SCIENCE APPLICATIONS INTERNATIONAL CORP. v. USA
Filing
419
REPORTED OPINION (reissued for publication of 415 **SEALED** MEMORANDUM AND ORDER DENYING in part 352 Plaintiff SAIC's Motion to Strike Untimely Non-Infringing Alternatives and Non-Infringement Theories, as it pertains to the n on-infringing alternatives theories; DENYING 350 SAIC's Daubert Motion to Exclude Testimony Regarding Alleged Non-Infringing Alternatives; GRANTING in part and DENYING in part 353 Defendants' Joint Rule 702 Motion to Partially Exclude the Amended Expert Damages Report of David A. Haas). Signed by Judge Eleni M. Roumel. (ms) Service on parties made.
In the United States Court of Federal Claims
SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION,
Plaintiff,
v.
THE UNITED STATES,
Defendant,
and
MICROSOFT CORPORATION,
No. 17-cv-825
Filed Under Seal: December
14, 2023
Publication: January 9, 2024 1
Intervenor-Defendant,
and
L3 TECHNOLOGIES, INC.,
Third-Party Defendant.
Gwendolyn Tawresey, Troutman Pepper LLP, Washington, D.C. argued for Plaintiff. With her on
the briefs were Orion Armon, Cooley LLP, Denver, C.O.; and DeAnna D. Allen and Stephen R.
Smith of Cooley LLP, Washington, D.C.
Hayley A. Dunn, United States Department of Justice, Civil Division, Washington, D.C. argued
for Defendant. With her on the briefs were Brian M. Boynton, Principal Deputy Assistant Attorney
General, Washington, D.C.; and Matthew D. Tanner, Scott Bolden, and Gary L. Hausken of the
United States Department of Justice, Civil Division, Washington, D.C.
Thomas L. Halkowski of Fish & Richardson P.C., Washington, D.C. for Intervenor-Defendant.
With him on the briefs were Ahmed J. Davis, W. Freeman, Jr., Daniel Y. Lee, and Laura C.
1
This Memorandum and Order was filed under seal, in accordance with the Protective Order
entered in this case (ECF No. 34) and was publicly reissued after incorporating all appropriate
redactions proposed by the parties (ECF No. 418-1). The two versions are substantively identical,
except for the publication date and this footnote.
1
Whitworth of Fish & Richardson P.C., Washington, D.C.; and John Thornburgh, Fish &
Richardson P.C., San Diego, C.A.
William C. Bergmann of Baker & Hostetler LLP, Washington, D.C. argued for Third-Party
Defendant. With him on the briefs were Charles C. Carson and Cassandra Simmons of Baker &
Hostetler LLP, Washington, D.C.; and Phillip D. Wolfe of Baker & Hostetler LLP, Philadelphia,
P.A.
MEMORANDUM AND ORDER
I.
Introduction
On June 19, 2017, Plaintiff Science Applications International Corporation (SAIC) filed
the present action alleging literal patent infringement pursuant to 28 U.S.C. § 1498(a) against
Defendant the United States (the Government). Complaint (ECF No. 1) (Compl.) ¶¶ 1–3. 2 SAIC
contends that the Government has infringed SAIC’s patents “by entering into contracts with
Plaintiff’s competitors for the manufacture and subsequent use of night vision goggle weapon
systems with specialized heads up displays that allegedly use Plaintiff’s patented technology.”
Sci. Applications Int’l Corp. v. United States, 148 Fed. Cl. 268, 269 (2020); see Compl. ¶¶ 2, 37.
This Court has issued several opinions throughout the course of this litigation, familiarity
with which is presumed. 3 See, e.g., Sci. Applications Int’l Corp. v. United States, 135 Fed. Cl. 661
(2018); Sci. Applications Int’l Corp., 148 Fed. Cl. at 268; Sci. Applications Int’l Corp. v. United
States, 154 Fed. Cl. 594 (2021); Sci. Applications Int’l Corp. v. United States, 156 Fed. Cl. 486
(2021); Sci. Applications Int’l Corp. v. United States, 161 Fed. Cl. 373 (2022); Sci. Applications
2
Citations throughout this Memorandum and Order reference the ECF-assigned page numbers,
which do not always correspond to the pagination within the document.
3
Since its inception in June 2017, this action has been reassigned four times to different judges.
See Sci. Applications Int’l Corp., 148 Fed. Cl. at 270; see also ECF No. 25 (Notice of
Reassignment, dated April 5, 2018); ECF No. 68 (Notice of Reassignment, dated June 21, 2019);
ECF No. 85 (Notice of Reassignment, dated July 23, 2019); ECF No. 113 (Notice of Reassignment
to undersigned judge, dated February 27, 2020).
2
Int’l Corp. v. United States, 162 Fed. Cl. 213 (2022); Sci. Applications Int’l Corp. v. United States,
163 Fed. Cl. 257 (2022); Sci. Applications Int’l Corp. v. United States, No. 17-825 (Fed. Cl. Sept.
28, 2023) (ECF No. 401) (Combined Summary Judgment Opinion). The following three motions
are pending before this Court and are ripe for adjudication:
•
Plaintiff SAIC’s Daubert Motion to Exclude Testimony Regarding Alleged Non-Infringing
Alternatives (ECF No. 350) (SAIC Daubert) 4
•
Plaintiff SAIC’s Motion to Strike Untimely Non-Infringing Alternatives and NonInfringement Theories (ECF No. 352) (SAIC MTS) 5
•
Defendants’ Joint Rule 702 Motion to Partially Exclude the Amended Expert Damages
Report of David A. Haas (ECF No. 353) (Def. Daubert) 6
The Court heard argument on these motions, and the motions are now ripe for adjudication.
Oral Argument Transcript, dated June 22, 2023 (ECF No. 400) (OA Tr.). A background summary
pertinent to the current motions follows.
4
See Defendants’ Response in Opposition to SAIC’s Daubert Motion to Exclude Testimony
Regarding Alleged Non-Infringing Alternatives (ECF No. 366) (SAIC Daubert – Def. Resp.);
SAIC’s Reply in Support of its Daubert Motion to Exclude Testimony Regarding Alleged NonInfringing Alternatives (ECF No. 383) (SAIC Daubert – SAIC Reply).
5
See Defendants’ Opposition to SAIC’s Motion to Strike Non-Infringing Alternatives and NonInfringement Theories (ECF No. 367) (SAIC MTS – Def. Resp.); SAIC’s Reply in Support of its
Motion to Strike Untimely Non-Infringing Alternatives and Non-Infringement Theories (ECF No.
382) (SAIC MTS – SAIC Reply). In the Court’s Memorandum and Opinion dated September 28,
2023, the Court denied, in part, Plaintiff SAIC’s Motion to Strike Untimely Non-Infringing
Alternatives and Non-Infringement Theories (ECF No. 352), solely as it pertains to Microsoft’s
non-infringement theory. Combined Summary Judgment Opinion at 19. As such, the remainder
of that motion is addressed by the present Memorandum and Order.
6
See SAIC’s Opposition to Defendants’ Joint Rule 702 Motion to Partially Exclude the Amended
Expert Damages Report of David A. Haas (ECF No. 365) (Def. Daubert – SAIC Resp.); Joint
Reply in Support of Defendants’ Rule 702 Motion to Partially Exclude the Damages Report of
David A. Haas (ECF No. 384) (Def. Daubert – Def. Reply).
3
A. Background
a.
The Alleged Infringing Parties
The Government has entered into several contractual arrangements with various parties to
develop and manufacture the accused technology. On May 9, 2014, the Government, acting by
and through the Department of the Army (the Army), awarded two contracts for the procurement
of the Enhanced Night Vision Goggle-III (ENVG-III) and the Family of Weapon Sights –
Individual (FWS-I) to BAE Systems, Inc. (BAE) and DRS Networks & Imaging Systems, LLC
(DRS). Compl. ¶¶ 2, 37. Neither BAE nor DRS have joined this suit.
On November 20, 2018, Intervenor-Defendant Microsoft Corporation (Microsoft) entered
into a contract with the Government to develop an
, which includes implementation of the Rapid Target Acquisition (RTA) feature relevant
to SAIC’s infringement claims. See Microsoft’s Unopposed Motion to Intervene Pursuant to Rule
24 (ECF No. 59) at 1. On April 30, 2019, Microsoft filed an unopposed Motion to Intervene in
this action under Rule 24 of the Rules of the United States Court of Federal Claims (Rules), which
this Court granted on May 6, 2019. See id.; Order Granting Intervention and Amending the
Schedule, dated May 6, 2019 (ECF No. 60) (granting Microsoft’s Motion to Intervene). On
September 28, 2023, this Court granted Microsoft’s Motion for Summary Judgment of NonInfringement. Combined Summary Judgment Opinion at 98.
On May 30, 2019, the Army entered into two separate other transaction agreements (OTAs)
with L3 Technologies, Inc. (L3) and Harris Corporation (Harris) to develop a prototype for an
Enhanced Night Vision Goggle-Binocular (ENVG-B) that also requires implementation of the
RTA technology at issue in this action. See Memorandum and Order, dated May 12, 2020 (ECF
No. 120) (May 12, 2020 Memorandum and Order) at 3. Defendant filed a Motion to Notify L3
4
and Harris as interested third parties pursuant to Rule 14(b) on March 10, 2020, which this Court
granted on May 12, 2020. See Motion to Notify Interested Party L3 Technologies, Inc. and Harris
Corporation Pursuant to RCFC 14(b) (ECF No. 114); May 12, 2020 Memorandum and Order at
9–10 (granting Defendant’s Motion to Notify L3 and Harris). Accordingly, Rule 14(b) notices
were issued to L3 and Harris, care of Elbit Systems of America, LLC (Elbit), 7 on May 12, 2020.
See Notice to Third Parties (L3 and Harris) pursuant to Rule 14(b)(1) (ECF No. 122). On July 14,
2020, L3 filed its Answer to SAIC’s Complaint, entering the case as a third-party defendant. L3
Technologies, Inc. Answer (ECF No. 131). In contrast, Elbit filed a Notice with the Court
declining to file any third-party pleadings. See Notice by Elbit Systems of America, LLC, dated
July 29, 2020 (ECF No. 135).
b.
