UNITED STATES OF AMERICA v. H&R BLOCK, INC. et al
Filing
40
MEMORANDUM re 35 MOTION for Preliminary Injunction filed by UNITED STATES OF AMERICA by UNITED STATES OF AMERICA. (Attachments: # 1 Exhibit Exhibit 1, # 2 Exhibit Exhibit 2, # 3 Exhibit Exhibit 12, # 4 Exhibit Exhibit 13, # 5 Exhibit Exhibit 30, # 6 Exhibit Exhibit 37, # 7 Exhibit Exhibit 40, # 8 Exhibit Exhibit 42, # 9 Exhibit Exhibit 43, # 10 Exhibit Exhibit 56, # 11 Exhibit Exhibit 112, # 12 Exhibit Exhibit 114, # 13 Exhibit Exhibit 115, # 14 Exhibit Exhibit 116, # 15 Exhibit Exhibit 123, # 16 Exhibit Exhibit 124, # 17 Exhibit Exhibit 139, # 18 Exhibit Exhibit 157)(Buterman, Lawrence)
Exhibit
1
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Tseng, for Defendant(s).
United States District Court, N.D. California,
San Jose Division.
HYNIX SEMICONDUCTOR INC., Hynix Semiconductor America Inc., Hynix Semiconductor U.K.
Ltd., and Hynix Semiconductor Deutschland GmbH,
Plaintiffs,
v.
RAMBUS INC., Defendant.
Rambus Inc., Plaintiff,
v.
Hynix Semiconductor Inc., Hynix Semiconductor
America Inc., Hynix Semiconductor Manufacturing
America Inc.,
Samsung Electronics Co., Ltd., Samsung Electronics
America, Inc., Samsung Semiconductor, Inc., Samsung Austin Semiconductor, L.P.,
Nanya Technology Corporation, Nanya Technology
Corporation U.S.A., Defendants.
Rambus Inc., Plaintiff,
v.
Samsung Electronics Co., Ltd., Samsung Electronics
America, Inc., Samsung Semiconductor, Inc., Samsung Austin Semiconductor, L.P., Defendants.
Rambus Inc., Plaintiff,
v.
Micron Technology, Inc., and Micron Semiconductor
Products, Inc., Defendants.
Nos. CV-00-20905 RMW, C-05-00334 RMW,
C-05-02298 RMW, C-06-00244 RMW.
Jan. 5, 2008.
Craig N. Tolliver, Pierre J. Hubert, Brian K. Erickson,
David C. Vondle, Gregory P. Stone, Carolyn Hoecker
Luedtke, Peter A. Detre, Burton Alexander Gross,
Steven McCall Perry, Jeannine Y. Sano, for Plaintiff(s).
Matthew D. Powers, David J. Healey, Edward R.
Reines, John D Beynon, Jared Bobrow, Leeron Kalay,
Theodore G. Brown, III, Daniel J. Furniss, Jordan
Trent Jones, Kenneth L. Nissly, Geoffrey H. Yost,
Susan Gregory van Keulen, Patrick Lynch, Jason
Sheffield Angell, Vickie L. Feeman, Mark Shean, Kai
ORDER DENYING RAMBUS'S MOTION FOR
SUMMARY JUDGMENT NO. 1 ON MONOPOLIZATION AND GRANTING IN PART AND
DENYING IN PART RAMBUS'S DAUBERT MOTION NO. 1
RONALD M. WHYTE, District Judge.
*1 This order addresses two motions brought by
Rambus related to the Manufacturers' FN1 antitrust
claims. Rambus's Summary Judgment No. 1 seeks
summary judgment on the Manufacturers' monopolization and attempted monopolization claims. Rambus's Daubert Motion No. 1 requests that certain testimony of Dr. Gilbert be excluded from trial. The
Manufacturers jointly oppose the motions. The court
has reviewed the papers and considered the arguments
of counsel. For the reasons set forth below, the court
denies Rambus's Motion for Summary Judgment
Number 1 on Monopolization. The court grants in part
and denies in part Rambus's Daubert Motion No. 1 to
exclude the opinions of Dr. Richard Gilbert.
FN1. For purposes of this order, the court
collectively refers to all of the Micron,
Nanya, and Hynix entities as “the Manufacturers.”
I. MARKET DEFINITION
Rambus's motion for summary judgment challenges the Manufacturers' ability to define a market
for their claims of monopolization or attempted monopolization under Section 2 of the Sherman Act, 15
U.S.C. § 2. A violation of Section 2 requires proof of a
relevant product market and geographic market. Spectrum Sports, Inc. v. McQuillan, 506 U.S.
447, 459 (1993); Unitherm Food Systems, Inc. v.
Swift-Eckrich, Inc., 375 F.3d 1341, 1363
(Fed.Cir.2004) (reversing an antitrust verdict because
no evidence supported the plaintiff's technology
market definition), rev'd on other grounds, 546 U.S.
394 (2006). The Supreme Court requires this showing
because it can be difficult to distinguish “robust
competition” from anticompetitive conduct. Id. at
458-59. The market definition requirement guards
against overuse of Section 2 in ways that chill competition. Id. at 459. While Rambus's motion raises a
number of questions about the Manufacturers' con-
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tentions, the motion is narrow. Its argument is that the
Manufacturers cannot define a relevant technology
market as a matter of law, because the Manufacturers
have no evidence of whether use of the alleged substitute technologies comprising the various technology
markets require royalties to be paid. As discussed
below, this failure to present evidence on royalties is
relevant, but not fatal, to the Manufacturers' attempts
to define technology markets.
A. The Relevant Market Contentions
The Manufacturers' pleadings accuse Rambus of
monopolizing a variety of markets. Micron's counterclaims accuse Rambus of monopolizing three alternative sets of technology markets:
The relevant markets negatively affected by
Rambus's anticompetitive misconduct are the markets for interface technologies for high performance
DRAMs (either generally or for computer main
memory). The Federal Trade Commission (“FTC”)
in In the Matter of Rambus Inc., Federal Trade
Commission Docket No. 9302, found that four such
markets had been affected by Rambus's misconduct:
(1) the market for latency technology; (2) the market for burst length technology; (3) the market for
data acceleration technology; and (4) the market for
clock synchronization technology. A fifth market
exists for precharge technologies and was negatively affected by Rambus's misconduct, as the FTC
found in its Opinion on Remedy.
*2 As an alternative to these markets, another
relevant market negatively affected by Rambus's
anticompetitive misconduct can be defined as the
market
for
interface
technologies
for
high-performance DRAMs (either generally or for
computer main memory).
As another alternative, the relevant markets are
the technology markets that are compliant with the
adopted standards.
Micron's First Amended Answer and Counterclaims, C-06-00244 RMW, Docket No. 87, at ¶ 103
(N.D.Cal. May 30, 2007) (line breaks added).
Nanya's pleadings define the relevant market as
the four technology markets considered in the FTC's
opinion. Nanya's First Amended Answer ... And
Counterclaims, C-05-00334 RMW, Docket No. 253,
at ¶ 193 (N.D.Cal. July 10, 2007). As alternative or
additional markets, Nanya alleges that Rambus has
monopolized “the worldwide relevant market for
interface technologies for high performance DRAMs
and the worldwide relevant market or markets for
interface technology for JEDEC-compliant DRAMs.”
