RainDance Technologies Inc. et al v. 10X Genomics Inc.

Filing 361

MEMORANDUM ORDER: Plaintiffs' motion to exclude testimony of Drs. Huck and Quackenbush (D.I. 239 ) is GRANTED-IN-PART and DENIED-IN-PART. Plaintiffs' motion to exclude testimony of Dr. Sullivan (D.I. 244 ) is DENIED. Defendant's motion to exclude testimony of Mr. Malackowski (D.I. 248 ) is GRANTED-IN-PART and DENIED-IN-PART. Signed by Judge Richard G. Andrews on 9/28/2018. (nms)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
BIO-RAD LABORATORIES, INC. and
THE UNIVERSITY OF CHICAGO,
Plaintiffs,
C.A. No. 15-152-RGA

V.

l0X GENOMICS, INC.,
Defendant.

MEMORANDUM ORDER
Presently before the Court are Plaintiffs Bio-Rad Laboratories Inc. ("Bio-Rad") and the
University of Chicago's Motions to Exclude Expert Testimony ofDrs. Wilheim Huck and John
Quackenbush (D.I. 239,240, 265 , 293) and to Exclude Expert Testimony of Dr. Ryan Sullivan
(D.I. 244, 245 , 271 , 294), and Defendant l0X Genornics, Inc.' s (" l0X ' s") Motion to Exclude
Expert Testimony of James E. Malackowski (D.I. 248, 249, 267, 287). I have considered the
parties' briefing.
I.

BACKGROUND
On February 12, 2015 , RainDance Technologies, Inc. ("RainDance") and the University

of Chicago filed suit against lOX alleging infringement of U.S. Patent Nos. 8,273 ,573 ("the ' 573
patent"); 7,129,091 ("the '091 patent"); 8,304,193 ("the ' 193 patent"); 8,329,407 ("the '407
patent"); 8,822,148 ("the ' 148 patent"); and 8,889,083 ("the '083 patent") (collectively, "the
Ismagilov patents"). (D.I. 1). On October 18, 2016, RainDance and the University of Chicago
filed a third amended complaint in which they asserted the original Ismagilov patents except for

the ' 573 patent, and an additional patent on behalf of RainDance only. (D.I. 85). The
RainDance patent was later dismissed. (D.I. 138). On May 30, 2017, Bio-Rad substituted for
RainDance. (D.I. 180).

II.

LEGAL ST AND ARD
Rule 702 provides that an expert witness may offer opinion testimony if (a) the expert's

scientific, technical, or other specialized knowledge will help the trier of fact to understand the
evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c)
the testimony is the product of reliable principles and methods; and (d) the expert has reliably
applied the principles and methods to the facts of the case. Fed. R. Evid. 702.
The Rules also "assign to the trial judge the task of ensuring that an expert's testimony
both rests on a reliable foundation and is relevant to the task at hand." Daubert v. Merrell Dow
Pharms. Inc., 509 U.S. 579, 594, 597 (1993). "The relevance prong [of Daubert] requires the

proponent [of the expert testimony] to demonstrate that the expert's ' reasoning or methodology
can be properly applied to the facts in issue. "' Johnson v. Arkema, Inc. , 685 F.3d 452,459 (5th
Cir. 2012) (quoting Curtis v. M & S Petroleum, Inc., 174 F.3d 661 , 668 (5th Cir. 1999)). "The
reliability prong [of Daubert] mandates that expert opinion ' be grounded in the methods and
procedures of science and ... be more than unsupported speculation or subjective belief. "'
Johnson , 685 F.3d at 459 (quoting Curtis, 174 F.3d at 668).

