Sloan Valve Company v. Zurn Industries, Inc. et al

Filing 663

MEMORANDUM Opinion and Order Signed by the Honorable Amy J. St. Eve on 10/15/2013:Mailed notice(kef, )

IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

SLOAN VALVE COMPANY,

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Plaintiff,
v.
ZURN INDUSTRIES, INC., and
ZURN INDUSTRIES, LLC,
Defendants.

Case No. 10-cv-00204

MEMORANDUM OPINION AND ORDER
AMY J. ST. EVE, District Court Judge:
Zurn Industries, Inc. (“Zurn”) has moved to exclude the testimony of Sloan Valve
Company’s (“Sloan”) expert, Julius Ballanco. For the reasons discussed below, the Court grants
the motion in part without objection, grants the motion in part, and denies the motion in part.
BACKGROUND
This is a patent infringement case involving U.S. Patent No. 7,607,635, entitled Flush
Valve Handle Assembly Proving Dual Mode Operation (the “Wilson patent”). The Wilson patent
“relates to flush valves for use with plumbing fixtures such as toilets, and more specifically to
improvements in the bushing of the actuating handle assembly that will provide for userselectable, dual mode operation of the flush valve.” (R. 314-1, Wilson patent, col.1, II. 6-10.) It
provides a mechanism that allows a user to select one of two flush volumes based on the
direction of actuation of the handle: a full flush volume to evacuate solid waste from the bowl or
a reduced flush volume to remove liquid waste. (Id., col. 1, II 11-19, col.2, II. 27-33.)

1 

Cross sectional representations of the preferred embodiment of the invention are
reproduced below for reference. These figures show the handle (38), bushing (68), and plunger
shank (80) for both a full flush (Figure 5) and for a reduced flush (Figure 6). (See id., col. 3, 11.
15-20.)
Figure 5

Figure 6

As depicted in Figure 5, in the full flush mode, the user pushes the handle (38) down, which
causes the plunger shank (80) to slide along the horizontal main axis (A) and hit the relief valve
stem at a location (108) that results in a full flush volume. (See id., col. 5, 11, 9-19.) As shown
in Figure 6, in the reduced-volume flush mode, the user pulls the handle up, which causes the
plunger shank (80) to tilt and slide along an angled axis (B), as compared to the horizontal axis,
and hit the relief valve stem at a lower contact point (110). This results in a reduced opening of
the relief valve, and thus a reduced volume of water. (See id., col. 5, 11, 19-34.)
On January 28, 2013, Sloan served the first Expert Report of Julius Ballanco (“Ballanco
I”). (R. 554-1, Ballanco I.) Mr. Ballanco intends to offer testimony regarding the alleged
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infringement of the ‘635 Patent by the accused products. (Id. at 5.) Mr. Ballanco opines that
Zurn directly and indirectly infringes claims 1, 4-8, 10-12, 14, 19, 29-31 and 33-34 of the Wilson
patent. Mr. Ballanco conducted an element-by-element analysis of the asserted claims as
compared to Zurn’s accused products. Mr. Ballanco also offers opinions regarding price erosion.
In reaching some of his opinions in Ballanco I, Mr. Ballanco relied on certain test data
generated by John Gregor1 at Made to Measure (the “Gregor Report”). Made to Measure
prepared CAD animations to reflect the travel of the plunger of the Zurn handle. Made to
Measure also provided positional coordinate data of the midpoint of the plunger in a spreadsheet
form. Because this data was inaccurate, Made to Measure re-ran the CAD animations and the
positional coordinate data. Mr. Bley reflected this new data in his report (the “Bley Report”).
On April 5, 2013, Sloan served Zurn with a second expert report from Mr. Ballanco
(“Ballanco II”). In Ballanco II, Mr. Ballanco relied on the new, second set of test data set forth
in the Bley Report. During his deposition on May 8, 2013, even Mr. Ballanco disavowed the
CAD data upon which he had relied for certain opinions in Ballanco I and instead relied on the
Bley Report data.

1

 On April 5, 2013, the Court permitted Sloan’s replacement of its expert witness John Gregor, a
technician with Made to Measure (“M2M”), with M2M’s owner, Sven Bley. (R. **.) Both of
these experts conducted the measurements of the Zurn’s Dual Flush Handle. Mr. Bley directly
supervised Mr. Gregor’s work. Immediately prior to Mr. Gregor’s scheduled deposition, Mr.
Gregor and Mr. Bley informed Sloan that Mr. Gregor could not go forward with his deposition
because he suffers from severe anxiety. Sloan then informed Zurn’s counsel and offered Mr.
Bley as a substitute witness to testify about the measurements taken by Mr. Gregor. Sloan told
Zurn that Mr. Gregor “is experiencing grave health concerns that prevent him from testifying . . .
.” (R.. 484-4.) Although Zurn challenged the substitution of the expert witnesses, under the
circumstances, the Court permitted Sloan to substitute Mr. Bley for Mr. Gregor.  