Id. at ¶ 194.
Hynix's pleadings differ from Micron and
Nanya's by alleging that Rambus has monopolized
product markets, in addition to technology markets.
Hynix alleged that the relevant markets are: “the
market for synchronous DRAM interface technology;
the market for synchronous DRAMs; and the market
for Logic Chips.” Hynix's Answer to Rambus's Reply,
C-05-00334 RMW, Docket No. 289, at ¶ 171
(N.D.Cal. July 30, 2007).
The day after Hynix filed its answer, Dr. Richard
Gilbert, the Manufacturers' jointly retained economics
expert, filed his report. Dr. Gilbert identifies six specific technology markets that he concludes Rambus
has monopolized: latency technology, burst length
technology, data acceleration technology, clock synchronization technology, precharge technology, and
write latency technology. See Luedtke Decl., Ex. A, at
¶ 60 (hereinafter “Gilbert report”). Despite Hynix's
allegations that Rambus monopolizes the markets for
DRAM and logic chips, Dr. Gilbert does not identify
any relevant product markets. Dr. Gilbert also does not
attest to any of the more general technology market
allegations made in the Manufacturers' pleadings.
After summarizing the Manufacturers' various
pleadings, Rambus's motion for summary judgment
addresses Dr. Gilbert's report and these market definitions. In their opposition, the Manufacturers do not
contest that these six technology markets identified by
Dr. Gilbert now comprise their theory of the case.
B. Defining Technology Markets
Traditional antitrust theory focuses on product or
goods markets. See U.S. Dept. of Justice & Fed. Trade
Comm'n, HORIZONTAL MERGER GUIDELINES §
1.1 (1992, rev.1997) (hereinafter “MERGER
GUIDELINES”); see, e.g., Rebel Oil Co., Inc. v. Atl.
Richfield Co., 51 F.3d 1421, 1437 (9th Cir.1995)
(considering market definition for retail gasoline
markets).FN2 It does not appear that the Manufacturers
currently contend that Rambus has monopolized
product markets. Instead, the Manufacturers allege
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that Rambus has monopolized or attempted to monopolize various technology markets, which “consist
of [ ] intellectual property that is licensed.” See U.S.
Dept. of Justice & Fed. Trade Comm'n, ANTITRUST
GUIDELINES FOR THE LICENSING OF INTELLECTUAL PROPERTY § 3.2.2 (1995) (hereinafter
“IP GUIDELINES”). Defining a technology market,
as opposed to a product market, makes sense where
“rights to intellectual property are marketed separately
from the products in which they are used.” Id.
FN2. If appealed, this case will be argued
before the Federal Circuit. See 28 U.S.C. §
1295. As discussed in prior orders, Federal
Circuit law governs whether a use of a patent
constitutes anticompetitive conduct. Regional circuit law, however, controls questions of “relevant market, market power,
damages, etc., as those issues are not unique
to patent law.” Nobelpharma AB v. Implant
Innovations, Inc., 141 F.3d 1059, 1068
(Fed.Cir.1998) (en banc in relevant part).
Therefore, where it is applicable, the court
applies Ninth Circuit law.
*3 While the possibility of applying antitrust law
to markets for intellectual property rights has existed
for decades, see SCM Corp. v. Xerox Corp., 645 F.2d
1195 (2d Cir.1981), the court is not aware of any case
setting forth a methodology for defining a technology
market. However, the DOJ/FTC Guidelines suggest
that to delineate a relevant technology market, one
must identify “the smallest group of technologies and
goods over which a hypothetical monopolist of those
technologies and goods likely would exercise market
power ... for example, by imposing a small but significant and nontransitory price increase.” IP
GUIDELINES, § 3.2.2.FN3 This approach is “conceptually analogous” to that used to define product
markets under the agencies' merger guidelines. Id.; see
also Michael L. Katz & Howard A. Shelanski, Mergers and Innovation, 74 Antitrust L.J. 1, 39 (2007)
(noting that “technology markets are ... in the end ...
just product markets”) (hereinafter “Katz & Shelanski”).
FN3. The Guidelines' methodology is “the
most authoritative statement of technology
market analysis to date.” See Joshua A.
Newberg, Antitrust for the Economy of
Ideas: The Logic of Technology Markets, 14
Harv. J.L. & Tech. 83. 100 (2000) (hereinafter “Newberg”).
“There is a long-standing principle by which
economists define the scope of a product market: two
goods or services are in the same relevant market if
and only if consumers view them as sufficiently close
substitutes.” Katz & Shelanski, 74 Antitrust L.J. at 31.
Under the Horizontal Merger Guidelines, this traditional product market definition of close economic
substitutability is developed by an iterative process.
See MERGER GUIDELINES § 1.1. First, one considers the narrowly defined product (or technology)
and asks “what would happen if a hypothetical monopolist of that product imposed at least a ‘small but
significant and nontransitory’ increase in price, but the
terms of sale of all other products remained constant.”
Id. If the hypothetical monopolist would not find this
profitable (because consumers of the product or
technology substitute away),FN4 one should consider
the next-best substitute for the product (or technology)
and add it to the group of products (or technologies).
Id. Then, the test should be repeated “until a group of
products is identified such that a hypothetical monopolist over that group of products would profitably
impose at least a ‘small but significant and nontransitory’ increase .” Id. This final group of products (or
technologies) is the relevant market under the traditional market definition process.
FN4. “In considering the likely reaction of
buyers to a price increase, the Agency will
take into account all relevant evidence, including, but not limited to, the following: (1)
evidence that buyers have shifted or have
considered shifting purchases between
products in response to relative changes in
price or other competitive variables; (2)
evidence that sellers base business decisions
on the prospect of buyer substitution between
products in response to relative changes in
price or other competitive variables; (3) the
influence of downstream competition faced
by buyers in their output markets; and (4) the
timing and costs of switching products.”
MERGER GUIDELINES § 1.1.
In the context of technology markets, the DOJ and
FTC recognize that data on technology licensing is
less likely to be available or quantifiable because
licensing terms are often secret or because licenses are
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granted in exchange for a cross-license, not a sum of
money. IP GUIDELINES, § 3.2.2. The lack of such
financial data is not fatal to a technology market definition. On the contrary, where such data cannot be
obtained, the agencies recommend defining a technology market by including “other technologies and
goods which buyers would substitute at a cost comparable to that of using the licensed technology” if the
hypothetical monopolist attempted to raise the price of
its technology. Id. For example, the IP Guidelines
illustrate the technology market definition process
using Alpha and Beta, two pharmaceutical process
developers. Id., example 2. The two firms have invented competing methods for manufacturing an unpatented drug. To evaluate a possible joint venture
between Alpha and Beta, the Guidelines suggest that
the agencies would examine a technology market
comprised of manufacturing processes that make the
drug. Such a market would include “other technologies that can be used to make the drug with levels of
effectiveness and cost per dose comparable to that of
the technologies owned by Alpha and Beta.” Id.FN5
The Guidelines do not explicitly require knowing the
royalty rates of the other technologies to determine
whether the technologies are substitutes (though “cost
per dose” in example 2 could include a running
royalty). Instead of requiring royalty calculations, the
Guidelines acknowledge that such information may
not exist. In those situations, a technology market can
still be defined by determining what other technologies a buyer could switch to if necessary.