In assessing the "reliability" of an expert's opinion, the trial court may consider a list of
factors including: "whether a theory or technique ... can be (and has been) tested," "whether the
theory or technique has been subjected to peer review and publication," "the known or potential
rate of error," "the existence and maintenance of standards," and "general acceptance" of a
theory in the "relevant scientific community." Daubert, 509 U.S. at 593-94; see also Kumho

2

Tire Co., Ltd. v. Carmichael, 526 U.S . 137, 150 (1999) ("Daubert makes clear that the factors it
mentions do not constitute a ' definitive checklist or test. "'); US. v. Valencia, 600 F.3d 389, 424
(5th Cir. 2010). "The proponent need not prove to the judge that the expert's testimony is
correct, but she must prove by a preponderance of the evidence that the testimony is reliable. "
Johnson, 685 F.3d at 459 (quoting Moore v. Ashland Chern., Inc. , 151 F.3d 269,276 (5th Cir.
1998) (en bane)). At base, "the question of whether the expert is credible or the opinion is
correct is generally a question for the fact finder, not the court." Summit 6, LLC v. Samsung
Elecs. Co. , Ltd. , 802 F.3d 1283, 1296 (Fed. Cir. 2015). Indeed, " [v]igorous cross-examination,
presentation of contrary evidence, and careful instruction on the burden of proof are the
traditional and appropriate means of attacking shaky but admissible evidence." Daubert, 509
U.S. at 596.

III.

ANALYSIS
A. Drs. Wilheim Huck and John Quackenbush
Plaintiffs move to exclude the testimony of Drs. Huck and Quackenbush as based on

impermissible claim constructions. (D.I. 240 at 2). "As expert testimony inconsistent with the
Court's claim construction is unreliable and unhelpful to the finder of fact, it should be excluded
under the Daubert standard." EMC Corp. v. Pure Storage, Inc. , 154 F. Supp. 3d 81 , 109 (D. Del.
2016) (internal quotation marks and citations excluded). Plaintiffs argue that Drs. Huck and
Quackenbush present non-infringement theories for the ' 193 and ' 407 patents based on
improperly limiting the claims to reactions on a "chip" or "substrate." (D.I. 240 at 6-7; see also
D.I. 116 at 9- 13). Specifically, Plaintiffs object to (1) Dr. Huck's reliance on the claim
preambles as limiting (D.I. 240 at 7-8; D.I. 241, Ex. 2 ,r,r 156-77), and (2) Drs. Huck and

3

Quackenbush's "channel" theory (D.I. 240 at 8- 10; D.I. 241, Ex. 2 ,r,r 318-38, Ex. 4 ,r,r 208,240,
242).
1. Preambles as Limiting

The '193 and ' 407 patent preambles refer to "an autocatalytic reaction in plugs in a
microfluidic system" and "a reaction in plugs in a microfluidic system," respectively. I
previously found each preamble "limiting only to the extent that it provides an antecedent basis
for the terms 'microfluidic system' and ' reaction. "' (D.I. 116 at 12-13). I rejected Defendant's
proposed construction that each preamble limited the method such that the reaction must take
place "in the substrate." 1 (Id.) . Plaintiffs thus allege that Dr. Huck testifies contrary to my
construction by opining that Defendant does not infringe, because it carries out reactions, not in
the substrate, but on a 96-well plate placed in a thermal cycler. (D.I. 240 at 7-8).
I disagree. The crux of Dr. Huck's theory is not that the reaction must occur in the
substrate, but that the reaction must occur in the microfluidic system, which does not include the
96-well plate and thermal cycler. (See D.I. 241, Ex. 2 ,r,r 156-77 ("166 .... For each of lOX's
products, once the droplets are mechanically removed from the microfluidic chip and
mechanically transferred to a 96-well plate, the droplets cease to be part of the ' microfluidic
system.' .. . 168. The thermal cycler is certainly not part of the ' microfluidic system."')). Dr.
Huck does not dispute my constructions of "microfluidic system" and "reaction." (See id.