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LEGAL STANDARD FOR DAUBERT MOTIONS 
“The admissibility of expert testimony is governed by Federal Rule of Evidence 702 and
the Supreme Court’s opinion in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579,
113 S. Ct. 2786, 125 L. Ed. 2d 469 (1993).” Lewis v. Citgo Petroleum Corp., 561 F.3d 698, 705
(7th Cir. 2009). Rule 702 provides, in relevant part, that “[i]f scientific, technical or other
specialized knowledge will assist the trier of fact[,] . . . a witness qualified as an expert by
knowledge, skill, experience, training or education, may testify thereto in the form of an
opinion. . . .” Id. See also Happel v. Walmart Stores, Inc., 602 F.3d 820, 824 (7th Cir. 2010).
Under the expert-testimony framework, courts perform the gatekeeping function of
determining whether the expert testimony is both relevant and reliable prior to its admission at
trial. See id.; Power Integrations, Inc. v. Fairchild Semiconductor Intern., Inc., 711 F.3d 1348,
1373 (Fed. Cir. 2013); United States v. Pansier, 576 F.3d 726, 737 (7th Cir. 2009) (“To
determine reliability, the court should consider the proposed expert’s full range of experience
and training, as well as the methodology used to arrive [at] a particular conclusion.”). In doing
so, courts “make the following inquiries before admitting expert testimony: first, the expert must
be qualified as an expert by knowledge, skill, experience, training, or education; second, the
proposed expert must assist the trier of fact in determining a relevant fact at issue in the case;
third, the expert’s testimony must be based on sufficient facts or data and reliable principles and
methods; and fourth, the expert must have reliably applied the principles and methods to the facts
of the case.” Lees v. Carthage College, 714 F.3d 516, 521-22 (7th Cir. 2013); see also Stollings
v. Ryobi Tech., Inc., 725 F.3d 753, 765 (7th Cir. 2013); Power Integrations, 711 F.3d at 1373;
Pansier, 576 F.3d at 737.

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An expert may be qualified to render opinions based on experience alone. See 2000
Advisory Committee Notes to Rule 702. “’[T]he text of Rule 702 expressly contemplates that an
expert may be qualified on the basis of experience. In certain fields, experience is the
predominant, if not the sole basis for a great deal of reliable expert testimony.” Id. In addition,
the Committee Notes add:
If the witness is relying solely or primarily on experience, then the witness must
explain how that experience leads to the conclusion reached, why that experience
is a sufficient basis for the opinion, and how that experience is reliably applied to
the facts. The trial court's gatekeeping function requires more than simply “taking
the expert's word for it.”
(Id.)
The Seventh Circuit has repeatedly stated that “genuine expertise may be based on
experience or training.” United States v. Conn, 297 F.3d 548, 556 (7th Cir. 2002) (quoting Tyus
v. Urban Search Mgmt., 102 F.3d 256, 263 (7th Cir. 1996)). “[W]hile extensive academic and
practical expertise in an area is certainly sufficient to qualify a potential witness as an expert,
Rule 702 specifically contemplates the admission of testimony by experts whose knowledge is
based on experience.” Trustees of Chicago Painters & Decorators Pension, Health & Welfare,
& Deferred Sav. Plan Trust Funds v. Royal Int’l Drywall & Decorating, Inc., 493 F.3d 782, 78788 (7th Cir. 2007) (citations and quotations omitted). As such, courts “consider a proposed
expert’s full range of practical experience, as well as academic or technical training, when
determining whether that expert is qualified to render an opinion in a given area.” Id. (quoting
Smith v. Ford Motor Co., 215 F.3d 713, 718 (7th Cir. 2000)).
In assessing the admissibility of an expert’s testimony, the Court’s focus “must be solely
on principles and methodology, not on the conclusions they generate.’” Winters, 498 F.3d at 742
(quoting Chapman v. Maytag Corp., 297 F.3d 682, 687 (7th Cir. 2002)). See also Stollings, 725
F.3d at 765. “The goal of Daubert is to assure that experts employ the same ‘intellectual rigor’
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in their courtroom testimony as would be employed by an expert in the relevant field.” Jenkins
v. Bartlett, 487 F.3d 482, 489 (7th Cir. 2007) (quoting Kumho Tire, 526 U.S. 137, 152, 119 S.
Ct. 1167, 143 L. Ed. 2d 238 (1999)). “A Daubert inquiry is not designed to have the district
judge take the place of the jury to decide ultimate issues of credibility and accuracy.” Lapsley v.
Xtek, Inc., 689 F.3d 802, 805 (7th Cir. 2012).
ANALYSIS
Zurn seeks to exclude the testimony of Mr. Ballanco on three grounds. First, Zurn asks
the Court to preclude Mr. Ballanco from testifying about his analysis of the “old” CAD model
prepared by Made To Measure. Sloan does not object to this aspect of the motion because it
does not intend to elicit any testimony from Mr. Ballanco regarding the old model. Second,
Zurn seeks to exclude Mr. Ballanco’s infringement analysis because it contends that Mr.
Ballanco used a claim construction inconsistent with the Court’s prior construction. Third, Zurn
challenges one aspect of Mr. Ballanco’s testimony relating to price erosion – Sloan’s ability to
charge a $20-$30 price premium if Zurn were not in the market infringing. The Court will
address each argument in turn.
I.