FN5. In this example, the agencies would
also consider what effect competing drugs
would have on Alpha and Beta's ability to
charge royalties on its processes. This caveat
recognizes that downstream competition
between two end-products (A and B) could
prevent an upstream supplier of inputs for A
from imposing a price increase because otherwise consumers would exclusively purchase B. This consideration does not apply to
the markets in this case because there do not
appear to be any substitutes for DRAMs in
making electronics.
*4 To be sure, the inquiry is always focused on
the economic substitutability of the two technologies,
not just whether the technologies accomplish a similar
function. See Unitherm, 375 F .3d at 1364. But while
royalty rates inform the question of economic substi-
tutability, determining royalty rates is not the goal of
this inquiry. The goal is always to determine whether
consumers would actually substitute between various
technologies. This basket of substitute technologies
comprises the relevant technology market.
Finally, a flexible approach to defining technology markets accords with economic research on
technology markets. Commentators have recognized
that creating a “bright-line” market definition in innovative sectors of the economy is often difficult and
can be counterproductive. Katz & Shelanski, 74 Antitrust L.J. at 33-34 (criticizing market definition requirement where proof of anticompetitive harm exists). Others have noted that “[m]arket definition is
least useful when market shares would not be strongly
probative of market power or anticompetitive effect,
while direct evidence as to market power or anticompetitive effect is available and convincing.” Jonathan B. Baker, Market Definition: An Analytical
Overview, 74 Antitrust L.J. 129, 131 (2007). As discussed below, market share is not a particularly meaningful measure of market power in technology markets affected by standard-setting. In situations where
monopoly power can be established by evidence other
than market share, some authority suggests that market definition is not a required element of an antitrust
claim. See, e.g., FTC v. Indiana Fed'n of Dentists, 476
U.S. 447, 460-61 (1986); Re/ Max Int'l v. Realty One,
Inc., 173 F.3d 995, 1018-19 (6th Cir.1999) (collecting
and discussing cases allowing direct evidence of harm
to substitute for structural market analysis). However,
the court does not reach the issue of whether the
Manufacturers must establish a market in this case
because it is not necessary to do so to resolve this
motion for summary judgment.
C. The Alleged Technology Markets
For each of the six technology markets, Dr. Gilbert identifies Rambus's patented technology and
various substitute technologies that he states comprise
the relevant technology market. Rambus challenges
Dr. Gilbert's market definitions, arguing that Gilbert
did not consider the costs of each substitute technology and perform the iterative test laid out in the
Merger Guidelines. Mot. In Limine at 5-6; reply at 3-4.
The Manufacturers respond that Dr. Gilbert has correctly defined the markets by relying on the expert
reports of Joseph McAlexander and Dr. Christopher
McArdle. Opp. at 9.
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Dr. Gilbert's report on relevant markets begins by
stating that:
I have assumed for the sake of my analysis that for
each of the Rambus technologies there existed close
substitutes at the time JEDEC was considering inclusion of the technology in JEDEC standards.
Furthermore, I assume that each of the Rambus
technologies and its close substitutes enable a
function (such as latency) for which there are no
other close substitutes. As a result, a reasonable relevant market definition consists of six relevant
technology markets corresponding to the six Rambus technologies, and the technologies that were
close substitutes for each, for use in high-speed
DRAMs.
*5 Gilbert report, ¶ 60. Rambus contends that Dr.
Gilbert cannot “assume” that there exist close substitutes; instead, Rambus argues that Dr. Gilbert must
have performed the traditional iterative process for
determining whether two technologies are close
enough substitutes that they comprise a single technology market.
Dr. Gilbert's report later identifies a formula for
determining whether two technologies are substitutes.
Gilbert report, ¶ 70. A technology has two characteristics to a consumer: its value (v) and its associated
royalty (r). Id. A consumer values two technologies
equally if:
v1-r1 = v2-r2
Id. While Dr. Gilbert uses this formula to develop
his testimony regarding Rambus's market power, he
does not use it in defining relevant technology markets.
I. Latency Technology
Dr. Gilbert's report first considers the market for
latency technology. Gilbert report, ¶ 60(a). The JEDEC SDRAM standards “incorporate a latency technology known as programmable column strobe
(‘CAS') latency.” Id. Dr. Gilbert defines the latency
technology market as also including: “fixed CAS
latency, setting latency with one or more fuses, setting
latency by antifusing, identifying CAS latency with
pin voltage, and using an asynchronous DRAM design.” Id. (citing Brewer Decl., Ex. 7 at 21-27 (hereinafter “McAlexander report”)). Dr. Gilbert under-
stands that these alternatives are “close substitutes”
for programmable CAS latency, and hence collectively form a market for latency technology .FN6 Id.
FN6. As a preliminary matter, it is worth
noting that the only alternatives to programmable CAS latency are fixed CAS latency or developing an asynchronous DRAM
design. See McAlexander report, at 21-27.
The various technologies listed by Dr. Gilbert-setting latency with one or more fuses,
setting latency by antifusing, or identifying
CAS latency with pin voltage-are all methods
of achieving fixed CAS latency. Id. at 23-26.
Dr. Gilbert's report does not contain any information on the costs of these various technologies. The
McAlexander report that Dr. Gilbert cites generally
states that “[e]ach of the viable alternatives mentioned
below would have been a reasonable consideration at
that time, either alone or in combination, when assessed in view of the cost, feasibility, performance,
and acceptability to JC-42.3 subcommittee members.”
McAlexander report at 17. The McAlexander report
similarly lacks any specifics on the costs of alternative
technologies.
In opposing Rambus's Daubert motion to prevent
Dr. Gilbert from testifying on market definition, the
Manufacturers argue that Dr. Gilbert also relied on the
report of Dr. Christopher McArdle. Dr. Gilbert's report on market definition does not cite McArdle's
reports. Nonetheless, Dr. McArdle's reports do contain
differential cost estimates for various alternative latency technologies. See Brewer Decl. Ex. 2a, at 23-28
(hereinafter “McArdle report II”); Brewer Decl. Ex.
2b, at 21 (hereinafter “McArdle report III”).
Rambus argues that the Manufacturers' failure to
produce any evidence on the royalty rates of the alternative technologies prevents the Manufacturers
from defining a technology market, as a matter of law.
Rambus notes that Dr. Gilbert's report recognizes that
one must know a technology's royalty rate to determine if a consumer will value it equally to another
technology. As discussed above, courts must not be so
rigorous in defining technology markets that they
render the antitrust laws meaningless. The Guidelines
explicitly recognize that royalty information, while
helpful, will not always be available. Where it is not
available, the plaintiffs (here, the Manufacturers) must
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still demonstrate that the two technologies are “close
substitutes” such that consumers would switch from
one to the other. However, they may demonstrate the
economic substitutability of the technologies by evidence that does not include royalty rates. The Manufacturers have introduced some evidence that there is a
relevant technology market for latency technologies.