,r 158

("I understand that the Court has construed 'microfluidic system' as a 'system comprised of at
least one substrate having a network of channels of micrometer dimensions through which fluid
may be transported.' I also understand from the Court's order that ' [a] ' microfluidic system' is

1

As discussed in the claim construction opinion, "devices are manufactured from one or more
substrates and devices are used to build microfluidic systems." (D.I. 116 at 6-7).
4

not limited to or the equivalent of a 'substrate.'' I understand that the court has construed
'reaction' as a " physical, chemical, biochemical or biological transformation. ' The location of
reactions is not limited to the substrate." (internal citations omitted))). Instead, Dr. Huck opines
that elements of Defendant's product are not part of the "microfluidic system," because they are
not physically connected to the microfluidic chip or instrument. (See id.

,r,r 159, 166-68).

I

already held in my Summary Judgment Order that, despite the claim construction, there remains
a dispute of material fact as to the outer limits of the "microfluidic system" in the preamble.
(D.I. 351 at 4-5). I expressly found a dispute of material fact regarding whether the thermal
cycler in Defendant's product meets the preamble. (Id. at 4). Therefore, it is proper for Dr.
Huck to opine that the 96-well plate and thermal cycler are outside the scope of the "microfluidic
system."

2. The "Channel" Theory
Plaintiffs object to Drs. Huck and Quackenbush's reliance on the "channel" theory-the
argument that "the plug being substantially surrounded by an oil flowing through the channel" in
claim 1 of the '407 and ' 193 patents requires reactions to occur while the plug is "flowing
through the channel." (D.I. 240 at 8-10). Both rely on this alleged limitation to support a
finding of non-infringement. Dr. Huck opines that "Dr. Sia's [infringement] analysis of ' claim
1d' fails to analyze a crucial element of claim 1 of the ' 407 and ' 193 patents: 'the 'reaction' must
take place within a 'plug' while the plug is 'substantially surrounded by the immiscible carrier
fluid flowing through the channel. "' (D.I. 241, Ex. 2 ,r 320; see also id.

,r,r 318-3 8).

Dr.

Quackenbush likewise finds that the relevant reaction "does not occur in 'the at least one plug' as
required by step 1e of the '193 and '407 patents," where '" the at least one plug' is a 'plug being
substantially surrounded by an oil flowing through the channel."' (D.I. 241, Ex. 4 ,r 208; see

5

also id.

,r,r 240, 242).

Plaintiffs assert that nothing in the claim language imposes a requirement

that reactions must occur during the flow conditions that prevail during droplet formation. (D.I.

240 at 8-10).
I rejected Defendant's argument in my Summary Judgment Order. In the prior summary
judgment briefing, Defendant asserted that "the plug being substantially surrounded by the
immiscible carrier fluid flowing through the channel" requires that the biological reaction occur
in "the at least one plug" while "flowing through the channel." (D.I. 351 at 4- 5). I found this
reading too limiting, and instead held, "The plain reading of the disputed language is that when
the 'at least one plug' is formed, it is ' substantially surrounded by the immiscible carrier fluid
flowing through the channel. "' (Id. ( emphasis added)). The disputed language does not bear on
the location of the reaction. Therefore, it is inconsistent with my claim construction for Drs.
Huck and Quackenbush to opine that the reaction must occur while the plug is "substantially
surrounded by the immiscible carrier fluid flowing through the channel." Their "channel"
opinions are excluded.
B. Dr. Ryan Sullivan

Plaintiffs move to exclude Dr. Ryan Sullivan's reasonable royalty opinions. Specifically,
Plaintiffs object to Dr. Sullivan's (1) reliance on a license agreement between the University of
Chicago and RainDance ("the Chicago-RainDance Agreement"), and (2) methodology used to
calculate royalty rates based on the same agreement. (D.I. 245 at 2- 3).
1. The Chicago-RainDance Agreement

Dr. Sullivan identifies the Chicago-RainDance Agreement as the most comparable
agreement to the license resulting from the hypothetical negotiation between RainDance and
Defendant. (D.I. 246, Ex. 10 ,r 186). Plaintiffs argue that the agreement cannot be considered

