition transcripts of

23

VMware employees Olivia Sun and Christina Lee,” see Dkt. No. 227 at 26, 28; (2) Phoenix’s

24

objections to “98% of VMware’s trial exhibits,” id. at 15; (3) Phoenix’s objection to VMware’s

25

allegedly “untimely disclosure of un-retained expert witnesses” Ray O’Farrell, Richard Harry, Jeff

26

Jennings, and Carl Eschenbach, id. at 10; (4) VMware’s objection to Phoenix’s allegedly untimely

27

disclosure of several “important documents,” see id. at 25; (5) VMware’s objections to Phoenix

28

“improperly designat[ing] only portions of certain discovery responses . . . rather than the full
18

1

response,” id. at 26; and (6) Phoenix’s “‘foundation’ objections to certain of VMware’s deposition

2

designations where no such objection was made at deposition,” see Dkt. Nos. 260 at 1, 261 at 1.

3

The Court does not know the current status of these issues. Because the parties did not again raise

4

these issues in their supplemental pre-trial conference statement, see Dkt. No. 323, the Court

5

assumes they have been resolved. However, should the parties contend that any of these issues

6

remain to be decided at this stage, they are directed to file a statement of no more than five pages

7

listing their remaining arguments no later than 3pm on Friday, May 12, 2017.

8

IV.

CONCLUSION
For the foregoing reasons, with regard to the parties’ motions in limine, the Court

10

(1) GRANTS Phoenix’s First Motion in Limine only insofar as it seeks to exclude Mr. Harry’s

11
United States District Court
Northern District of California

9

testimony relating to the “overall value” of the source code to VMware; (2) DENIES Phoenix’s

12

Second Motion in Limine; and (3) GRANTS Phoenix’s Third Motion in Limine with regard only

13

to Ms. Davis’ 2005 hypothetical negotiation date. The Court also DENIES VMware’s Third,

14

Fourth, and Fifth Motions in Limine, and DENIES VMware’s First Motion in Limine without

15

prejudice.

16
17
18
19

IT IS SO ORDERED.
Dated: 5/11/2017
______________________________________
HAYWOOD S. GILLIAM, JR.
United States District Judge

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