The ’230 Patent
The only patent remaining at issue in this action is U.S. Patent No. 9,229,230 (the ’230
Patent). See Joint Stipulation of Invalidity and Motion for Partial Summary Judgment Regarding
the Asserted Patents (ECF No. 208) at 2. The ’230 Patent includes forty-two total claims, three of
which are independent claims: claims 1, 15, and 29. See generally ’230 Patent. Familiarity with
the ’230 Patent is presumed, as is this Court’s September 28, 2023 Memorandum and Opinion,
which includes a detailed explanation of the patent. Combined Summary Judgment Opinion at 8–
16.
7
Though the Government awarded Harris one of the May 30, 2019 OTAs, the division of Harris
responsible for developing the company’s night vision technology was spun-off and purchased by
Elbit Systems of America, LLC (Elbit), which is the U.S. subsidiary of Elbit Systems, Ltd. See
May 12, 2020 Memorandum and Order at 3 n.1.
5
c.
Fact & Expert Discovery
The parties have invested considerable time and resources into discovery practice
throughout the course of this action, including previously-filed motions to compel that the Court
has denied. See Order, dated June 1, 2022 (ECF No. 278) at 1. Ultimately, fact discovery ended
on August 9, 2022, and expert discovery ended on December 13, 2022. See Scheduling Order,
dated June 14, 2022 (ECF No. 285) at 2; Order, dated November 16, 2022 (ECF No. 326) at 2.
Four expert reports rest at the heart of the three pending motions. On November 4, 2022,
SAIC served Defendants with a copy of the Amended Expert Damages Report of David A. Haas,
SAIC’s damages expert. See Def. Daubert at 7. The report sought to amend Mr. Haas’ original
Expert Damages Report, dated September 30, 2022. See id. On November 22, 2022, Defendants
served SAIC with rebuttal expert reports from Dr. Hany Farid, Defendants’ source code expert;
Dr. John Villasenor, Defendants’ technical expert; and Ms. Kimberly Schenk, Defendants’
damages expert. See SAIC Daubert at 13.
B. Summary of Rulings
For the reasons stated in this Memorandum and Order, the Court orders the following
disposition of the parties’ three pending motions. Plaintiff SAIC’s Motion to Strike Untimely
Non-Infringing Alternatives and Non-Infringement Theories (ECF No. 352) is DENIED in part,
as it pertains to the non-infringing alternatives theories. 8 Plaintiff SAIC’s Daubert Motion to
Exclude Testimony Regarding Alleged Non-Infringing Alternatives (ECF No. 350) is DENIED.
8
See supra note 5 (“In the Court’s Memorandum and Opinion dated September 28, 2023, the
Court denied, in part, Plaintiff SAIC’s Motion to Strike Untimely Non-Infringing Alternatives and
Non-Infringement Theories (ECF No. 352), solely as it pertains to Microsoft’s non-infringement
theory.”).
6
Defendants’ Joint Rule 702 Motion to Partially Exclude the Amended Expert Damages Report of
Davis A. Haas (ECF No. 353) is GRANTED in part and DENIED in part.
II.
Plaintiff’s Motion to Strike
On March 13, 2023, SAIC filed a Motion to Strike urging the Court to strike Defendants’
non-infringing alternatives theories as untimely and inadequately disclosed. 9 See generally SAIC
MTS. Accordingly, SAIC moves to strike the following items from the record:
•
Paragraphs 7, 11–19, 23, 24, 26–30, 65–70, and 128–30 from Appendix D to Dr. John
Villasenor’s Expert Report (ECF No. 350-1) (Villasenor Report Appendix D or Villasenor
Rpt. App. D);
•
Paragraphs 91–93 from Appendix C to Dr. John Villasenor’s Expert Report (ECF No. 3506) (Villasenor Report Appendix C or Villasenor Rpt. App. C);
•
Paragraphs 98, 175, 177–82, 188, 198, 281, 286, 297, and 395–99 and associated
calculations in Schedule 7.0 of Ms. Kimberly Schenk’s expert report (ECF No. 350-2)
(Schenk Report or Schenk Rpt.);
•
Paragraphs 18–25 of Dr. Hany Farid’s Rebuttal Expert Report on Infringement (ECF No.
350-9) (Farid Report or Farid Rpt.); and
•
Paragraphs 2.a–2.e of the Declaration of Microsoft Witness
(ECF No. 352-15)
.
See SAIC MTS at 9, 22, 34.
This Court previously denied in part SAIC’s Motion to Strike, solely as it pertains to
Microsoft’s non-infringement theory. See supra note 5; Combined Summary Judgment Opinion
at 19. The Court now addresses the remaining sections of SAIC’s Motion to Strike regarding the
timeliness of Defendants’ non-infringing alternatives theories. See Combined Summary Judgment
Opinion at 17 n.14.
9
SAIC’s Motion to Strike also contested the timeliness of Microsoft’s non-infringement theories.
SAIC MTS at 23–33. This Court’s September 28, 2023 Memorandum and Order denied the
Motion as it pertains to Microsoft’s non-infringement theory. See Combined Summary Judgment
Opinion at 19.
7
night vision goggles and weapon systems infringe the ’230 Patent through use of ‘spatially aligned’
or ‘bubble’ mode in the Rapid Target Acquisition (‘RTA’) functionality.”).
Defendants contend, however, that the accused devices offer two alternative, noninfringing RTA modes. L3’s ENVG-B system and Microsoft’s
devices offer three different
RTA modes—the Picture-in-Picture (PiP) mode, full weapon sight (FWS) mode, and accused
spatially aligned or bubble mode. See Villasenor Rpt. App. C ¶¶ 92, 92 n.40. SAIC has not
accused either the PiP mode or FWS mode of infringing the ’230 Patent. See SAIC MTS at 6
(“SAIC alleges that one mode of Rapid Target Acquisition (‘RTA’) infringes the asserted claims.
There are two other RTA modes that are not accused.”). As such, Defendants argue that
Villasenor Rpt. App. C ¶ 92.
The second non-infringing alternative theory posited by Defendants is that Microsoft’s
devices can operate in bubble mode without infringing the ’230 Patent by
. See Schenk Rpt. ¶ 281
;
Microsoft Corporation’s First Supplemental Response to SAIC’s Fourth Set of Interrogatories (No.
19) (ECF No. 350-4) (Microsoft’s Resp. to Interrog. No. 19) at 5
. SAIC’s
9
Motion to Strike contests the timeliness and adequacy of Defendants’ disclosure of the two
aforementioned non-infringing alternatives theories.
B. Applicable Legal Standards
Rule 33 governs interrogatories between parties. See Rule 33(b)(3) (“Each interrogatory
must, to the extent it is not objected to, be answered separately and fully in writing under oath.”).
During fact discovery, parties may issue contention interrogatories to “discover the factual basis
of the allegations in a complaint, answer, or counterclaim, or to determine the theory of the
opposing party’s case.” Contention Interrogatory, BLACK’S LAW DICTIONARY (11th ed. 2019).
Rule 26(a)(2) governs disclosures related to parties’ expert witnesses. Specifically, an
expert’s report must contain “a complete statement of all opinions the [expert] witness will express
and the basis and reasons for them.” Rule 26(a)(2)(B)(i). “A party must make these disclosures
at the times and in the sequence that the court orders.” Rule 26(a)(2)(D).
Rule 26(e)(1) imposes a duty on parties to supplement their interrogatory responses and
expert reports in certain circumstances:
A party who has made a disclosure under [Rule] 26(a)—or who has responded to
an interrogatory, request for production, or request for admission—must
supplement or correct its disclosure or response . . . in a timely manner if the party
learns that in some material respect the disclosure or response is incomplete or
incorrect, and if the additional or corrective information has not otherwise been
made known to the other parties during the discovery process or in writing; or . . .
as ordered by the court.
Rule 26(e)(1)(A)–(B). Additionally, “[f]or an expert whose report must be disclosed under [Rule]
26(a)(2)(B), the party’s duty to supplement extends both to information included in the report and
to information given during the expert’s deposition.” Rule 26(e)(2).
Failure to comply with these disclosure requirements can result in sanctions. Under Rule
37(c)(1), “[i]f a party fails to provide information or identify a witness as required by [Rule] 26(a)
or (e), the party is not allowed to use that information or witness to supply evidence on a motion,
10
at a hearing, or at a trial, unless the failure was substantially justified or is harmless.” Rule
37(c)(1). The decision to impose sanctions and the extent of any such sanctions are at the trial
court’s discretion. See Rule 37(c)(1)(A)–(C) (“In addition to or instead of [the exclusion] sanction,
the court, on motion and after giving an opportunity to be heard . . . may order payment of the
reasonable expenses, including attorney’s fees, caused by the failure . . . [and] may impose other
appropriate sanctions . . . .”) (emphasis added); see, e.g., Precision Pine & Timber, Inc. v. United
States, No. 98-720 C, 2001 WL 1819224, at *3 (Fed. Cl. Mar. 6, 2001) (citing Adkins v. United
States, 816 F.2d 1580, 1581–82 (Fed. Cir. 1987)) (“The decision on whether to impose discovery
sanctions, either pursuant to its inherent authority or under existing Rules of the Court of Federal
Claims rests within the sound discretion of the Court.”); Bowman Constr. Co. v. United States, No.
18-1822C, 2020 WL 1970546, at *3 (Fed. Cl. Apr. 23, 2020) (quoting Ingalls Shipbuilding, Inc.
v. United States, 857 F.2d 1448, 1450 (Fed. Cir. 1988)) (“The decision whether to impose
discovery sanctions rests within the sound discretion of the trial court.”).
A party that fails to meet its discovery obligations may avoid sanctions if it demonstrates
that its failure was either “substantially justified or is harmless.” Rule 37(c)(1); see, e.g., Zoltek
Corp. v. United States, 71 Fed. Cl. 160, 167 (2006) (“Circuit courts applying the federal rule have
held that the sanction of exclusion is automatic and mandatory unless the party violating [Rule] 26
shows that the violation was justified or harmless.”); Scott Timber, Inc. v. United States, 93 Fed.
Cl. 221, 226 (2010) (noting “the burden is on the offending party to show that its violation was
either justified or harmless” and citing as support cases from the First, Fifth, and Seventh Circuits).
This Court has wide discretion to determine whether a non-disclosing party’s conduct was
“substantially justified or harmless.” See, e.g., Hanover Ins. Co. v. United States, 137 Fed. Cl.
479, 483 (2018) (citing Cohen v. United States, 100 Fed. Cl. 461, 468 (2011)).