6

comparable, because "the University of Chicago is a university and not a competitor in the
market for the accused and embodying products." (D.I. 245 at 5-12).
"When relying on licenses to prove a reasonable royalty, alleging a loose or vague
comparability between different technologies or licenses does not suffice." LaserDynamics, Inc.
v. Quanta Comput. , Inc. , 694 F.3d 51, 79 (Fed. Cir. 2012); see also Lucent Techs., Inc. v.
Gateway, Inc. , 580 F.3d 1301 , 1327-32 (Fed. Cir. 2009) (finding reliance on license agreements

"radically different" from a license resulting from the hypothetical negotiation weighed strongly
against the jury' s lump-sum damages award). However, the "degree of comparability of [the
agreements] as well as any failure on the part of [the expert] to control for certain variables are
factual issues best addressed by cross examination and not by exclusion." Active Video
Networks, Inc. v. Verizon Commc 'ns, Inc., 694 F.3d 1312, 1333 (Fed. Cir. 2012).

Plaintiffs present that the University of Chicago is distinguishable from a for-profit
company, like RainDance, because "the mission of the university is to disseminate knowledge."
Therefore, Plaintiffs allege that the royalty rates in the Chicago-RainDance Agreement are lower
than what would have been agreed upon in the hypothetical negotiation. (D.I. 245 at 7-8).
Defendant counters that Plaintiffs' position is inconsistent with Dr. Sullivan's report, which
states that the University of Chicago retained a consultant to analyze and value the patents-in-suit
and sought to license the technology to at least 20 companies that had commercialized
microfluidics products. (D.I. 246, Ex. 10 ,r,r 76-77). Plaintiffs do not cite any cases to support
their argument that, as a rule, universities have different licensing goals than for-profit
companies. I am not persuaded that any license with a university is so incomparable to a license
with a for-profit company that related royalty testimony should be excluded.

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Plaintiffs also argue that Dr. Sullivan' s reliance on the Chicago-RainDance Agreement is
improper, because RainDance and Defendant were competitors during the time of the
hypothetical negotiation, while the University of Chicago and RainDance were not. (D.I. 245 at
9-12). The central disagreement between the parties is whether RainDance and Defendant were
competitors during the relevant period. (D.I. 271 at 11- 15). This is a factual question best
addressed through cross-examination.2
I find Dr. Sullivan provides sufficient reasons beyond "alleging a loose or vague
comparability" to rely on the Chicago-RainDance Agreement. Dr. Sullivan explains that the
agreement is comparable as it "includes relevant parties to the hypothetical negotiation, grants
rights to the patents-in-suit for a field of use applicable to 1OX as a licensee, was executed
around the time of the hypothetical negotiation, and is an agreement between two non-competing
parties." (Id.). Therefore, Dr. Sullivan's reasonable royalty testimony based on the ChicagoRainDance Agreement is proper.
2. Royalty Rate Calculations
Plaintiffs object to the adjustments Dr. Sullivan makes to the Chicago-RainDance
Agreement royalty rates. Plaintiffs argue that both the "royalty stacking" adjustment and the
"exclusivity" adjustment should be excluded for arbitrariness. (D.I. 245 at 13-16).
"[A]ny reasonable royalty analysis necessarily involves an element of approximation and
uncertainty." Lucent, 580 F.3d at 1325 (quoting Unisplay, SA. v. Am. Electronic Sign Co., 69
F.3d 512, 517 (Fed. Cir. 1995)). "And, while mathematical precision is not required, some
explanation of both why and generally to what extent the particular factor impacts the royalty

2

Any opinions I stated in connection with a motion to stay are meaningless for the Daubert
issue.
8