Accordingly, there is a genuine issue of material fact
as to market definition and summary judgment cannot
be entered as to latency technology.
ii. Burst Length Technology
*6 Dr. Gilbert next considers the market for burst
length technology. See Gilbert report ¶ 60(b). The
JEDEC standards use a programmable burst length
technology. Id. Dr. Gilbert lists the following alternatives which he argues comprise the market: “fixed
burst length, setting burst length with fuses, setting
burst length with a dedicated pin, controlling burst
length with a burst terminate signal, and using an
asynchronous DRAM design.” Id. (citing McAlexander report at 29-31).FN7 Dr. Gilbert's report does not
recite any data on the cost of these technology alternatives; neither does McAlexander. Dr. McArdle's
reports, however, contain cost estimates for various
alternative burst length technologies. See McArdle
report II, at 28-29; McArdle report III, at 21. Accordingly, there is some evidence to support a burst
length technology market thus precluding the entry of
summary judgment.
FN7. Setting burst length with fuses, setting
burst length with a dedicated pin, and controlling burst length with a burst terminate
signal are all methods of fixing burst length;
they are not alternatives to fixing burst
length. See McAlexander report at 28-30.
iii. Data Acceleration Technology
Dr. Gilbert's proposed market for data acceleration technology includes the JEDEC-standard
dual-edge clocking and the alternative technologies of
single-edge clocking with double clock frequency and
IBM's toggle mode. Gilbert report ¶ 60(c) (citing
McAlexander report, at 34-35). McAlexander identifies two alternative technologies: single edge clocking
and IBM's asynchronous toggle mode. McAlexander
report, at 33-34. Neither report discusses the costs of
implementing these technologies. The McArdle reports do estimate the costs of dual-edge clocking alternatives, though it is not clear that McArdle esti-
mates the costs of the same features that McAlexander
proposes as alternatives. See McArdle report II, at
21-22; McArdle report III, at 20. Nonetheless, Rambus's motion for summary judgment is narrowly focused on the Manufacturers' failure to demonstrate the
royalty rates of these alternative technologies. As
knowledge of the royalty rate is not an absolute requirement for defining a technology market, Rambus's
motion fails as to data acceleration technology.
iv. Clock Synchronization Technology
Dr. Gilbert identifies a technology market comprised of the JEDEC standard on-chip PLL/DLL, as
well as “not using a PLL or DLL (either by relying on
a single edge of a faster clock, by relying on a strobe,
or simply by eliminating the PLL/DLL without other
changes to the DDR design), using an off chip PLL or
DLL (either on the memory module or memory controller), using an echo clock instead of a PLL/DLL,
using a vernier circuit instead of a PLL/DLL, using the
DQS strobe rather than the system clock to coordinate
the timing of data transmissions, and using an asynchronous DRAM design.” Gilbert report ¶ 60(d) (citing McAlexander report at 31-34). McAlexander
discusses the technological feasibility of these alternatives, but does not discuss their costs. McAlexander
report at 30-33. McArdle provides cost estimates for
some of these features. See McArdle report II, at
22-24; McArdle report III, at 21. Again, the Manufacturers have produced some evidence suggesting the
existence of a market for clock synchronization
technology. While knowledge of the royalty rates
covering these alternative technologies would assist in
defining the market, it is not absolutely required.
v. Precharge Technology
*7 According to Dr. Gilbert, the precharge technology market consists of the JEDEC-standard auto
precharge and alternatives such as using an RAS level
trigger, using a separate precharge command, using a
“hidden precharge” command, and eliminating the
feature. Gilbert report ¶ 60(e) (citing McAlexander
report at 35-36). McAlexander suggests that these
technology alternatives were available, but does not
provide any cost estimates for using them. McAlexander report at 34-35. Dr. McArdle briefly suggests
how much some of these features would cost to implement. See McArdle report II, at 30; McArdle report
III, at 21. On summary judgment, this showing suffices to establish a genuine issue of material fact as to
whether a market for precharge technology existed.
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vi. Write Latency Technology
The final technology market proposed by Dr.
Gilbert consists of write latency technologies. Gilbert
report ¶ 60(f). Dr. Gilbert believes that the market is
comprised of the JEDEC standard programmable
write latency, as well as a variety of methods for fixing
write latency or using an asynchronous DRAM design. Id. (citing McAlexander report at 27-28). Again,
the only cost estimates for write latency technologies
come from Dr. McArdle. See McArdle report III, at
21-22. While these estimates again do not include any
possible royalties, they could establish that the alternative technologies are economic substitutes for programmable write latency, and hence the court cannot
enter summary judgment as to whether there is a
market for write latency technology.
vii. Additional Economic Considerations
Economic commentary on the problem of defining technology markets suggests a method for providing a “backstop” or “checksum” to the market
definition inquiry. See Joshua A. Newberg, Antitrust
for the Economy of Ideas: The Logic of Technology
Markets, 14 Harv. J.L. & Tech. 83 (2000). The demand for licensed intellectual property, i.e., technology, stems from the need to use intellectual property
as a “legal” input for making traditional products. Id.
at 104-05. The demand for an intellectual property
license is therefore similar to the demand for other
manufacturing inputs or raw materials. Id. at 104. For
example, the demand for the DRAMs at issue in this
case derives from the consumer demand for the electronic devices that use them, hence the demand for
DRAMs is referred to as “derived demand.” Id.; see,
e.g., Hynix Semiconductor, Inc. v. United States, 474
F.Supp.2d 1338, 1343 (C.I.T.2006). Accordingly, the
demands for the various technologies at issue in this
case are also “derived demands.”
Economic analysis suggests that antitrust law
should be concerned about derived-demand technology markets where the following characteristics are
present: (1) the downstream product's demand is inelastic; (2) the licensing fees are a small portion of the
downstream product's cost; and (3) the cost of
switching between substitute technologies is high
because of sunk costs associated with adopting the
technology. See id. at 107-08. These characteristics
collectively suggest a market where a hypothetical
monopolist could more easily extract rents from
downstream consumers because (1) the consumers'
demand for the downstream product is constant, (2)
even a large increase in the price of one of many inputs
will result in only a small increase in the price of the
final product, and (3) manufacturers of the final
product have no choice but to include the monopolized
technology in the final product.FN8 The record demonstrates that these factors are all present to varying
degrees in this case, which suggests that the Manufacturers may be able to establish the relevant technology markets on this basis at trial.
FN8. Prof. Newberg proposed an additional
factor, namely that “substitute technologies
are either unavailable or not as efficient as
the technology comprising the candidate relevant market.” Newberg, 14 Harv. J.L. &
Tech. at 107. This factor duplicates the
process of defining the relevant technology
market.
*8 For the foregoing reasons, the Manufacturers
have introduced sufficient evidence to create genuine
issues of material fact regarding the existence of the
six alleged technology markets. Rambus's arguments
that the Manufacturers have no evidence regarding the
royalty costs associated with the alleged substitutes is
persuasive. Nonetheless, the Guidelines suggest that
market definition can be done in the absence of quantifiable royalty rates. Accordingly, Rambus's motion
that the antitrust claims be dismissed because the
Manufacturers have no evidence of royalty rates must
be denied.