11
When determining whether a disclosure failure warrants sanctions or, rather, was
“substantially justified or harmless,” this Court may consider a variety of factors: (1) prejudice or
surprise to the opposing party; (2) ability to cure that prejudice or surprise; (3) the importance of
the challenged evidence; (4) the extent to which admitting the evidence would disrupt trial; (5) the
non-disclosing party’s explanation for their conduct; and (6) whether the party acted in bad faith
or willfully. 11 See, e.g., SAIC, 163 Fed. Cl. at 272–73; see also MicroStrategy Inc. v. Bus. Objects,
S.A., 429 F.3d 1344, 1357 (Fed. Cir. 2005) (quoting S. States Rack & Fixture, Inc. v. SherwinWilliams Co., 318 F.3d 592, 596 (4th Cir. 2003)) (referencing a five-factor test that included
surprise, ability to cure surprise, disruption of trial, the importance of the testimony, and the party’s
11
Though some courts have required a showing of willfulness or bad faith prior to imposing
sanctions, such a requirement is not universally applied. See, e.g., SAIC v. United States, 162 Fed.
Cl. 257, 272 n.19 (2022) (discussing decisions by various circuits and whether those courts
required a showing of willfulness). Typically, courts will not sanction by dismissing a case, or
imposing a sanction tantamount to dismissal, absent a showing of willfulness or bad faith. See,
e.g., Intelligent Invs., Inc. v. United States, No. 2021-2310, 2022 WL 17075056, at *1 (Fed. Cir.
Nov. 18, 2022) (“[W]e conclude that the Claims Court abused its discretion by dismissing the case
without finding that the noncompliance was willful or in bad faith . . . .”); Securiforce Int’l Am.
LLC v. United States, 127 Fed. Cl. 386, 396 (2016) (quoting Ingalls Shipbuilding, Inc., 857 F.2d
at 1451) (noting sanctions such as “de facto dismissal” necessitate a showing of bad faith or
willfulness, although Rule 37 does not explicitly state such a requirement). However, courts have
not demonstrated a clear consensus whether demonstration of bad faith or willfulness is necessary
prior to imposing lesser sanctions. Compare Toyrrific, LLC v. Karapetian, 606 F. App’x. 365 (9th
Cir. 2015) (declining to affirm evidentiary exclusion for a Rule 26 violation that had no evidence
of bad faith) with Zoltek, 71 Fed. Cl. at 168 (refusing to require showing of bad faith and “instead
choosing to subsume it into the justification requirement in analyzing the explanation for the
party’s failure to disclose”). Instead, courts consider whether the sanction is proportionate to the
offending party’s discovery conduct. See, e.g., Adasa Inc. v. Avery Dennison Corp., 55 F.4th 900,
917 (Fed. Cir. 2022) (“And, while district courts may impose [discovery] sanctions for deterrent
effects, the size of the award must bear a reasonable relationship to the harm that occurred.”);
Salgado v. Gen. Motors Corp., 150 F.3d 735, 740 (7th Cir. 1998) (quoting Melendez v. Illinois
Bell Tel. Co., 79 F.3d 661, 672 (7th Cir. 1996)) (refusing to grant dismissal sanctions that were not
“proportionate to the circumstances surrounding [the] party’s failure to comply with discovery
rules”); Canvs Corp. v. United States, 104 Fed. Cl. 727, 733 (2012) (acknowledging that the
discovery sanction imposed was a “fair and appropriate sanction proportional to the misconduct in
question”).
12
explanation for its failure to disclose); David v. Caterpillar, Inc., 324 F.3d 851, 857 (7th Cir. 2003)
(identifying a four-factor test considering prejudice or surprise to the party, the ability to cure
surprise, the likelihood of disruption to trial, and the bad faith or willfulness of the non-disclosing
party); Hitkansut LLC v. United States, 127 Fed. Cl. 101, 107 (2016) (“[T]he court may consider
surprise to the other party, whether there is opportunity to cure that surprise, the proponent’s need
for the evidence at trial, or other factors.”); Banks v. United States, 75 Fed. Cl. 294, 298–99 (2007)
(summarizing the various tests that courts have applied and adopting the approach applied by the
Third, Seventh, and Tenth Circuits).
C. Discussion
SAIC contends that Defendants’ allegedly belated disclosure of their two non-infringing
alternatives theories prejudiced SAIC.
Specifically, SAIC alleges that it only learned of
Defendants’ other modes theory via Defendants’ rebuttal expert reports, and that Microsoft waited
until the last day of discovery and after the completion of all depositions to contend that
. SAIC MTS at 6. As
SAIC argues that the delay was not justified and the resulting prejudice is incurable, SAIC urges
the Court to strike Defendants’ theories and preclude Defendants from presenting such theories at
trial. Id.
a. Other Modes Theory
SAIC argues that “Defendants sprang the new [other modes] theory” for the first time in
rebuttal expert reports, thereby depriving it of the opportunity to depose Defendants’ fact
witnesses, request additional discovery, or address the theory in its own expert reports. Id. at 22.
However, SAIC’s arguments fail to account for the fact that SAIC was aware of the other modes
as non-infringing alternatives as early as May 2, 2022. See L3’s Response to SAIC’s Second Set
13
clarification from L3 on its response, requested further written discovery on the topic, or raised
any concerns with the adequacy of L3’s response. 12 See SAIC MTS – Def. Resp. at 10.
Further, SAIC’s citation in support of its position is inapposite. SAIC MTS – SAIC Reply
at 10 (citing ICM Controls Corp. v. Honeywell Int’l Inc., No. 15:12-CV-1766, 2021 WL 3403734,
at *3 (N.D.N.Y. Aug. 4, 2021)). While the Court in ICM Controls Corp. did, in fact, exclude
evidence of non-infringing alternatives on account of the lack of notice to the patentee due to
“vague and general language” in the interrogatory response, the record in front of this Court is
distinguishable from that in ICM Controls Corp. See 2021 WL 3403734, at *3. As explained in
ICM Controls Corp., “when the alternatives at issue are hypothetical and never existed on the
market . . . the burden shifts to the alleged infringer to demonstrate that the non-infringing
alternative would have been available” and the accused infringer should “alert[] [the patentee] of
its proposed non-infringing alternatives.” Id. In contrast, the other RTA modes named as noninfringing alternatives in L3’s response are not merely hypothetical but are already built into the
accused products. See Villasenor Rpt. App. C ¶¶ 92, 92 n.40. Additionally, unlike the defendant
in ICM Controls Corp., which merely posited potential unnamed, unspecified alternatives in its
interrogatory response, L3 specifically identified the other RTA modes as non-infringing
alternatives. Compare ICM Controls Corp., 2021 WL 3403734, at *2 (noting Defendant’s
12
It is the responding party, i.e., Defendants, who have “an affirmative duty to amend a prior
response if it is materially incomplete or incorrect.” Zoltek, 71 Fed. Cl. at 164. In evaluating
whether Defendants had an affirmative duty, the Court considers the following four factors: “(1)
whether there was a prior response; (2) whether the response became materially incorrect or
incomplete; (3) whether the [party] knew that the response was incomplete; and (4) whether the
corrective information was otherwise made known to [the movant] through the discovery process
or in writing.” Id. Whether the opposing party requested further clarification—for example,
through a motion to compel—is relevant to this inquiry. See id. at 166 (explaining how Defendant
was “on notice” that its interrogatory response was incomplete due to multiple requests from
Plaintiff for additional information).
15
interrogatory response merely stated, “Discovery revealed the existence of several non-patented
competing designs that were in public use during the relevant period when [the accused infringer]
could have redesigned the accused products”) with L3 Resp. to SAIC Second Set of Interrog. at 11
.
Even if this Court were to construe L3’s interrogatory response as somehow inadequate,
the record in front of this Court indicates that any such failure would be “substantially justified or
[] harmless.” Rule 37(c)(1); see Zoltek, 71 Fed. Cl. at 167. Arguably, the main purpose of SAIC’s
Interrogatory No. 14 was to ascertain whether Defendants intended to put forth any non-infringing
alternatives. See L3 Resp. to SAIC Second Set of Interrog. at 10–11. While L3 may not have
responded with the degree of specificity that SAIC had desired, L3’s response, nonetheless,
adequately conveyed the fact that it would claim the other RTA modes as non-infringing
alternatives; in doing so, L3 effectively eliminated, or at least diminished, the potential for surprise
to SAIC. See Hitkansut LLC, 127 Fed. Cl. at 107 (“[T]he court may consider surprise to the other
party . . . .”). Additionally, as explained further below, SAIC had the opportunity to depose
Defendants’ fact witnesses on the factual underpinnings of the non-infringing alternatives theories.
With the Interrogatory Response, deposition testimony, and expert opinions in hand, SAIC has
ample evidence on the record to formulate a counterargument to Defendants’ other modes noninfringing alternatives theory and to challenge the theory at trial without prejudice.
SAIC, however, further claims that Defendants tried to “have it both ways” by preventing
SAIC from deposing Defendants’ witnesses, such as Jason Coffman, L3’s Rule 30(b)(6) witness,
and Dean Kissinger, an Army representative, on non-infringing alternatives theories, but then
relying on conversations between those same witnesses and their expert witnesses to further non-
16
infringing alternatives theories. SAIC MTS – SAIC Reply at 11. SAIC bases its claim on L3’s
objection to its notice of depositions, namely L3’s objection to SAIC’s “Deposition Topic No. 48,”
which focuses on non-infringing alternatives. Id.; see also L3 Technologies, Inc.’s Responses and
Objections to Plaintiff’s Notice of Deposition Under Rule 30(b)(6) (ECF No. 367-5) (L3’s Resp.
and Obj. to Notice of Depo.) at 3–4. In its response, L3 “object[ed] to this topic as seeking
premature expert discovery that will be addressed at the appropriate time during expert discovery.”
L3’s Resp. and Obj. to Notice of Depo. at 4. While L3 did limit the scope of deposition testimony
to exclude any improper lay opinion testimony on technical conclusions as to non-infringing
alternatives, it did not institute a wholesale ban on any and all questions related to the other RTA
modes. See SAIC MTS – Def. Resp. at 14–15. Instead, in emails leading up to the depositions,
L3’s counsel clarified that its “witnesses will be prepared to testify about other modes to a
reasonable degree . . . .” Id. at 15.
As indicated by the record, Defendants’ witnesses did, in fact, provide testimony on the
other modes, and SAIC’s counsel had the opportunity to ask questions regarding the other modes
when pertinent to the testimony of the witnesses being deposed. During his deposition, Mr.