calculation is needed." See Whitserve, LLC v. Computer Packages, Inc., 694 F.3d 10, 31 (Fed.
Cir. 2012) (discussing Georgia-Pacific factors). "But where the methodology is reasonable and
its data or evidence are sufficiently tied to the facts of the case, the gatekeeping role of the court
is satisfied, and the inquiry on the correctness of the methodology and of the results produced
thereunder belongs to the factfinder. " Summit 6, 802 F.3d at 1296.
Plaintiffs agree that royalty stacking provisions can reduce the royalty rate for a product
subject to multiple royalty payments. (D.I. 245 at 14). Dr. Sullivan includes a 50% reduction to
account for Defendant's royalty payments to Harvard College and Matrix Technologies. (D.I.
246, Ex. 10 ,i,i 258, 260). Plaintiffs argue that Dr. Sullivan applies the same reduction twice,
because the Harvard agreement has its own royalty stacking provision that would have been
triggered by the hypothetical agreement. (D.I. 245 at 14- 15 ; see also D.I. 246, Ex. 8 at 201:15203 :8). Plaintiffs further argue that the use of 50% is arbitrary, because Dr. Sullivan merely
selects the floor from a range of royalty stacking rates in the Chicago-RainDance Agreement.
(D.I. 245 at 15). I find Dr. Sullivan provides reasonable support for his analysis, and thus
Plaintiffs' arguments go to the weight and credibility of his testimony. Dr. Sullivan explains in
his report that the 50% rate is based on similar rates in existing agreements. (D.I. 264, Ex. 10 ,i
260). Further, he opines that Plaintiffs oversimplify the relationship between different licenses
affected by royalty stacking. Rather than "double benefiting" from the Harvard royalty stacking
provision, Dr. Sullivan states that his hypothetical license rates "reflect relative contributions of
technology." (Se e D.I. 246, Ex. 8 at 201 :15-204:9). Plaintiffs' objections to the accuracy of Dr.
Sullivan' s analysis may be explored during cross-examination.
Dr. Sullivan also applies a 50% reduction to account for exclusivity-the ChicagoRainDance Agreement was an exclusive license, while the license arising from the hypothetical

9

negotiation would be non-exclusive. Plaintiffs argue that this reduction is arbitrary. (D.I. 245 at
15-16). Again, I find Dr. Sullivan provides sufficient support for his calculations. Dr. Sullivan
relies on an agreement between Stanford University and Defendant, which applied a 50%
reduction in the royalty rate once 1OX' s patent rights transitioned from exclusive to nonexclusive. (D.I. 246, Ex. 101261). Once more, Plaintiffs' arguments go to the weight, not the
admissibility, of Dr. Sullivan's testimony.

C. James E. Malackowski
Defendant moves to exclude James E. Malackowski's lost profits and reasonable
royalties testimony as unreliable and irrelevant. (D.I. 249).
1. Lost Profits

Defendant objects to Mr. Malackowski 's lost profits testimony for (1) failure to offer a
final opinion, (2) inadequate support for a two-supplier market, and (3) failure to apportion
damages.
First, Defendant argues that Mr. Malackowski's opinion should be excluded "for the
simple fact that he has not offered a final opinion as to the amount of lost profits Bio-Rad would
obtain." (D.I. 249 at 9). In support, Defendant cites to a single district court case- Dolphin v.

Synthes (USA) Ltd., 2011 WL 1345334 (S.D.N.Y. Mar. 25, 2011). I find Dolphin inapposite.
The court in Dolphin excluded an expert witness for failure to conduct tests that the same witness
indicated were necessary to supplement his final report. See id. at *6-7. Here, Mr. Malackowski
calculated a per-unit incremental profit expected for each sale Bio-Rad lost to Defendant. Mr.
Malackowski opted for a per-unit figure pending the production of actual sales information. Mr.
Malackowski also asserts that he has since supplemented his report to provide total profit

10

calculations. (D.I. 267 at 3; D.I. 269, Ex. 1 at 42:6- 16). I expect Mr. Malackowski will have a
final opinion by the time of trial.
Second, Defendant argues that Mr. Malackowski fails to provide adequate support for
finding a two-supplier market. I believe Defendant objects to both the methodology and
relevance of Mr. Malackowski ' s testimony on the basis that a two-supplier market does not fit
with the facts ofthis case. (See D.I. 249 at 10- 13). Defendant asserts that the evidence shows
there were additional participants in the market. (Id.). Plaintiffs argue that the evidence shows
Bio-Rad and Defendant were the only relevant participants. (Se e D.I. 267 at 4). I find the actual
number of market participants to be a factual issue that should be addressed in crossexarnination.
Defendant also argues that Mr. Malackowski failed to conduct a suitable "market
reconstruction." Defendant alleges that, to show "but for" causation and entitlement to lost
profits, Federal Circuit law requires a "market reconstruction" with "sound economic proof of
the nature of the market. " (D.I. 249 at 9 (citing Crystal Semiconductor Corp. v. TriTech