II. MONOPOLY POWER
Rambus next moves for summary judgment on
the grounds that it lacks sufficient market share in the
six relevant technology markets to support a finding
that it possesses monopoly power, and that therefore
the Manufacturers' Section 2 claims must fail. To
support this argument, Rambus points to the market
analysis prepared by one of Hynix's experts, Roy
Weinstein. Weinstein's report includes a chart of the
sales volume of SDRAM, DDR SDRAM, and DDR2
SDRAM. See Perry Decl., Ex. A. The chart shows that
Rambus has only obtained licenses from 27.5% of the
combined SDRAM markets, while 72 .5% of
SDRAMs sales are unlicensed. Id. Rambus argues that
because only 27.5% of global SDRAM sales in 2006
were licensed, Rambus cannot have monopoly power
in the six technology markets as a matter of law.FN9
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FN9. The court notes that the data Rambus
relies on demonstrate Rambus's licensed
share of various DRAM markets, not necessarily the technology markets the Manufacturers now claim Rambus has monopolized.
No one appears to argue, however, that the
relevant technologies have any downstream
use other than for manufacturing DRAMs.
An essential element of a Section 2 claim is monopoly power. Eastman Kodak Co. v. Image Tech.
Servs., Inc., 504 U.S. 451, 481 (1992). Monopoly
power refers to the “power to control prices or exclude
competition.” Id. Monopoly power is most often
demonstrated by circumstantial evidence, and is presumed where a defendant controls a dominant market
share in a relevant market. See, e.g., Rebel Oil Co.,
Inc. v. Atl. Richfield Co., 51 F.3d 1421, 1434 (9th
Cir.1995). Yet the Supreme Court has long recognized
that market share alone can be misleading, and will
consider other evidence to determine whether a
company has the power to restrict output and raise
prices, i.e., monopoly power. See, e .g., United States
v. General Dynamics Corp., 415 U.S. 486 (1974)
(considering, in assessing a merger, whether a coal
company could raise prices where long-term supply
contracts fixed coal prices). “Market share is just a
way of estimating market power, which is the ultimate
consideration. When there are better ways to estimate
market power, the court should use them.” Ball Mem'l
Hosp., Inc. v. Mutual Hosp. Ins., Inc., 784 F.2d 1325,
1336 (7th Cir.1986).
Rambus draws the court's attention to the Ninth
Circuit's discussion of monopoly power in Rebel Oil,
and directly to the phrase that “most cases hold that a
market share of 30 percent is presumptively insufficient to establish the power to control price.” 51 F.3d
at 1438. As a preliminary matter, this discussion is
limited to proving monopoly power by circumstantial
evidence of a relevant market and market share. It has
no bearing on proof of monopoly power by evidence
of direct competitive harm. Second, it only establishes
a presumption against monopoly power that can be
rebutted. It does not establish a per se rule that immunizes Rambus from antitrust scrutiny in the event
Rambus had only 27.5% of each relevant technology
market. Nonetheless, the court cannot grant summary
judgment for Rambus, even if market share alone were
determinative, because Rambus's share of the relevant
technology markets is contested. Rambus argues that
its share of the technology markets is measured by the
share of licensed users of the technologies, which
Weinstein suggests is 27.5% of the market in 2006.
Mot. at 13. Yet Rambus has accused Micron, Nanya,
Hynix, and Samsung of infringing its patents on the
technologies at issue. While the Manufacturers vigorously deny that the patents are valid and that they
infringe, they comprise another 60.3% share of the
various technology markets. Rambus cannot defeat
the Manufacturers' antitrust claims because of its
limited market share, given that it may win at the
patent trial (as it did against Hynix) and establish a
dominant share in the relevant technology markets.
*9 Another difficulty with Rambus's market share
argument is that it fundamentally overlooks the nature
of this antitrust case. This case involves technology
markets tied up with standard-setting. The Manufacturers accuse Rambus of monopolizing or attempting
to monopolize the markets for six technologies, which
in turn are inputs for making JEDEC-compliant
SDRAMs. Prior to JEDEC's actions, the alternative
technologies in the six markets competed for inclusion
in the standard. The purpose of standardization,
however, is to pick one technology as a winner, and
most likely to confer 100% of the market to that
technology.FN10 Under a presumption-approach to
demonstrating monopoly power, every successfully
standardized technology would be presumed to have
monopoly power over its technology market. Such a
presumption could breed ruinous and unmerited litigation. Cf. Illinois Tool Works, Inc. v. Independent
Ink, Inc., 547 U.S. 28, 43-45 (2006) (rejecting even a
presumption that a patent confers market power). This
is especially true given that most standard-setting
bodies require some sort of RAND (“reasonable and
non-discriminatory”) licensing commitment. See
generally Daniel G. Swanson & William J. Baumol,
Reasonable and Nondiscriminatory (RAND) Royalties, Standards Selection, and Control of Market
Power, 73 Antitrust L.J. 1 (2005). Where such a
commitment exists, the patent owner likely has no
meaningful ability to raise the licensed technology's
price or reduce its output, despite having 100% market
share. Hence, it would seem impossible to describe the
patent owner in those contexts as having “monopoly
power” over the technology market. On the other
hand, a patent owner whose patent covers a standard
and is not bound by RAND commitments or
pre-existing licenses would seem to have market
power, i.e., the power to raise price or reduce output. If
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they obtained this market power through anticompetitive conduct, they may have violated section 2.
FN10. Scholarly economic and legal literature on technology, standard-setting, and antitrust is growing. A general background is
helpfully provided by Prof. Mark Lemley.
Intellectual Property Rights and Standard-Setting Organizations, 90 Calif. L.Rev.
1889 (2002). Others have highlighted the
risks of overzealous antitrust enforcement.
David Teece & Edward Sherry, Standard
Setting and Antitrust, 87 Minn. L.Rev.1913
(2003) (Teece is an expert witness for
Rambus). The most recent discussion of the
topic is forthcoming in the Antitrust Law
Journal. See Joseph Farrell, John Hayes, Carl
Shapiro, and Theresa Sullivan, Standard
Setting, Patents, and Hold-Up, available at:
http://
faculty haas.berkeley.edu/shapiro/standards2007.
pdf (August 13, 2007) (Farrell, Hayes, and
Sullivan have worked for Hynix in relation to
this case).
Accordingly, the court cannot grant Rambus's
motion for summary judgment on monopoly power
because there are multiple issues of fact, including the
size of Rambus's market share. Even if Rambus's
market share could be fixed, the court is doubtful that
market share is a meaningful indicator of monopoly
power in a standardized technology market.
In the alternative, Rambus moves for summary
judgment on the geographic dimension of the Manufacturers' market definitions, arguing that it cannot
have worldwide market power because the Manufacturers have introduced no evidence that “Rambus has
any issued patents that cover (or are likely to be held to
cover) the manufacture and sale of a DRAM that occurs entirely outside the United States.” Mot. at 14.