Coffman testified that
. See Deposition
of Jason Coffman, dated July 29, 2022 (ECF No. 367-3) (Coffman Depo. Tr.) at 75:21–77:14,
79:11–80:7. Mr. Kissinger was also deposed on
. Deposition of Dean Kissinger, dated August 5, 2022 (ECF No.
367-4) (Kissinger Depo. Tr.) at 183:19–184:23. While these witnesses did not testify as to how the
other modes technically constitute non-infringing alternatives, it was not their role to do so.
17
Rather, they testified
, and in doing so, they laid out the
factual underpinnings of Dr. Villasenor’s technical opinion on the other modes non-infringing
alternatives theory. See Villasenor Rpt. App. C. ¶¶ 91–94.
SAIC also contests the applicability of the other modes theory to Microsoft’s
devices. 13 SAIC MTS – SAIC Reply at 8–9. However, as previously explained, this Court has
already granted Microsoft’s Motion for Summary Judgment, finding that “Microsoft has provided
substantial fact and expert testimony demonstrating that its accused devices do not practice the
‘display’ operation according to the ’230 patent’s proper claim construction.”
Combined
Summary Judgment Opinion at 151. As such, SAIC’s arguments contesting the applicability of
the other modes theory to Microsoft are now moot and are accordingly DENIED.
As L3 timely disclosed the other modes non-infringing alternatives theory and SAIC had
ample opportunity to address the factual underpinnings of the theory, SAIC’s arguments contesting
the timeliness and adequacy of Defendants’ disclosure of the other modes non-infringing
alternatives theory are DENIED.
13
SAIC argues that L3’s interrogatory response does not apply to Microsoft on account of L3’s
objection to the inclusion of
in the definition of “Accused Instrumentalities.” SAIC MTS –
SAIC Reply at 8; see also L3 Resp. to SAIC Second Set of Interrog. at 3–4 (“L3 objects to the
definition of ‘Instrumentalities’ set forth in the Definitions and Instructions on the grounds that is
[sic] vague, ambiguous, overly broad and seeks information that is not relevant to any claim or
defense to the extent that it would purport to include any products not specifically identified in
Plaintiff’s Infringement Contentions to the U.S. Government, and to the extent that it refers to
‘Systems, developed, made or provided by You or Your contractors, subcontractors, or suppliers
that include an
. . . .”). SAIC also argues that Dr. Villasenor’s and Ms. Schenk’s reliance
on conversations with Mr. Coffman and Mr. Kissinger, who purportedly have no personal
knowledge of Microsoft’s
devices, further supports its position that the other modes theory
does not apply to
. SAIC MTS – SAIC Reply at 9.
18
b.
Theory
SAIC alleges that Microsoft belatedly disclosed its intent to present a non-infringing
alternative theory based on its purported ability to
. SAIC MTS at 18–
21. SAIC argues that Defendants should have, instead, disclosed this theory earlier, when SAIC
still had the opportunity to seek full discovery to address and counter Defendants’
non-infringing alternative theory. Id.
As noted, this Court has already granted Microsoft’s Motion for Summary Judgment,
holding that Microsoft’s
devices do not operate in such a way as to infringe the ’230 Patent.
Combined Summary Judgment Opinion at 151. Therefore, SAIC’s arguments contesting the
timeliness and adequacy of Microsoft’s disclosure of its
non-infringing alternative
theory are DENIED as moot.
D. Conclusion
For the foregoing reasons, this Court DENIES SAIC’s Motion to Strike Untimely NonInfringing Alternatives and Non-Infringement Theories (ECF No. 352), as it pertains to
Defendant’s other modes non-infringing alternatives theory, and DENIES as moot SAIC’s Motion
to Strike Untimely Non-Infringing Alternatives and Non-Infringement Theories (EFC No. 352),
as it pertains to the
III.
non-infringing alternative theory.
Daubert Motions
On March 13, 2023, the parties filed competing Daubert motions seeking the exclusion of
certain expert testimony and, at times, the testimony of fact witnesses relied upon by experts.
First, SAIC filed a Daubert motion urging the Court to exclude testimony by Defendants’
experts on alleged non-infringing alternatives. Specifically, SAIC alleges that the testimony from
Dr. Villasenor, Dr. Farid, and Ms. Schenk fail to satisfy the requirements of Federal Rules of
19
Evidence (FRE) 702 and 703. SAIC Daubert at 6, 16–29; see also FED. R. EVID. 702, 703.
Accordingly, SAIC seeks to exclude the following portions of Defendants’ expert reports and
preclude Defendants from presenting on the theories espoused therein at trial:
•
Paragraphs 32, 34, 36, 37, 43, 128–30 of Appendix D to Dr. Villasenor’s rebuttal report;
•
Paragraphs 36, 37, 40–45 of Dr. Farid’s report;
•
Paragraphs 91–94, including footnote 40, of Appendix C to Dr. Villasenor’s rebuttal report;
and
•
Paragraphs 96, 98, 175, 177–82, 188, 198, 281, 297, 396–99 and associated calculations in
Schedule 7.0 from Ms. Schenk’s rebuttal report.
See SAIC Daubert at 8–9. SAIC also seeks to prevent Microsoft from allegedly introducing expert
testimony at trial through Microsoft fact witnesses, such as
and
. Id. at 9.
Second, Defendants jointly filed a Daubert motion to partially exclude Dr. Haas’ amended
damages report on the basis it fails to satisfy FRE 702 in reaching conclusions that are allegedly
legally erroneous, unreliable, and unsupported by the evidence. Def. Daubert at 6; see also FED.
R. EVID. 702. Accordingly, Defendants seek to exclude the following portions of Mr. Haas’ report
and testimony on the same at trial:
•
Mr. Haas’ opinion that if the Court chooses to award lump sum damages, SAIC would be
entitled to royalties on “Future Accused Units;”
•
Mr. Haas’ opinion regarding apportionment;
•
Mr. Haas’ opinion based on the value of spare parts;
•
Mr. Haas’ opinion that SAIC is entitled to damages for “Accused Development Spend.”
Def. Daubert at 6.
Having considered the parties’ arguments, applicable law, and the record, this Court
DENIES SAIC’s Daubert Motion to Exclude Testimony Regarding Alleged Non-infringing
20
Alternatives (ECF No. 350), as it pertains to non-Microsoft-based theories and witnesses;
DENIES as moot SAIC’s Daubert Motion to Exclude Testimony Regarding Alleged Noninfringing Alternatives (ECF No. 350), as it pertains to Microsoft-based theories and witnesses;
GRANTS Defendants’ Joint Rule 702 Motion to Partially Exclude the Amended Expert Damages
Report of David A. Haas (ECF No. 353), solely as it pertains to the “Future Accused Units”
argument; DENIES Defendants’ Joint Rule 702 Motion to Partially Exclude the Amended Expert
Damages Report of David A. Haas (ECF No. 353), as it pertains to the apportionment and spare
parts arguments; and DENIES as moot Defendants’ Joint Rule 702 Motion to Partially Exclude
the Amended Expert Damages Report of David A. Haas (ECF No. 353), solely as it pertains to the
“Accused Development Spend” argument.
A. Background
At the core of the competing Daubert motions is the admissibility of various opinions and
conclusions reached by the parties’ expert witnesses: Ms. Schenk, Dr. Villasenor, Dr. Farid, and
Mr. Haas. Background relevant to (a) SAIC’s Daubert Motion, and (b) Defendants’ Daubert
Motion is explained further below.
a. Relevant Background Regarding Plaintiff SAIC’s Daubert Motion to
Exclude Testimony Regarding Alleged Non-Infringing Alternatives
On November 22, 2022, Defendants served SAIC with three rebuttal expert reports from
Ms. Schenk, Dr. Villasenor, and Dr. Farid, respectively. See SAIC Daubert at 13. Ms. Schenk,
Defendants’ damages expert, largely focuses her report on calculating a potential damages amount,
including by factoring in the value of the non-infringing alternatives posited by Dr. Villasenor.
SAIC Daubert at 13–14; see Schenk Rpt. ¶¶ 177–82. In calculating any potential damages amount,
Ms. Schenk follows the Georgia-Pacific criteria to determine a hypothetically negotiated royalty
rate. See Schenk Rpt. ¶ 97
21
. For
example, Ms. Schenk considers
Id. at 7. In assessing this Georgia-Pacific factor, Ms. Schenk compares
the three RTA modes, citing to conversations with Mr. Kissinger, Mr. Coffman, and Dr. Villasenor
as well as relying on Dr. Villasenor’s rebuttal report. See, e.g., id. ¶¶ 177–78. Another factor Ms.
Schenk considers is
Id. at 11. Ms. Schenk explains that
Id. ¶ 198. Ms. Schenk also uses her report to respond to SAIC’s
damages expert, Mr. Haas. See id. ¶¶ 281, 297, 396–99. In doing so, she references potential noninfringing alternatives and cites to Dr. Villasenor’s report, conversations with Dr. Villasenor, and
conversations with fact witnesses. See, e.g., ¶281 n.511.
Dr. Villasenor, Defendants’ technical expert, spends time in his report on potential noninfringing alternatives theories. Villasenor Rpt. App. C ¶¶ 91–94; see SAIC Daubert at 13. As
previously previewed in this Court’s discussion of SAIC’s Motion to Strike, these non-infringing
alternatives theories are the other modes theory, in which Defendants claim that two of the RTA
modes serve as non-infringing alternatives, and the
theory, in which Defendants
claim that Microsoft’s
22
Def.
Daubert at 8; Am. Haas Rpt. ¶¶ 14, 16, 92.
Central to Mr. Haas’ report is his method of apportionment. Apportionment is the practice
of identifying the smallest saleable patent unit (SSPPU) and where the SSPPU is a multicomponent product, proceeding to “estimate what portion of the value of that product is
attributable to the patented technology.” VirnetX, Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1327–
28 (Fed. Cir. 2014). Mr. Haas opines that at least one-third of the value of the RTA technology
should be apportioned to RTA bubble mode. Am. Haas Rpt. ¶ 163.
As part of his apportionment process, Mr. Haas attempts to estimate the value of the RTA
technology as a whole. Id. ¶¶ 164–66. To do so, Mr. Haas employs two methods. Under the first
method, he compares the value of a product that includes the RTA technology, such as the ENVGB device, with a product that does not include the RTA technology, such as the SBNVG device.
Id. ¶ 164. Under the second method, he compares the value of spare parts that incorporate the
RTA technology with the value of spare parts that do not incorporate the RTA technology. Id. ¶¶
165–66.