Microelectronics Int '!, Inc., 246 F.3d 1336, 1355 (Fed. Cir. 2001))). It is well accepted that lost
profits may be awarded "based on a wide variety of reconstruction theories where the patentee
has presented reliable economic evidence of ' but for ' causation." Crystal Semiconductor, 246
F.3d at 1355. Defendant argues that under Presidio Components, Inc. v. American Technical

Ceramics, Corp., a lost profits analysis must address "whether a non-infringing alternative would
be acceptable compared to the patent owner ' s product, not whether it is a substitute for the
infringing product." 875 F.3d 1369, 1381 (Fed. Cir. 2017). Defendant argues that Mr.
Malackowski ' s testimony is wrong as a matter oflaw, because he failed to "reconstruct the entire
market without lOX' s products to determine whether [other products on the market] would be an

11

acceptable alternative to Bio-Rad's ddSEQ." (D.I. 287 at 2). Defendant's argument thus
depends on the existence of a non-infringing alternative. Mr. Malackowski determined that there
were no non-infringing alternatives as the relevant market only had two products-Defendant's
Genomics Chromium and Bio-Rad's ddSEQ. Therefore, Defendant's argument under Presidio
again goes to the validity Mr. Malackowski ' s two-supplier market theory.
Third, Defendant argues that Mr. Malackowski's testimony should be excluded for
failure to apportion the lost profits attributable to the patented technology. (D.I. 249 at 13-14).
Plaintiffs allege that Mr. Malackowski has taken apportionment into account through his
consideration of the Panduit factors by finding a two-supplier market. (D.I. 267 at 9-10 (citing
Mentor Graphics Corp. v. EVE-USA, Inc., 851 F.3d 1275, 1287-88 (Fed. Cir. 2017))). "In the

two-supplier market, it is reasonable to assume, provided the patent owner has the manufacturing
and marketing capabilities, that it would have made the infringer's sales." State Indus., Inc. v.
Mor-Flo Indus., Inc., 883 F.2d 1573, 1578 (Fed. Cir. 1989). Again, Defendant's argument turns

on whether Mr. Malackowski properly determined the existence of a two-supplier market.
The underlying theme of Defendant's arguments is that Mr. Malackowski failed to
provide "sound economic proof' for his two-supplier market theory. The Federal Circuit has
held that the first step in a two-supplier market test is to define the relevant market. The relevant
market includes the patented invention, as well as "other devices or substitutes similar in
physical and functional characteristics to the patented invention. It excludes, however,
alternatives 'with disparately different prices or significantly different characteristics."' Micro
Chem. , Inc. v. Lextron, Inc., 318 F.3d 1119, 1124- 25 (Fed. Cir. 2003) (quoting Crystal
Semiconductor, 246 F.3d at 1356). Notably, "the patentee often must adduce economic data

supporting its theory of the relevant market in order to show 'but for' causation." See Grain