The Manufacturers' opposition notes a Rambus press
release stating that it possesses U.S. and European
patents covering Rambus's inventions. Brewer Decl.,
Ex. 63. The Manufacturers have also submitted evidence of Rambus's patent applications from India,
Taiwan, Israel, Korea, Germany and Europe. See
generally Brewer Decl., Exs. 45-56. The Manufacturers have also produced evidence that Rambus has
sued Micron in the Germany, France, Italy, and the
United Kingdom, though so far without success .FN11
While the Manufacturers bear the burden of demonstrating a relevant market at trial, Rambus has the
burden on summary judgment of demonstrating that
there is no genuine issue of material fact. Rambus's
argument here is based solely on whether it has issued
foreign patents that arguably cover DRAM. To the
extent Rambus's motion is based solely on whether it
owns any foreign patents, the Manufacturers have
produced enough evidence to raise a genuine issue of
material fact as to Rambus's foreign patent rights.
FN11. At oral argument, the Manufacturers
suggested that Rambus has worldwide market power because it requires licensees to pay
royalties on DRAM sales everywhere in the
world. Mr. Barza also argued that Rambus
has global market power because “if you
cannot get into the U.S., then you're pretty
much out of the market[.]” While the arguments are probative as to global market
power, the court has not been able to find any
evidence in the record to support them, nor
do the Manufacturers raise them in their
opposition.
*10 To be clear, the relevant technology market
may not be worldwide. As a technology market consists of “intellectual property that is licensed,” the
territoriality of patent rights may preclude defining a
technology market broader than one country. Indeed,
the Manufacturers' expert, Dr. Gilbert, appears have
some doubt as to whether there is a worldwide market.
See Gilbert report, ¶¶ 64, 65 (stating that the market is
“at least the United States, and could be worldwide”).
However, questions of fact exist, and, accordingly, the
court cannot enter summary judgment on the geographic scope of the relevant technology markets.
III. DR. GILBERT'S EXPERT TESTIMONY
Rambus moves under Rule 702 of the Federal
Rules of Evidence to exclude various portions of Dr.
Gilbert's testimony. In general, expert testimony must
be helpful to the trier of fact and the expert must be
qualified.FN12 FRE 702. If an expert is qualified and
the expert's testimony would be helpful, Rule 702
imposes three conditions to ensure that the expert's
testimony is reliable. First, the testimony must be
based upon sufficient facts and data. Id. Second, the
testimony must be the product of reliable principles
and methods. Id. Third, the expert must have reliably
applied those principles to the facts of the case. Id.
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Rambus argues that various aspects of Dr. Gilbert's
testimony fail to satisfy these criteria.
FN12. Rambus's Daubert motion does not
attack Dr. Gilbert's qualifications as an
economist.
A. Market Definition
Dr. Gilbert's report on market definition begins by
citing the FTC and DOJ IP GUIDELINES discussed
above, which Dr. Gilbert helped to write. Gilbert report ¶ ¶ 4, 60 & fn. 113. Rambus argues that while Dr.
Gilbert selected the reliable method for defining a
market, he did not reliably apply that method to the
facts and data of this case, and that he should therefore
be barred from presenting his opinion regarding
market definition.FN13
FN13. Establishing market definition in this
case likely requires expert testimony. The
Ninth Circuit has referred to market definition as a “highly technical economic question.” Morgan, Strand, Wheeler & Biggs v.
Radiology, Ltd., 924 F.2d 1484, 1490 (9th
Cir.1991). Other courts have suggested that,
“[f]ailure to adduce expert testimony on
competitive issues such as market definition
augurs strongly in favor of granting summary
judgment against an antitrust plaintiff.” Drs.
Steuer and Latham, P.A. v. National Medical
Enterprises, Inc., 672 F.Supp. 1489, 1512 n.
25 (D.S.C.1987), aff'd mem, 846 F.2d 70 (4th
Cir.1988). The Eleventh Circuit has gone
farther and held that “[c]onstruction of the
relevant market and a showing of monopoly
power must be based on expert testimony.” Bailey v. Allgas, Inc., 284 F.3d 1237,
1246 (11th Cir.2002). While some courts
have permitted plaintiffs to establish market
definitions without expert testimony, see,
e.g., General Industries Corp. v. Hartz
Mountain Corp., 810 F.2d 795, 806 (1987),
that is likely not appropriate in this case because while a technology market is, in the
end, just another product market, its contours
are difficult to define, as the DOJ and FTC
have recognized. See IP GUIDELINES §
3.2.2 (noting the agencies will delineate
technology markets “if the data permit”).
Given the complexity of the task, a jury
likely cannot conclude that two technologies
are “close substitutes” and hence comprise a
relevant technology market without expert
testimony.
By relying on the McAlexander report, Dr. Gilbert's report lays out why he believes the various alternative technologies would be viewed as technological substitutes. It is less clear that Dr. Gilbert adequately considered whether consumers would view
the alternative technologies as close economic substitutes, especially given the report's failure to cite to
Dr. McArdle in his discussion. See Unitherm, 375
F.3d at 1363. Rambus also correctly points out that Dr.
Gilbert's report does not mention using a “small but
significant and non-transitory” price increase to determine if the technologies are close economic substitutes such that they constitute a relevant market. In
Unitherm, the Federal Circuit held that an expert's
testimony could not support a finding of a market
definition as a matter of law because the expert failed
to address the ability of consumers to substitute as an
economic matter. Id. In that case, the expert had defined the technology market as a single patented
process because no other process had the same elements as the patented process. Id. The court explained
that while nothing would be a perfect substitute as a
technological matter, the expert failed to provide
evidence of what consumers would do as an economic
matter. Id.
*11 A court does not have to admit “opinion
evidence that is connected to existing data only by the
ipse dixit of the expert.” General Elec. Co. v. Joiner,
522 U.S. 136, 146 (1997). “A court may conclude that
there is simply too great an analytical gap between the
data and the opinion proffered.” Id. (emphasis added).
Rambus's dissection of Gilbert's report suggests that
there may be some gaps in his reasoning that the various technologies are close economic substitutes and
hence comprise relevant technology markets. On the
other hand, Dr. Gilbert's market definition appears
more substantial than the excluded expert's analysis in
Unitherm. Given the complexity and significance of
this issue, the court does not believe these gaps are
“simply too great” to prevent Dr. Gilbert from testifying to market definition. Dr. Gilbert may testify to
his conclusion (a), specifically that
A reasonable relevant market definition for purposes of assessing Rambus's challenged conduct
consists of six relevant technology markets corres-
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ponding to the six Rambus technologies, and the set
of technologies that were close substitutes for each,
for use in high-speed DRAMs. The geographic
scope of the relevant markets is the United States. If
it were demonstrated that viable alternative interface technologies were sufficiently close substitutes
to constrain Rambus's pricing of the individual
technologies at issue, a reasonable market definition
would also include those alternative DRAM interface technologies.
Gilbert report ¶ 13(a).