B. Applicable Legal Standards
Pursuant to FRE 702, a witness qualified as an expert may provide expert testimony if four
requirements are met. FED. R. EVID. 702. First, an expert may testify if his “scientific, technical,
or other specialized knowledge will help the trier of fact to understand the evidence or to determine
a fact in issue.” FED. R. EVID. 702(a). Second, the expert’s testimony must be “based on sufficient
facts or data.” FED. R. EVID. 702(b). Third, the expert’s testimony must be “the product of reliable
principles and methods.” FED. R. EVID. 702(c). Fourth, “the expert’s opinion [must] reflect a
reliable application of the principles and methods to the facts of the case.” FED. R. EVID. 702(d).
24
At issue in the present motions is the requirement that expert testimony be “the product of
reliable principles and methods.” FED. R. EVID. 702(c); see SAIC Daubert at 6; Def. Daubert at 6.
When considering whether a methodology is reliable, the Court may consider: (1) whether the
theory is testable; (2) whether the theory has been peer reviewed and published; (3) a theory’s rate
of error; (4) whether the theory is subject to standards and controls; and (5) the scientific
community’s acceptance of a theory. Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 593–
95 (1993); see also Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 152 (1999) (applying the
Daubert principles to technical and specialized expert testimony). These factors, however, are not
definitive and “do not all necessarily apply even in every instance in which the reliability of
scientific testimony is challenged.” Kumho Tire Co., 526 U.S. at 151. For example, at times, it
may be more appropriate to evaluate reliability by focusing on an expert’s personal knowledge or
experience. Id. at 150.
The reliability requirement of an expert’s principles and methods applies equally to the
legal sufficiency of an expert’s opinions. As such, “[i]ncorrect statements of law are no more
admissible through ‘experts’ than are falsifiable scientific theories.” Herbert v. Lisle Corp., 99
F.3d 1109, 1117 (Fed. Cir. 1996); Summit 6, LLC v. Samsung Elecs. Co., Ltd., 802 F.3d 1283,
1295 (Fed. Cir. 2015) (“Under these rules, a district court may exclude evidence that is based upon
unreliable principles or methods, legally insufficient facts and data, or where the reasoning or
methodology is not sufficiently tied to the facts of the case.”).
As a “distinct but integral part of that [reliability] inquiry,” the Court must also determine
whether the data or facts underlying an expert’s methodology are “sufficiently tied to the facts of
the case.” Summit 6, 802 F.3d at 1296; see also Daubert, 509 U.S. at 591 (explaining there must
be an adequate “fit” between expert testimony and the facts of the case). If the “analytical gap
25
between the data and the opinion proffered” is “simply too great,” then the Court must exclude the
expert’s testimony. General Electric Co. v. Joiner, 522 U.S. 136, 146 (1997). If, however, the
Court deems “the methodology is sound, and the evidence relied upon sufficiently related to the
case at hand, disputes about the degree of relevance or accuracy (above this minimum threshold)
may go to the testimony’s weight, but not its admissibility.” I4i Ltd. P’ship v. Microsoft Corp.,
598 F.3d 831, 852 (Fed. Cir. 2010).
FRE 703 governs the type of evidence that experts may consider in formulating their
opinions. Specifically, FRE 703 permits experts to rely on otherwise inadmissible evidence “if
their probative value in helping . . . evaluate the opinion substantially outweighs their prejudicial
effect.” FED. R. EVID. 703. As such, experts may rely on hearsay evidence to form their opinions,
but only after “applying [their] extensive experience and a reliable methodology to the
inadmissible materials.” United States v. Mejia, 545 F.3d 179, 197 (2d Cir. 2008) (internal
quotations omitted).
In general, Daubert inquiries are flexible, and the Court’s role is best described as that of a
“gatekeeper.” Daubert, 509 U.S. at 594 (“The inquiry envisioned by Rule 702 is, we emphasize,
a flexible one.”); Trin-Co Investment Co. v. United States, 130 Fed. Cl. 592, 596–97 (2017). As
emphasized by the Supreme Court in Daubert, this role is a limited one in which the Court must
be careful to focus its review “solely on principles and methodology, not on the conclusions that
they generate.” Summit 6, 802 F.3d at 1295 (quoting Daubert, 509 U.S. at 595). The Court should
be careful, therefore, not to “overstep its gatekeeping role and weigh facts, evaluate the correctness
of conclusions, impose its own preferred methodology, or judge credibility, including the
credibility of one expert over another.” Apple Inc. v. Motorola, Inc., 757 F.3d 1286, 1314 (Fed.
26
Cir. 2014), overruled on other grounds by Williamson v. Citrix Online, LLC, 792 F.3d 1339, 1349
(Fed. Cir. 2015).
C. Discussion
SAIC and Defendants have each filed Daubert motions contesting the admissibility of the
opposing parties’ expert testimony. SAIC contends that Defendants’ experts, Ms. Schenk, Dr.
Villasenor, and Dr. Farid, reached their conclusions concerning damages and non-infringing
alternatives solely through conversations with fact witnesses and failed to conduct any independent
testing or analysis. SAIC Daubert at 6. Further, SAIC claims that the fact witnesses relied upon
by Defendants’ experts would be testifying on “hypothetical non-infringing alternatives that do
not exist.” Id. at 7. SAIC submits that such testimony would run afoul of FRE 602’s requirement
that fact witnesses testify only to facts in their personal knowledge. Id.; see also FED. R. EVID.
602.
Defendants, in turn, move to partially exclude portions of the report of SAIC’s damages
expert, Mr. Haas. See generally Def. Daubert. Defendants allege that the inclusion of “Future
Accused Units” and “Accused Development Spend” as part of the report’s damages calculation
are legally erroneous and that the methods employed to value the RTA technology and apportion
the value of the accused RTA bubble mode are arbitrary and unreliable. See id. at 10–12.
The Court addresses each Daubert motion in turn below.
a. SAIC’s Daubert Motion
SAIC alleges that the opinions presented by Ms. Schenk, Dr. Villasenor, and Dr. Farid fail
to meet the standards for admissible expert opinion under FRE 702 and FRE 703. Furthermore,
SAIC requests that the Court preclude Microsoft’s fact witnesses
and
from presenting what SAIC alleges is improper lay opinion testimony.
27
1. Schenk Report
SAIC claims that Ms. Schenk’s opinions on the impact of the alternative RTA modes in
reducing or limiting damages are unsupported by the record. SAIC Daubert at 28–29. First, SAIC
alleges that Ms. Schenk relied on conversations with fact witnesses without conducting any further
analysis, thereby acting as a mouthpiece for the hearsay of the fact witnesses she spoke with. SAIC
Daubert – SAIC Reply at 5, 15–16. Additionally, SAIC contends that Ms. Schenk overly relied
on Dr. Villasenor’s rebuttal report and conversations with him, which were themselves
unsupported beyond mere reliance on conversations with fact witnesses. SAIC Daubert at 28–29;
see infra Section III(C)(a)(2).
SAIC also asserts that to the extent that Dr. Villasenor’s
conversations with Ms. Schenk exceeded the scope of what he disclosed to SAIC through his own
report, Defendants should be prohibited from “sneak[ing] testimony from Dr. Villasenor that is
outside the scope of his reports into the record by letting Ms. Schenk introduce it as hearsay.”
SAIC Daubert at 29.
SAIC’s arguments rely on a misunderstanding or mischaracterization of Ms. Schenk’s role
in the present action. Ms. Schenk’s role as a damages expert is to calculate damages by evaluating
factors, such as the Georgia-Pacific factors, that are relevant to determining damages; at times,
that analysis may include making certain assumptions, including regarding the availability and
acceptability of non-infringing alternatives. SAIC Daubert – Def. Resp. at 8, 15; see GeorgiaPacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970) (listing 15 factors
the Court found to be generally relevant to determining a reasonable royalty for a patent license).
It is not her role to evaluate the possibility of non-infringing alternatives herself, as that is a role
best left to a technical expert, such as Dr. Villasenor. See Schenk Rpt. ¶ 1
28
; see also Carnegie Mellon Univ. v. Marvell
Tech. Grp., Ltd., 807 F.3d 1283, 1303 (Fed. Cir. 2015), reh’g en banc denied in part, 805 F.3d
1382 (Fed. Cir. 2015) (holding it was proper for district court to conclude that “[f]or areas outside
her expertise,” a damages expert “could, indeed must, rely upon . . . other experts . . . .”);
Greatbatch Ltd. v. AVX Corp., No. 13-723, 2015 WL 9171042, at *5 (D. Del. Dec. 11, 2015)
(explaining how an expert’s consideration of the opinions of another expert’s testimony when he
lacked expertise in a certain technical area “mak[es] [the expert’s] testimony more, not less
reliable”).
Rather, Ms. Schenk’s role was to calculate an appropriate damages amount that could be
sought by SAIC should this Court find the Government liable for infringement. Schenk Rpt. ¶ 1.
When Ms. Schenk’s report is reviewed with this role in mind, it is clear that Ms. Schenk did, in
fact, apply her own expertise and analysis to the facts at hand to arrive at her opinions. Ms.
Schenk’s reliance on conversations with fact witnesses or Dr. Villasenor does not amount to her
being a “mouthpiece” for those witnesses. She is not merely parroting their statements, but rather,
applying those statements to a hypothetical negotiation, pursuant to Georgia-Pacific, to determine
how the presence of non-infringing alternatives or their costs would affect a royalty rate. See
generally Georgia-Pacific Corp., 318 F. Supp. at 1116. For example, while Ms. Schenk describes
her understanding, based on discussions with Mr. Kissinger, Mr. Coffman, Dr. Villasenor, and
review of Dr. Villasenor’s report, that other RTA modes may serve as non-infringing alternatives,
she does so within the context of evaluating how such alternatives would affect her analysis of a
Georgia-Pacific factor.
Schenk Rpt. at 7, ¶¶ 177–78
29
. She then proceeds to opine that
Id. ¶ 182. Later in her report, she once again describes
Id. at 11, ¶ 198
.
Aside from her analysis of the impact of non-infringing alternatives on a hypothetically
negotiated royalty rate, Ms. Schenk also addresses the alternatives when rebutting Mr. Haas’
conclusions regarding damages. See, e.g., id. ¶¶ 289, 396. For example, Ms. Schenk claims that
Mr. Haas’ royalty rate is overstated. Id. at 3 (depicting a table of contents for Ms. Schenk’s report,
including
). Reviewed within that
context as opposed to as a stand-alone snippet, 14 one can see how Ms. Schenk’s reiteration of her
14
SAIC’s Exhibit 2 to its Daubert Motion is a compilation of excerpts of Ms. Schenk’s report it
deems relevant. SAIC Daubert, Exhibit 2, Expert Report of Kimberly J. Schenk (ECF No. 3502). It excerpts the Table of Contents, showing that internal pages 106 through 129 focus on Ms.