12

Processing Corp. v. Am. Maize-Prods. Co. , 185 F.3d 1341 , 1354 (Fed. Cir. 1999); see also
Linear Tech. Corp. v. Micrel, Inc. , 2006 WL 8425047, at *80 (N.D. Cal. June 9, 2006).
Defendant has presented several devices by other suppliers that it alleges are part of the
relevant market. (D.I. 249 at 9-11). Mr. Malackowski has not provided any analysis to support
his contrary finding that the market is limited to Defendant and Bio-Rad' s products. Rather, Mr.
Malackowski simply states that based on his review of the technical expert's report, he
understands that "the Patents-in-Suit disclose technologies that are foundational to the industry
generally and to the Accused Products specifically. As a result, [he understands] that there are
no acceptable non-infringing alternatives." (D.I. 250, Ex. 1 at 19). This is a conclusory
statement and insufficient to show the existence of a two-supplier market.
In addition, Mr. Malackowski opines "but for" causation exists, because "within their
particular market segment, 1OX and Bio-Rad are essentially the only two suppliers of single cell
products, and are head-to-head competitors in that two-supplier market." (D.I. 250, Ex. 1 at 19).
In support, Mr. Malackowski relies on qualitative evidence describing Bio-Rad and Defendant as
competitors, including charts showing an overview of the " Competitive Landscape," and BioRad employee and expert testimony. (Id. at 19- 23; see also D.I. 267 at 4- 5). Mr. Malackowski
does not appear to rely on any economic or financial data. It is not clear to me why Mr.
Malackowski, as an economics expert, is better equipped than the finder of fact to interpret such
qualitative evidence. I find Mr. Malackowski ' s testimony regarding the two-supplier market to
be divorced from any economic analysis, and therefore to be excludable.

13

1. Reasonable Royalties
Defendant objects to Mr. Malackowski ' s reasonable royalty testimony for (1) use of
unreliable methodology, (2) being inconsistent with the facts of this case, and (3) failure to
apportion damages. (D.I. 249 at 14-20).
First, Defendant objects to Mr. Malackowski ' s selection of three comparable license
agreements. (Id. at 15). As discussed with respect to Dr. Sullivan, beyond "alleging a loose or
vague comparability" between licenses, the "degree of comparability" and any failure to "control
for certain variables" are factual issues best addressed by cross examination. See

LaserDynamics, 580 F.3d at 1327- 32; Active Video , 694 F.3d at 1333 . Mr. Malackowski
provides reasonable and specific explanations for selecting the agreements he did. (See D.I. 267
at 10-11). Thus, Mr. Malackowski does more than allege a "loose or vague comparability," and
his testimony in reliance on the agreements is proper.
Defendant also argues that Mr. Malackowski ' s methodology is unreliable, because he
fails to adjust the royalty rates from the selected agreements. Specifically, Defendant asserts that
Mr. Malackowski engaged in a "superficial recitation of the Georgia-Pacific factors, followed by
conclusory remarks," insufficient to render the testimony reliable. (D.I . 249 at 15- 16 (quoting

Whitserve, 694 F.3d at 31)). Plaintiffs respond that Mr. Malackowski should not be penalized
for declining to make arbitrary adjustments. (D.I. 267 at 11-12). It is well established that
estimating a reasonable royalty is not an "exact science." Summit 6, 802 F.3d at 1296. Here, Mr.
Malackowski discusses each Georgia-Pacific factor, makes an individual determination of its
effect on the reasonable royalty, and finds the factors together do not warrant adjusting the
royalty rate. (D.I. 250, Ex. 1 at 38-51). I find Mr. Malackowski ' s analysis goes beyond a
"superficial recitation" of the factors and thus is proper.

14

Second, Defendant argues that Mr. Malackowski's reasonable royalty opinions should be
excluded as inconsistent with the facts of this case. (D.I. 249 at 16-19). As stated, Defendant's
objections to license comparability are best addressed in cross-examination. Defendant also
argues for exclusion based on Mr. Malackowski's failure to account for royalty stacking. (Id. at
18). Defendant argues that under A VM Technologies, LLC v. Intel Corp., Mr. Malackowski is
required to discuss royalty stacking to provide context for the parties' hypothetical negotiations.
2017 WL 1787561 (D. Del. May 1, 2017). Defendant rnischaracterizes my opinion inAVM. I
did not require the expert at issue to discuss royalty stacking, but merely noted that he chose to
do so. See id. at *3. Finally, Defendant argues that Mr. Malackowski improperly finds
Defendant and RainDance were competitors. (D.I. 249 at 18-19). As discussed with respect to
Dr. Sullivan, the disagreement over whether the companies were competitors during the time of
the hypothetical negotiation goes to the credibility, not the admissibility, of the expert's
testimony.
Third, Defendant argues that Mr. Malackowski' s reasonable royalty opinion should be
excluded for failure to apportion damages. (D.I. 249 at 19-20). A reasonably royalty award
"must be based on the incremental value that the patented invention adds to the end product."
Ericsson, Inc. v. D-Link Sys. , Inc., 773 F.3d 1201, 1226-27 (Fed. Cir. 2014). The parties agree