B. Acquisition of Monopoly Power
Rambus next attacks two conclusions Dr. Gilbert
makes in his report regarding monopoly power. The
first conclusion Rambus argues should not be heard by
the jury is that “Rambus's market power in each of the
six relevant markets would have been disciplined by
viable alternative technologies.” Gilbert report, ¶
13(b). Rambus argues that the conclusion “turns entirely” on Dr. Gilbert's assumption that various alternative technologies were viable, which he concedes he
assumed based on the Manufacturers' other expert
reports. Rambus then argues that if these assumptions
are undercut and there were no viable alternatives,
then the conclusion on pre-standardization market
power would not follow. Rambus concludes that because Dr. Gilbert's opinion rests on assumptions about
alternative technologies, he should not be allowed to
testify because he has made no independent analysis
and because the conclusion is beyond his expertise.
Dr. Gilbert does not offer an opinion on the viability of alternative technologies (which would be
beyond his expertise). He testifies to the effect alternative technologies would have had on Rambus's
ability to wield market power. This conclusion is
within his economic expertise. Similarly, it is irrelevant that Dr. Gilbert has not independently analyzed
whether the alternative technologies were viable. He
may properly rely on the Manufacturers' engineering
experts for those conclusions. See FRE 703. His independent analysis consists of the effect the alternative technologies have on the market. Rambus correctly points out that if those assumptions turn out to
be false, Dr. Gilbert's testimony will likely be baseless. But such an argument goes to the weight of Dr.
Gilbert's testimony, not its validity, and should be
evaluated based upon the foundational facts presented
at trial.
*12 Dr. Gilbert's second conclusion is that “in
early 2000, ... the competitive viability of the technological alternatives to the Rambus technologies was
significantly weakened.” Gilbert report, ¶ 13(c).
Rambus repeats that this conclusion turns on the assumption that technological alternatives were viable.
Again, this argument attacks one of Dr. Gilbert's
conclusions because some of his assumed facts may
not be true. This does not mean that Dr. Gilbert must
be prevented from testifying under Rule 702; it simply
means that if the jury concludes that Dr. Gilbert's
assumed facts are wrong, then his conclusion should
be rejected.
C. Switching Costs
Rambus's motion next argues that Dr. Gilbert's
conclusions on switching costs must be excluded
because he lacks sufficient expertise and has not performed an independent analysis of switching costs.
Dr. Gilbert's conclusions in short are that the cost of
switching away from the SDRAM standards enhanced
Rambus's market power. See Gilbert report ¶
13(c)-(e). Dr. Gilbert's conclusions contain estimates
of the switching costs the Manufacturers faced, yet Dr.
Gilbert concedes that he cannot estimate those
switching costs. Id. at ¶ 86. Rambus argues that
therefore Dr. Gilbert should not be allowed to testify
to his conclusions based on switching costs. Rambus's
argument seeks too much. Dr. Gilbert is qualified, has
done the analysis, and made conclusions about the
effects of switching costs on market power. He may
testify that “switching costs provide a measure of
enhancement to Rambus's market power that resulted
from JEDEC's decision to incorporate the Rambus
technologies into the JEDEC DRAM standards.” Id. at
¶ 13(d).
Rambus's argument does have merit, however, if
Dr. Gilbert intends to testify to that a “reasonable
estimate of switching costs totals billions of dollars”
or any specific dollar amount for switching costs. Id.
at ¶ 13(d). Rambus may believe that the Manufacturers intend to have Dr. Gilbert do so because Dr. Gilbert's “Summary of Conclusions” refers to “billions of
dollars.” This estimate is not based on Dr. Gilbert's
own research but on Dr. McArdle's analysis. See id. ¶¶
87-89. Were Dr. Gilbert to attempt to testify to the
amount of switching costs, it would be clearly improper given that he concedes that “it is beyond my
training and expertise to reach my own independent
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conclusions regarding the specific costs that DRAM
suppliers and other industry participants would incur
in conjunction with a switch to an interface technology
that avoided Rambus's claimed patent rights.” Id. ¶ at
86. As with the technological viability of alternatives,
it is beyond Dr. Gilbert's expertise to testify to the
amount of switching costs. Dr. Gilbert may, however,
rely on other evidence and testimony to draw conclusions about the economic effect of those costs.
D. Monopoly Power
Rambus next argues that Dr. Gilbert's conclusions
that “Rambus has achieved a monopoly position in the
relevant markets” and that “Rambus's monopoly position is durable” must be kept out because these
conclusions are based on “assumptions rather than
expert economic analysis.” Mot. In Limine No. 1 at
9-10. Rambus also reiterates its argument that the
Manufacturers (and Dr. Gilbert) cannot argue that
Rambus has power without conceding that Rambus's
patents are valid and infringed. The court has previously observed, and the Manufactures acknowledge,
that Dr. Gilbert's opinion will be predicated on the
infringement and validity of Rambus patents. If it is
later determined that Rambus's patents are not infringed or are invalid, any verdict in favor of the
Manufacturers on their antitrust claims will have to be
set aside. Rambus, of course, has consistently and
strenuously argued that its patents are valid and infringed. The “assumptions” argument is based on the
truth of the Manufacturers' allegations regarding relevant markets and switching costs. These positions of
course may be discredited at trial. That is not, however, a basis for excluding Dr. Gilbert at this stage. If
Rambus's argument were the law, no expert could
testify to any conclusion that did not rest on factual
stipulations by the parties.
power from conduct other than competition on the
merits.
Gilbert report, ¶ 13(f). Dr. Gilbert concedes he
has no “special expertise to address whether Rambus's
conduct violated JEDEC's written rules.” Id. ¶ 38. He
also disclaims any expertise to determine “the intent of
Rambus and other participants in JEDEC” and “the
appropriate legal standard for evaluating Rambus's
conduct in JEDEC.” Id. ¶ 9. Dr. Gilbert “assume[s] for
the purpose of [his] analysis that during the time
Rambus was a member of JEDEC and thereafter,
Rambus undertook a course of conduct that deceived
and misled JEDEC member companies.” Id. ¶ 48. Dr.
Gilbert's report then summarizes the conduct he assumed occurred. Id. ¶¶ 49-59.
E. Anticompetitive Conduct
*13 Rambus's Motion In Limine No. 1 has merit
with respect to its challenge to Dr. Gilbert's conclusions on anticompetitive conduct. Dr. Gilbert opines
that:
Against this background of disclaimers and assumptions, Dr. Gilbert's proposed testimony and conclusion as to anticompetitive conduct are beyond his
area of expertise and without foundation. As Rambus
correctly points out, Dr. Gilbert's report merely attaches the label “anticompetitive” to the Manufacturers' pleadings. He has conducted no economic analysis
to explain why any assumed conduct should be
deemed “anticompetitive.” Putting aside whether the
testimony has any reliable basis, his testimony in this
regard is simply not helpful to the trier of fact, and
therefore cannot be admitted. Even if Dr. Gilbert's
opinion testimony regarding anticompetitive conduct
could be admitted under Rule 702, its prejudicial
effect greatly outweighs any purported relevance and
is subject to exclusion under Rule 403. See, e.g.,
United States v. Dukagjini, 326 F.3d 45, 54-56 (2d
Cir.2002) (discussing the impropriety of allowing an
expert witness to make “sweeping conclusions,”
summarize the case, or stray from their expertise in the
case of a drug prosecution). Accordingly, Dr. Gilbert
may not testify regarding Rambus's conduct at JEDEC. Dr. Gilbert may not testify regarding whether
such conduct is “anticompetitive.” Dr. Gilbert's opinion set forth in paragraph 13(f) of his summary of
conclusions may not be presented to the jury.