Schenk’s contention that
Id. at 3. The exhibit, however,
only includes pages 128 and 129 of that sub-section, making it difficult to fully ascertain the
context within which Ms. Schenk’s statements on those two pages are situated. Defendants also
attached excerpts of Ms. Schenk’s report as Exhibit 2 of their Response to SAIC’s Daubert Motion,
30
understanding of potential non-infringing alternatives fits into her broader analysis of the accuracy
of Mr. Haas’ royalty rate. See id.; see also id. ¶ 396.
SAIC’s objections to Ms. Schenk’s reliance on Dr. Villasenor’s report and conversations
with him are, likewise, unfounded. It is permissible for one expert to rely on the opinions of
another expert in reaching her conclusions. Carnegie Mellon Univ., 807 F.3d at 1303, reh’g en
banc denied in part, 805 F.3d at 1382 (“For areas outside her expertise,” a damages expert “could,
indeed must, rely upon . . . other experts . . . .”); Greatbatch Ltd., 2015 WL 9171042, at *5
(explaining how an expert’s consideration of the opinions of another expert’s testimony when he
lacked expertise in a certain technical area “mak[es] [the expert’s] testimony more, not less
reliable”). To the extent that SAIC’s objections to Ms. Schenk’s reliance on Dr. Villasenor’s report
is based on its allegations that Dr. Villasenor’s opinions are themselves inadmissible, this Court
finds such objections unpersuasive, as explained further below. See infra Section III(C)(a)(2).
SAIC also notes its concern that Defendants seek to “sneak testimony from Dr. Villasenor
that is outside the scope of his report” through Ms. Schenk, alluding to the possibility that Dr.
Villasenor’s conversations with Ms. Schenk may go beyond what he addressed in his report. SAIC
Daubert at 29. However, there is no indication, other than mere speculation from SAIC, that Ms.
Schenk relied on supposedly never-disclosed, first-in-time assertions from Dr. Villasenor in
reaching her damages calculations and opinions. With regard to the contested portions of Ms.
Schenk’s report concerning the other modes non-infringing alternatives, her citations to
“Discussion[s] with John Villasenor” support assertions that can easily be found in Dr.
Villasenor’s report as well—that there are three RTA modes, two of which are not accused of
but it too only includes three pages from the pertinent sub-section. SAIC Daubert – Def. Response,
Exhibit 2, Expert Report of Kimberly J. Schenk (ECF No. 366-2) at 28–30.
31
infringing the ’230 Patent, and therefore can serve as non-infringing alternatives. See Schenk Rpt.
¶¶ 178 n.325, 281 n.511, 396 n.732; see also Villasenor Rpt. App. C ¶¶ 91–94. At any rate, SAIC
had the opportunity to depose both Dr. Villasenor and Ms. Schenk on the nature of their
conversations.
See Deposition of John Villasenor, dated Dec. 13, 2022 (ECF No. 340-5);
Deposition of Kimberly Schenk, dated Dec. 12, 2022 (ECF No. 350-12).
Finally, SAIC contests the reliability of Ms. Schenk’s opinion that
decreases the value of the ’230 Patent. SAIC
Daubert at 24; see Schenk Rpt. ¶¶ 98, 175, 179–81, 188, 286, 297, 396–99. SAIC claims that Ms.
Schenk assumes that
purely based on
conversations with Microsoft witnesses or Dr. Villasenor’s own opinions, which SAIC contests as
equally unreliable. SAIC Daubert at 24; see infra Section III(C)(a)(2). As explained previously,
this Court’s prior grant of summary judgment regarding Microsoft’s
devices renders SAIC’s
arguments on Ms. Schenk’s opinions regarding
, including her
reliance on Microsoft fact witnesses, moot. See Combined Summary Judgment Opinion at 151.
2. Villasenor Report
SAIC claims that Dr. Villasenor’s opinions on the other modes non-infringing alternatives
theory are conclusory and unreliable. SAIC Daubert at 22–23. In concluding that the other RTA
modes constitute non-infringing alternatives, Dr. Villasenor relies, in part, on conversations he had
with Mr. Coffman and Mr. Kissinger. See Villasenor Rpt. App. C. ¶ 92 n.41
. SAIC characterizes Dr.
Villasenor’s resulting opinion as nothing but “repeating what he has been told.” SAIC Daubert at
22.
32
This Court disagrees with SAIC’s characterization of Dr. Villasenor’s process in reaching
his opinions. Dr. Villasenor relied on conversations with fact witnesses as evidence that other
RTA modes, which have not been accused of infringement by SAIC, exist and that these modes
are currently in use and accepted by soldiers in the field. See SAIC Daubert – Def. Resp. at 7.
Such conversations, however, were not the end product, but instead, they served as the underlying
factual evidence that Dr. Villasenor then applied his technical expertise to in order to conclude the
other RTA modes are non-infringing alternatives because
. See Villasenor Rpt. App. C ¶¶ 91–94.
SAIC alleges that Dr. Villasenor’s report includes “nothing to show that these alternatives
would be accepted by the Government or that they provide the same benefits as the accused
technology.” SAIC Daubert at 22–23. SAIC argues that Defendants must do more than simply
point to the existence of alternatives to prove they are non-infringing alternatives, but instead, must
prove that the modes are available and acceptable. SAIC Daubert – SAIC Reply at 13; see Presidio
Components, Inc. v. Am. Tech. Ceramics Corp., 702 F.3d 1351, 1361 (Fed. Cir. 2012); Nease v.
Ford Motor Co., 848 F.3d 219, 234 (4th Cir. 2017). However, Dr. Villasenor’s report does not
merely state that modes generally exist in the market. Rather, Dr. Villasenor explains that
. Villasenor Rpt. App. C ¶ 92. As such, the
facts of Nease are distinguishable from the facts in the present matter. In Nease, the court held
that the defendant’s argument that an alternative was generally in use for decades was insufficient
to establish that the alternative constituted an acceptable non-infringing alternative. Nease, 848
F.3d at 234. In contrast, Dr. Villasenor’s opinion that the other modes constitute non-infringing
33
alternatives is based on
. Villasenor Rpt. App. C ¶ 92.
SAIC also takes issue with Dr. Villasenor’s opinions regarding Microsoft’s
SAIC claims that Dr. Villasenor’s extension of his other modes theory to the
devices.
devices is
unreliable and unsupported on account of his alleged failure to “analyze anything about
three modes of RTA, much less to consider the differences between
and ENVG-B.” SAIC
Daubert at 23–24. SAIC also argues that the Court should prevent Dr. Villasenor from testifying
at trial on
. SAIC Daubert at 16–21. As noted, this Court’s prior
grant of summary judgment regarding Microsoft’s
devices renders SAIC’s arguments on
Microsoft’s devices moot. See Combined Summary Judgment Opinion at 151.
3. Farid Report
SAIC argues that Dr. Farid’s analysis that
, on which Dr.
Villasenor purportedly relied, likewise fails to satisfy the criteria for admissible expert opinion.
SAIC Daubert at 21–22. As such, SAIC contends that portions of Dr. Farid’s opinion are
inadmissible. The portions of Dr. Farid’s report that SAIC seeks to exclude relate solely to
Microsoft’s source code,
. Farid Rpt. ¶¶ 36, 37, 40–45; see SAIC
Daubert at 8–9. As previously explained, this Court’s prior grant of summary judgment regarding
Microsoft’s
devices renders SAIC’s arguments to exclude portions of Dr. Farid’s opinion
moot. See Combined Summary Judgment Opinion at 151.
4. Microsoft Fact Witnesses
SAIC argues that based on Dr. Villasenor’s and Ms. Schenk’s reports, it appears likely that
Microsoft intends to present what amounts to expert opinions through lay witnesses, specifically
and
. SAIC Daubert at 30–32. In addition to claiming that the expected
34
testimony of
and
likely constitutes improper lay opinion, SAIC claims
that any testimony from
and
on
is purely speculative
and thus inadmissible under FRE 602. SAIC Daubert at 31; see FED. R. EVID. 602 (“A witness
may testify to a matter only if evidence is introduced sufficient to support a finding that the witness
has personal knowledge of the matter . . . .”).
The portions of Dr. Villasenor’s and Ms. Schenk’s reports that contain references to
conversations with
and
are limited purely to Microsoft’s
devices.
See SAIC Daubert at 30–32 (listing nine instances in the Villasenor and Schenk reports citing
discussions with Microsoft fact witnesses on the
devices/system
that
SAIC alleges constitute improper lay opinion). As previously explained, this Court’s prior grant
of summary judgment regarding Microsoft’s
devices renders SAIC’s arguments
, including its arguments to exclude testimony from
Microsoft’s
devices/system
and
on
, moot. See Combined Summary Judgment
Opinion at 151.
For the reasons stated, this Court DENIES SAIC’s Daubert Motion to Exclude Testimony
Regarding Alleged Non-Infringing Alternatives (ECF No. 350), as it pertains to non-Microsoftbased theories and witnesses and DENIES as moot SAIC’s Daubert Motion to Exclude Testimony
Regarding Alleged Non-Infringing Alternatives (ECF No. 350), as it pertains to Microsoft-based
theories and witnesses.
b. Defendants’ Daubert Motion
Defendants argue that Mr. Haas’ methodology in calculating damages is unreliable and
thus inadmissible under FRE 702. Def. Daubert at 6; see FED. R. EVID. 702. As such, Defendants
35
request that this Court exclude portions of Mr. Haas’ report and preclude him from testifying at
trial about the topics identified below.
1. Lump Sum Estimate
Defendants contend that by including royalties for Future Accused Units into his
calculation of lump sum damages, Mr. Haas ignores the jurisdictional limits of this Court as
embodied in 28 U.S.C. § 1498. See Def. Daubert at 12–13. Mr. Haas’ lump sum base estimate,
in which he claims to
Am. Haas Rpt. ¶ 93. Mr. Haas explains that
Id. ¶ 94.
In granting this Court jurisdiction over certain patent infringement actions, Section 1498(a)
states:
Whenever an invention described in and covered by a patent of the United States is
used or manufactured by or for the United States without license of the owner
thereof or lawful right to use or manufacture the same, the owner’s remedy shall be
by action against the United States in the United States Court of Federal Claims for
the recovery of his reasonable and entire compensation for such use and
manufacture.