that the products at issue have non-infringing aspects. (See D.I. 250, Ex. 1 at 50). It is further
undisputed that Mr. Malackowski does not identify the smallest salable patent-practicing unit in
order to conduct an apportionment analysis. Plaintiffs argue, however, that Mr. Malackowski
properly accounted for apportionment through the selection of royalty rates from comparable
license agreements. (D.I. 267 at 18-20).

15

The Federal Circuit does not limit apportionment to specific methodologies, because
flexibility is required to determine fact-dependent damages. See, e.g., Ericsson, 773 F.3d at
1226; Commonwealth Sci. & Indus. Research Org. v. Cisco Sys., 809 F.3d 1295, 1301 (Fed. Cir.
2015). As a methodology, I see no problem with using comparable licenses to establish a
reasonable royalty rate, without performing a separate apportionment analysis, where there is a
logical basis for doing so. See Commonwealth, 809 F.3d at 1302-03 (Fed. Cir. 2015) (finding
the district court' s analysis of the reasonable royalty based on a prior negotiation between the
parties "already built in apportionment" without analysis of the smallest salable unit); Intel Corp.

v. Future Link Sys., LLC, 2017 WL 2482881 , at* 1-2 (D. Del. June 1, 2017) (finding an expert' s
reasonable royalty opinion based on comparable licensing negotiations without a separate
apportionment analysis consistent with the Federal Circuit's approved methodology).
I am dubious, however, of Mr. Malackowski ' s execution. In his report, Mr. Malackowski
simply states that apportionment "would have been considered by the parties to the various
agreements referenced throughout this report," and "[a]s a result, this apportionment has largely
already been taken into consideration through the selection of the quantitative royalty indicators I
have referenced." (D.I. 250, Ex. 1 at 50).
The Federal Circuit has repeatedly emphasized the importance of apportionment as part
of a district court's gatekeeping function. See VirnetX, Inc. v. Cisco, Sys., 767 F.3d 1308, 1328
(Fed. Cir. 2014) (" [T]he district court should have exercised its gatekeeping authority to ensure
that only theories comporting with settled principles of apportionment were allowed to reach the
jury."); see also Commonwealth, 809 F.3d at 1301 - 02; Ericsson, 773 F.3d at 1226-27. Allowing
Mr. Malackowski's cursory analysis to circumvent the apportionment requirement would

16

effectively gut the doctrine. 3 Therefore, I find Mr. Malackowski' s reasonably royalty opinion
improper for failure to account for apportionment.
IV.

CONCLUSION

For the foregoing reasons, Plaintiffs' motion to exclude testimony of Drs. Huck and
Quackenbush (D.I. 239) is GRANTED-IN-PART and DENIED-IN-PART, Plaintiffs' motion
to exclude testimony of Dr. Sullivan (D.I. 244) is DENIED, and Defendant's motion to exclude
testimony of Mr. Malackowski (D.I. 248) is GRANTED-IN-PART and DENIED-IN-PART.

IT IS

so ORDERED this

Zr day of September 2018.

~~

~ ~tnct Judge

3

Further, the fact that the parties to each agreement incorporated the concept of apportionment
into their reasonable royalties does not itself show that the same royalty rates apply here. For
example, one comparable agreement might provide a 15% reasonable royalty where the patented
technology accounts for 50% of a product. A second comparable agreement might provide a 3%
reasonable royalty where the patented technology accounts for 10% of a different product. Both
rates are apportioned, but further analysis is required to determine whether either rate is
apportioned in a comparable fashion to the contribution of the patented technology to the
accused products.
17