In my opinion, Rambus's conduct should be deemed
anticompetitive because Rambus manipulated the
expectations of JEDEC members and distorted the
standard setting process. My conclusion stands irrespective of whether Rambus violated a specific
JEDEC rule regarding disclosure. The relevant issue
is whether Rambus acquired heightened market
F. Causation
Rambus's final challenge to the conclusions of Dr.
Gilbert's report focuses on causation, specifically Dr.
Gilbert's conclusion that “Rambus's alleged course of
conduct resulted in its ability profitably to charge
royalty rates in excess of the rate, if any, that it would
have been able to charge in the absence of its disputed
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behavior.” Gilbert report ¶ 13(h). Dr. Gilbert discusses
causation in part VIII of his report. See id. ¶¶ 124-137.
While part VIII is rich in assumed facts, it lacks any
expert analysis of why those assumed facts lead to a
finding of causation. Dr. Gilbert's expertise adds
nothing to the facts the Manufacturers hope to prove
that would be helpful to the jury. Nor does Dr. Gilbert
explain the “reliable methods” he applied to decide
that Rambus's conduct caused its increase in market
power.
*14 The Manufacturers argue that Dr. Gilbert's
report “appl[ies] economic analysis,” and highlight
Dr. Gilbert's discussion of reasonable royalty rates in
paragraph 135 of his report. Opp. to Mot. In Limine
No. 1 at 16. Dr. Gilbert's recitation of an inequality
does not convert a paragraph of advocacy into “economic analysis.” Paragraph 135 begins with a swipe at
Rambus's legal arguments in prior cases, then discusses how Dr. Gilbert defines the amount of a RAND
royalty. It is not entirely clear how the paragraph
relates to Dr. Gilbert's opinion on causation, and the
Manufacturers' reliance on it as particularly illustrative of Dr. Gilbert's expert reasoning seems misplaced.
At trial, the jury will be able to determine on the
basis of the evidence of Rambus's conduct and the
expert testimony regarding market definition and
monopoly power whether Rambus's conduct caused
its alleged acquisition of monopoly power. The jury
does not need Dr. Gilbert's personal opinion on the
question to help them. See, e.g., Rottlund Co. v. Pinnacle Corp., 452 F.3d 726, 732 (8th Cir.2006) (reversing district court's allowance of expert testimony
on whether the defendant independently created a
work of authorship because jury did not need expert
help on that issue).
G. “Vouching”
Having challenged each of Dr. Gilbert's report's
conclusions, Rambus next focuses its ire on Dr. Gilbert's allegedly improper “vouching” for the quality of
other experts' testimony. In particular, Rambus points
to long stretches of Dr. Gilbert's report wherein he
summarizes the findings of the other Manufacturers'
expert witnesses. See, e.g., Gilbert report ¶¶ 83-121.
Particularly troublesome paragraphs include phrases
like “[i]n my view, the foregoing testimony is consistent with Dr. McArdle's overarching conclusion
[regarding switching costs].” Id. ¶ 95. The Manufacturers argue that Dr. Gilbert is not improperly
vouching, but explaining the factual basis and underlying assumptions of his later analysis.
Dr. Gilbert is allowed to explain the basis for his
opinions. For example, Dr. Gilbert can explain that he
relied on Dr. McArdle's conclusions about the existence of switching costs and McAlexander's analysis
of technological alternatives. As the Manufacturers
point out, this is “absolutely necessary” for the jury to
decide whether to accept or reject Dr. Gilbert's analysis. Dr. Gilbert will not, however, be permitted to
spruce up the Manufacturers' other experts' testimony
at trial by vouching for its consistency or accuracy.
Such testimony would invade the province of the jury,
and it is also far afield from Dr. Gilbert's expertise
given his professed lack of knowledge in the subject
areas covered by the other experts.
Paragraph 95 of Dr. Gilbert's report is an illustrative example of how Dr. Gilbert vouches for the testimony of other experts. Paragraph 95 follows a
lengthy recitation of evidence elicited at the FTC trial,
which Dr. Gilbert then explains is “consistent” with
Dr. McArdle's analysis. Dr. Gilbert may explain that
his opinions on monopoly power rest on the switching
costs faced by the DRAM industry, and he may cite to
evidence in the record for testimony supporting a
“lock-in.” However, he may not state that the testimony of one witness reinforces the testimony of
another. As Dr. Gilbert has conceded, he has no expertise to enable him to calculate switching costs. See
id. at ¶ 86. Assertions that the testimony of one witness supports that of another is a proper subject of
argument but not a subject of expert testimony.
H. Additional Opinions
*15 Rambus concludes by moving the court to
exclude Dr. Gilbert's opinions on two issues: whether
JEDEC members should have known Rambus had
relevant intellectual property and whether JEDEC
minutes were confidential. Rambus argues that Dr.
Gilbert has no relevant expertise (being an economist)
to opine on these two subjects.
As a preliminary matter, it is not clear that the
Manufacturers oppose Rambus's motion on these
points. See Opp. to Mot. in limine at 17-18. The
Manufacturers appear to argue that Dr. Gilbert is not
offering opinions on these subjects, but that he has
made assumptions regarding those two issues that
inform his expert opinions. Dr. Gilbert's report (sec-
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tions IX.A and IX.C, ¶¶ 138-150) recites some assumed facts and argument but contains no analysis.
Putting that aside, these two issues are questions of
fact on which an economic expert's opinion is not
helpful. Accordingly, Dr. Gilbert may not testify as to
his opinion on these two additional issues because
they are beyond his expertise and his opinions are not
helpful. To the extent that these issues inform his
expert opinions, Dr. Gilbert may, however, explain
that he assumed that JEDEC members should not have
known about Rambus's IP and that he assumed that
JEDEC minutes were confidential but he cannot
comment on the accuracy of the assumptions.
IV. ORDER
For the foregoing reasons, the court denies
Rambus's Motion for Summary Judgment No. 1 on
Monopolization. The court grants in part and denies in
part Rambus's Daubert Motion No. 1:
1. Dr. Gilbert may testify as to his opinions set
forth in his Summary of Conclusions paragraphs
13(a), (b), (c) and (d) (to the extent of assuming that
there were switching costs and, if so, that those costs
enhanced Rambus's market power) and (e);
2. Dr. Gilbert may not testify to his conclusions in
paragraph 13(d) that switching costs would total “billions of dollars” or any other specific dollar amount,
or to any conclusions in paragraph 13(f), 13(g) and
13(h); and
3. Dr. Gilbert may not express an opinion on
whether JEDEC members should have known that
Rambus had relevant intellectual property and
whether JEDEC minutes were confidential (but he can
assume those alleged facts as part of the bases for his
opinions).
N.D.Cal.,2008.
Hynix Semiconductor Inc. v. Rambus Inc.
Not Reported in F.Supp.2d, 2008 WL 73689
(N.D.Cal.), 2008-1 Trade Cases P 76,047
END OF DOCUMENT
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