28 U.S.C. § 1498(a). Defendants argue that Section 1498(a) prohibits recovery of future royalties
for future inventions because they have not yet been “used or manufactured.” See Def. Daubert at
12; 28 U.S.C. § 1498(a) (“Whenever an invention . . . is used or manufactured . . . .”) (emphasis
added); OA Tr. at 235:5–6 (Government Counsel: “[T]he past tense of the statute, I think, is really
important here.”). In contrast to 35 U.S.C. § 271, Section 1498(a) deliberately uses the past tense
in describing what circumstances confer jurisdiction of a patent infringement matter to the Court
of Federal Claims. Compare 35 U.S.C. § 271(a) (“[W]hoever without authority makes, uses, offers
36
to sell, or sells any patented invention . . . .”) with 28 U.S.C. § 1498(a) (“Whenever an invention .
. . is used or manufactured . . . .”); OA Tr. at 252:14–17 (Government Counsel: “[Section 1498]
has ‘used’ or ‘manufactured’ [in] a past tense. Whereas, Title 35 does use a present tense. We
have to consider that the actual plain meaning of the statute itself carries weight.”).
Section 1498(a)’s requirement that an invention be “used or manufactured” has been
consistently interpreted to limit the Court of Federal Claims’ jurisdiction to award damages
“presently due and owing from the United States.” De Graffenried v. United States, 228 Ct. Cl.
780, 783 (1981). 15 For example, in considering this issue, in Wright v. United States, the court
held, “According to 28 U.S.C. § 1498(a) . . . there are no provisions for including future
procurement costs for expected making and using in the royalty base. The statute provides relief
only for units that are actually infringing.” 53 Fed. Cl. 466, 471 (2002). Likewise, in Hitkansut
LLC v. United States, the court reiterated that it “does not have jurisdiction to award relief for
future infringements.” 130 Fed. Cl. 353, 395 (2017). SAIC cites to SecurityPoint Holdings, Inc.
v. United States to support its proposed inclusion of future accused units in the damages
calculation, but SecurityPoint actually further undermines SAIC’s argument by noting that
“[d]amages beyond the date of judgment are not available in this litigation.” 156 Fed. Cl. 750,
794 n.40 (2021). 16
SAIC misses the mark in countering Defendants’ argument.
SAIC characterizes
Defendants’ objection to Mr. Haas’ calculation of a lump sum payment as merely an objection to
lump sum damages. See Def. Daubert – SAIC Resp. at 18 (“Defendants incorrectly, argue that a
15
Decided by an appellate panel of the Court of Claims, De Graffenried is binding authority on
this Court. See S. Corp. v. United States, 690 F.2d 1368, 1370–71 (Fed. Cir. 1982).
16
While such Court of Federal Claims cases are not binding, this Court finds the reasoning of such
opinions persuasive here.
37
lump sum payment is not allowable . . . .”). Defendants’ argument is more nuanced. Indeed,
Defendants do not contend that Section 1498(a) prohibits lump sum damages, but rather, assert
that Section 1498(a) prohibits the inclusion of any damages that account for future infringements.
Def. Daubert – Def. Reply at 7; OA Tr. at 232:23–233:5 (The Court: “You don’t dispute that lumpsum damages are appropriate in certain patent infringement actions, correct?” Government
Counsel: “Absolutely correct, Your Honor. We do not dispute that lump-sum awards could be
appropriate given the facts of a case. What we truly dispute is Mr. Haas’ inclusion of future
damages as part of the lump-sum base itself . . . .”).
One potential form of permissible lump sum damages is one based on the hypothetically
negotiated value of a fully paid-up license. See SecurityPoint Holdings, 156 Fed. Cl. at 777–
78; Def. Daubert – Def. Reply at 10. This would be an alternative to a per-unit royalty. Id. Mr.
Haas, however, appears to conflate the two by calculating a “lump sum” that applies a per-unit
royalty rate to all accused devices that have been and may still be delivered. Am. Haas Rpt. ¶ 93
(emphasis added); OA Tr. at 236:1–8 (Government Counsel: “[W]e
see that [Mr. Haas] has included damages for future infringements in lump-sum base. He does
this by looking at the preexisting Microsoft, L3 and Elbit contracts, and he adds the future units
that are contemplated but have not been used or manufactured by the Government, and he
calculates the present value of these future units that have still not been used or manufactured.”).
While Mr. Haas’ inclusion of damages for future accused units may be administratively
efficient, it is, nonetheless, legally erroneous under Section 1498(a). See De Graffenried, 228 Ct.
Cl. at 783–84 (“[The Court] can only render money judgments for money presently due and owing
38
from the United States. Plaintiff argues that it would waste effort to require it to bring suit for
future infringements. Nevertheless, relief for future infringements is beyond the power of the court
by declaratory judgment or otherwise.”) (internal citations omitted); OA Tr. at 235:15–18
(Government Counsel: “It might be easier if we could just resolve all of this right now, but the law
is clear that the Court does not have jurisdiction even if this is a cumbersome process.”). No matter
how seemingly unwieldy, the proper course of action to address future infringement is to address
it after infringement has actually occurred, or alternatively, the parties may come to an agreement
amongst themselves.
See OA Tr. at 254:1–8 (Government Counsel: “One [option] is that
[Plaintiff] would have to bring a new suit.
And De Graffenried notes that that might be
cumbersome, but this Court just doesn’t have jurisdiction, unfortunately, in light of that. But the
parties could also come to an agreement, you know, should this case go to trial and there’s a
decision. The parties could also come to an agreement as to the future. So there’s some flexibility
there.”).
Accordingly, given that Mr. Haas includes compensation for future accused units in his
damages, portions of his report addressing his opinion on future accused units as well as any
potential testimony on the same must be excluded pursuant to FRE 702. See Herbert, 99 F.3d at
1117 (“Incorrect statements of law are no more admissible through ‘experts’ than are falsifiable
scientific theories.”); Summit 6, 802 F.3d at 1295; see also FED. R. EVID. 702.
2. Apportionment
Defendants argue that Mr. Haas’ purported method of apportionment is arbitrary. 17 Def.
Daubert at 15–17. Specifically, Defendants claim that Mr. Haas applies a one-third apportionment
17
Defendants also initially claimed that Mr. Haas improperly relied on the Entire Market Value
Rule (EMVR). Def. Daubert at 23–24. EMVR is a limited exception to apportionment that applies
when the patented feature constitutes the basis for market demand. Lucent Techs, Inc. v. Gateway,
39
sufficiently close relation to the claimed functionality.” 767 F.3d at 1329. That is not at issue
here. Mr. Haas employed a thorough approach that identified the SSPPU with the claimed
infringed functionality and then applied numerous quantitative and qualitative factors to arrive at
his apportioned value of one-third for the RTA mode in question. See, e.g., Am. Haas. Rpt. ¶¶ 54,
164–66. The facts of LaserDynamics, likewise, differentiate themselves from the facts in front of
this Court. In LaserDynamics, the Court upheld the district court’s conclusion that that the
plaintiff’s damages expert arbitrarily arrived at an apportionment value through “vague qualitative
notions of the relative importance” of the patented technology. 694 F.3d at 69. Namely, Plaintiff
had argued that various activities that are performed on a computer using a disk drive constitute a
third of the value of the computer. LaserDynamics, Inc. v. Quanta Computer Inc., No. 2:06-CV348, 2011 WL 7563818, at *2 (E.D. Tex. Jan. 7, 2011). However, as pointed out by the district
court, the activities plaintiff had listed, such as playing movies or transferring documents (among
other examples), could be accomplished without the patented disk drive and also required interplay
from other parts of the computer. Id. In contrast, the nature of the RTA modes in the accused
devices are far more distinct from that of a disk drive, which is closely integrated with the other
functions of a computer.
The three modes are clearly delineated, and Mr. Haas’ analysis
specifically distinguishes the relative benefits and drawbacks of the different modes. See Am.
Haas. Rpt. ¶¶ 54, 164–66.
As opposed to experts in cases cited by Defendants that rely solely on vague assertions or
poorly explained apportionment methods, Mr. Haas carefully documents his approach and the
underlying evidence in arriving at the one-third apportionment. For example, Mr. Haas relies on
Dr. Bajaj’s opinion in determining the value of the RTA modes. In his report, Dr. Bajaj presents
41
Amended Opening Expert Report of Dr. Chandrajit Bajaj, Ph.D. on Infringement of U.S.
Patent No. 9,229,230 (ECF No. 353-6) (Bajaj Am. Rpt.) ¶ 715. Defendants argue that Dr. Bajaj,
a technical expert, is not qualified to provide an opinion on the value of RTA mode. Def. Daubert
at 17; see Bajaj Depo. Tr. at 160:9–17
. Even
regarding the technical aspects of RTA mode, Defendants argue that Dr. Bajaj’s purported lack of
relevant background or experience using the RTA technology makes him unqualified to opine on
the relative value of various operational and technical benefits and drawbacks; Defendants claim
that he should not be able to use those comparisons to place a relative value on each RTA mode.
Def. Daubert at 19. As such, Defendants argue that “given Dr. Bajaj[’s] apportionment was
unreliable input, Mr. Haas’ damages opinion is unreliable output.” Def. Daubert at 20.
Defendants’ objections to Mr. Haas’ reliance on Dr. Bajaj’s report appear, at times, to be
aimed more at the substance of Dr. Bajaj’s report rather than the methodology. See, e.g., id. at 19
(characterizing Dr. Bajaj’s statements as conclusory). Yet, Defendants do not move to exclude the
portions of Dr. Bajaj’s report that they question. Def. Daubert – Def. Reply at 17 (“Defendants
have not moved to exclude Dr. Bajaj’s opinions relating to his technical analysis of the three RTA
modes.”) (emphasis omitted). Dr. Bajaj is well within the bounds of expertise to conclude that he
would
Bajaj Am. Rpt. ¶ 715 (emphasis added). He need not have personally used the
technology in the field to have the requisite expertise to opine on the technical benefits and
drawbacks, as ascertained from his review of the technical issues pertinent to RTA modes. See
42
Bajaj Depo. Tr. at 160:9–17
. Furthermore, it is undisputed that damages
experts, such as Mr. Haas, are permitted to rely on the opinions of technical experts, such as Dr.
Bajaj, in reaching their conclusions. See Arctic Cat Inc. v. Bombardier Recreational Prods. Inc.,
876 F.3d 1350, 1369–70 (Fed Cir. 2017) (finding that it was proper for a damages expert to rely
on a technical expert’s opinion to calculate and support a reasonable royalty rate); Def. Daubert –
Def. Reply at 17 (“Of course, a damages expert may rely upon a technical expert . . . .”).
Defendants also question Mr. Haas’ reliance on a survey of soldiers regarding their usage
of the RTA modes. Def. Daubert at 20–21. Mr. Haas states in his report that
Am. Haas
Rpt. ¶ 163. Defendants argue, however, that the evidence Mr. Haas relies on
.
Def. Daubert at 20–21 (citing Deposition of Mark Stephens, dated Aug. 1, 2022 (ECF No. 353-7)
(Stephens Depo. Tr.) at 120:6–21
). SAIC pushes back on Defendants’ concerns on the survey relied upon by
Mr. Haas, arguing that Defendants’ objections go to weight rather than admissibility. Def. Daubert
– SAIC Resp. at 32–35. This Court agrees. While Mr. Stephens’ deposition testimony may raise
questions as to whether the soldiers merely used or, in fact, preferred RTA bubble mode, that is a
matter of diverging interpretation by the parties and amounts to a credibility question best left for
further exploration at trial.
Finally, Defendants severely understate the thoroughness of Mr. Haas’ apportionment
methodology, claiming he “primarily relies” on Dr. Bajaj’s opinion and aside from that, only relies
43
on the purported survey of soldiers to reach his conclusions. See Def. Daubert at 17, 20. This is
clearly not the case. Mr. Haas relied on
Am. Haas Rpt. ¶ 163
. He reviewed each of the awarded contracts. Id. ¶¶ 44–55,
57–68, 132. He reviewed Government documents
Id. ¶¶ 133–35. He cited testimony from Defendants’ witnesses, such as Mr. Lloyd Luedtke,
Mr. Mark Stephens, Mr. Kissinger, and Major General Anthony Potts
. Id. ¶¶ 141 n.415, n.417.
Estimating a reasonable royalty, including through the apportionment process, is not an
exact science, and “all approximations involve some degree of uncertainty.” Summit 6, 802 F.3d
at 1296. Perhaps Defendants would have preferred an apportionment derived from review of
different materials than those upon which Mr. Haas relied, however, at this stage of proceedings it
is not this Court’s role to “inquir[e] on the correctness of the methodology and of the results
produced thereunder.” Id. Defendants’ objections here implicate weight, not admissibility.
3. Spare Parts
Defendants contend that Mr. Haas’ method of comparing the value of spare parts (battery
packs) that include the RTA technology with those that do not include the RTA technology is not
an accepted methodology. Def. Daubert at 24. In his report, Mr. Haas proposes
. See Am. Haas Rpt. ¶
165. Defendants argue, however, that there are a number of possible factors, such as the seller’s
market power or costs specific to the production of spare parts, that are wholly unrelated to the
44
value of the RTA technology but could drive the price of spare parts. Def. Daubert at 25.
Defendants also note that the prices of spare parts may be inflated, further skewing any resulting
comparison. Id. at 26
;
Def. Daubert – Def. Reply at 20.
Defendants’ arguments, while noted, are better reserved for consideration at trial as they
too implicate weight rather than admissibility. Defendants correctly point out that SAIC does not
cite to any cases or treatises that explicitly endorse Mr. Haas’ spare parts methodology. Def.
Daubert – Def. Reply at 19. The two cases cited by SAIC, Honeywell Int’l Inc. v. United States
and King Instruments Corp. v. Perego, do not conclusively endorse Mr. Haas’ method of
comparing spare parts prices as part of his determination of a reasonable royalty rate. Def. Daubert
– SAIC Resp. at 39; see Honeywell Int’l Inc. v. United States, 107 Fed. Cl. 659, 685 (2012) (noting
that the defendant’s damages expert considered spare parts in analyzing damages); King
Instruments Corp. v. Perego, 599 F.2d 941, 953, 958, 975 (Ct. Cl. 1979) (explaining whether a
patentee may include spare parts in the royalty base). The lack of cases or treatises explicitly
endorsing Mr. Haas’ methodology is not, however, dispositive. See Kumho Tire Co., 526 U.S. at
150–51 (explaining that the Daubert factors are not definitive and “do not all necessarily apply
even in every instance in which the reliability of scientific testimony is challenged”). While there
is an absence of case law explicitly endorsing Mr. Haas’ methodology, there also is no case law
explicitly prohibiting its use.
Furthermore, there appears to be no definitive evidence that the spare parts pricing is
completely without any relation to the value of the RTA technology. Despite Ms. Schenk’s
reservations about Mr. Haas’ methodology, she could not identify any functional differences
45
between the spare parts other than the RTA functionality. Schenk Depo. Tr. at 85:15–86:9
; id. at 87:3–13
; id. at 104:5–17
.
Similarly, there is no definitive evidence before the Court that the prices of the battery packs are
inflated in such a way as to make the resulting price differential between compared packs unusable.
See Def. Daubert – SAIC Resp. at 40 (arguing that because Mr. Haas relied only on the price
differences between the spare parts, any purported inflation would impact both spare parts and
thus still result in a relative price difference); see also Schenk Depo. Tr. at 84:24–85:13
.
While Defendants raise reasonable questions about Mr. Haas’ comparison of spare parts
prices, such questions are better reserved for trial. I4i Ltd. P’ship, 598 F.3d at 856 (quoting
Daubert, 509 U.S. at 596) (“As the Supreme Court explained in Daubert, ‘[v]igorous cross-
46
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.’”); Apple, 757
F.3d at 1314, overruled on other grounds by Williamson, 792 F.3d at 1349 (cautioning the Court
against “overstep[ping] its gatekeeping role”); Libas, Ltd. v. United States, 193 F.3d 1361, 1366
(Fed. Cir. 1999) (“The difference between weight and admissibility . . . is in many instances a
close question.”). This Court fully expects Defendants to further explore the questions they have
raised at trial, at which point this Court will evaluate the credibility and weight of any testimony
related to Mr. Haas’ spare parts methodology. For now, SAIC has provided enough evidence
indicating that Mr. Haas’ spare parts methodology meets the minimum threshold for admissibility
at this stage.
4. Accused Development Spend
Defendants contend that Mr. Haas’ inclusion of Accused Development Spend costs in the
royalty base is unreliable and irrelevant. Def. Daubert at 6. Mr. Haas’ damages calculation
includes purported damages from the Government’s research, testing, and development spend for
Microsoft’s
devices. Am. Haas Rpt. ¶¶ 14, 16, 92. Mr. Haas explains that
Id. ¶ 92.
Defendants contend, however, that non-prototype
development costs should be precluded from recovery on account of SAIC’s failure to “reduce[]
the bare teachings of the ’230 Patent to practice.” Def. Daubert at 11; see also id. at 13 (citing
Wright, 53 Fed. Cl. at 473). Additionally, Defendants argue that there is no evidence that SAIC
expected royalty payments for research and development nor that the Government would be
willing to pay such royalties. Id. at 14.
Mr. Haas’ inclusion of Accused Development Spend is limited to Microsoft’s
devices. See Deposition of David A. Haas, dated Dec. 8, 2022 (ECF No. 353-2) (Haas Depo. Tr.)
47
at 107:5–9
. As such, this Court’s prior grant of summary judgment regarding Microsoft’s
devices renders moot Defendants’ arguments contesting Mr. Haas’ inclusion of Accused
Development Spend. See Combined Summary Judgment Opinion at 151.
D. Conclusion
For the foregoing reasons, this Court DENIES in part SAIC’s Daubert Motion to Exclude
Testimony Regarding Alleged Non-Infringing Alternatives (ECF No. 350), as it pertains to nonMicrosoft-based theories and witnesses; DENIES in part as moot SAIC’s Daubert Motion to
Exclude Testimony Regarding Alleged Non-Infringing Alternatives (ECF No. 350), as it pertains
to Microsoft-based theories and witnesses; GRANTS in part Defendants’ Joint Rule 702 Motion
to Partially Exclude the Amended Expert Damages Report of David A. Haas (ECF No. 353), solely
as it pertains to the “Future Accused Units” argument; DENIES in part Defendants’ Joint Rule
702 Motion to Partially Exclude the Amended Expert Damages Report of David A. Haas (ECF
No. 353), as it pertains to the apportionment and spare parts arguments; DENIES in part as moot
Defendants’ Joint Rule 702 Motion to Partially Exclude the Amended Expert Damages Report of
David A. Haas (ECF No. 353), solely as it pertains to the “Accused Development Spend”
argument.
IV.
Conclusion
For the reasons stated above, this Court ORDERS the following disposition of the parties’
motions. Plaintiff SAIC’s Motion to Strike Untimely Non-Infringing Alternatives and NonInfringement Theories (ECF No. 352) is DENIED in part, as it pertains to the other modes noninfringing alternatives theory.
Plaintiff SAIC’s Motion to Strike Untimely Non-Infringing
48
Alternatives and Non-Infringement Theories (ECF No. 352) is DENIED as moot, as it pertains to
non-infringing alternative theory.
SAIC’s Daubert Motion to Exclude
Testimony Regarding Alleged Non-Infringing Alternatives (ECF No. 350) is DENIED, as it
pertains to non-Microsoft-based theories and witnesses. SAIC’s Daubert Motion to Exclude
Testimony Regarding Alleged Non-Infringing Alternatives (ECF No. 350) is DENIED as moot,
as it pertains to Microsoft-based theories and witnesses. Defendants’ Joint Rule 702 Motion to
Partially Exclude the Amended Expert Damages Report of David A. Haas (ECF No. 353) is
GRANTED in part, solely as it pertains to the “Future Accused Units” argument. Defendants’
Joint Rule 702 Motion to Partially Exclude the Amended Expert Damages Report of David A.
Haas (ECF No. 353) is DENIED in part, as it pertains to the apportionment and spare parts
arguments. Defendants’ Joint Rule 702 Motion to Partially Exclude the Amended Expert Damages
Report of David A. Haas (ECF No. 353) is DENIED in part as moot, solely as it pertains to the
“Accused Development Spend” argument.
The parties are directed to CONFER and FILE a Notice by January 5, 2024, attaching a
proposed public version of this Sealed Memorandum and Order, with any competition-sensitive
or otherwise protected information redacted.
IT IS SO ORDERED.
Eleni M. Roumel
ELENI M. ROUMEL
Judge
Dated: December 14, 2023
Washington, D.C.
49
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