Julius Ballanco
Julius Ballanco is a professional engineer with more than 35 years of experience in the

plumbing industry. He is a registered professional engineer in eight states, including Illinois. In
addition, he is a certified plumbing designer by the American Society of Plumbing Engineers
(“ASPE”). He served as President of the ASPE from 2006-2010. Mr. Ballanco is a member of
the American Society of Mechanical Engineers and other professional engineering societies. Mr.
Ballanco received his Bachelor of Engineering, with an emphasis in mechanical engineering,
from Stevens Institute of Technology in New Jersey in 1975.

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Since 1990, Mr. Ballanco has been self-employed as President of JB Engineering and
Code Consulting, P.C. in Munster, Indiana. His firm “provides engineering consulting in the
area of codes and standards, as well as, plumbing, mechanical, and fire protection.” (R. 565-23,
Ballanco I at 7.) From 1967 to 1975, he worked part time as a plumbing mechanic for Ballanco
Plumbing and Heating Company. From 1979 to 1990, he served as a Senior Staff Engineer and
head of Plumbing and Mechanical Engineering for Building Officials and Code Administrators
International, Inc. (“BOCA”). BOCA was “a non-profit model code organization that develops
the National Building, Plumbing, Mechanical, and Fire Prevention Codes.” (Id.) Mr. Ballanco
held the primary responsibility for the interpretation and promulgation of the BOCA National
codes.
II.

Ballanco I
Zurn first moves to preclude Mr. Ballanco from offering certain opinions he rendered in

Ballanco I because he relied on inaccurate data when he gave those opinions. Namely, Mr.
Ballanco relied on inaccurate data from Mr. Gregor’s January 2013 CAD model as the basis for
certain opinions regarding the travel of the Zurn plunger. Indeed, even Mr. Ballanco admits that
the Made to Measure data upon which he relied in Ballanco I was inaccurate:
Q.

So can we assume that the original test Made to Measure reported in its January
2013 report is accurate?

A.

No.
***

Q.

Why not?

A.

It turns out in my discussion with Mr. Gregor that there was a slight twisting of
the bushing and the point they were honing in on has the fixed point moved ever
so slightly and that distorted the results at the end as it was extending out. He
indicated, you know, that that’s what occurred.

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(R. 554-5, Ex. 6, Dep. at 460:20-461:13.) Sloan does not object to this aspect of the motion to
the extent it pertains only to Mr. Ballanco’s testimony that relied on the inaccurate date from the
Gregor Report. As such, the Court grants this aspect of the motion without objection as to those
opinions in Ballanco I that rely on the CAD and plunger midpoint data from the January 2013
Gregor Report.
Sloan also requests that the “preclusion is mutual – that is, so long as Zurn does not
introduce or comment on that earlier CAD data at trial.” (R. 588 at 2.) The Court disagrees.
Zurn is free to cross examine Mr. Ballanco on the fact that he relied on inaccurate data in
preparing his first report because it goes to the carefulness he used in preparing his opinions.
Such information is proper for a jury to consider in assessing what weight to give to his opinions.
At the end of its opening brief, Zurn cursorily contends that the Court also should exclude
the opinions in Ballanco II because he “introduces data that is also questionable in its
methodology.” (R. 554 at 13.) Zurn claims, without any elaboration or development, that the
CAD model in the Bley Report contains a substantial gap between the blue plunger seal and the
bushing. Zurn attempts to expand on this undeveloped argument in its reply brief with new
arguments, and further asserts that Mr. Ballanco cannot rely on any of the CAD data from the
Bley Report. Zurn, however, failed to develop this argument in its opening brief. Undeveloped
arguments and arguments raised for the first time in a reply brief are waived. Scxomas v. Colvin,
__ F.3d __, 2013 WL 5485143 at * 6 (7th Cir. Oct. 3, 2013) (undeveloped arguments waived):
United States v. Kennedy, 726 F.3d 968, 974 n.3 (7th Cir. 2013) (“Arguments raised for the first
time in a reply brief, however, are waived); Bracey v. Grondin, 712 F.3d 1012, 1020 (7th Cir.
2013) (same). See also Emenaker v. Peake, 551 F.3d 1332, 1339 (Fed. Cir. 2008). Accordingly,
Zurn has waived this argument. Even if Zurn had not waived the argument, the challenge goes

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to the weight of Mr. Ballanco’s testimony, not its admissibility. Zurn is free to rigorously cross
examine Mr. Ballanco on this issue.
III.

Ballanco II’s Reliance on a Particular Claim Construction
Despite this Court’s claim construction Order of September 13, 2012, Sloan and Zurn

continue to argue over the proper interpretation of the claim term “axis of plunger travel.” In its
claim construction Order, the Court construed “axis of plunger travel” to mean the “axis on
which the plunger travels.” (R. 391, Markman Order, at 32). Zurn seeks to exclude certain
infringement opinions of Mr. Ballanco on the basis that he “bases his infringement analysis . . .
on a construction of ‘axis of plunger travel’ that is not what was provided by this Court.” (R.
554, Zurn’s Memo on Daubert Motion, at 9). Zurn also argues that the Court should exclude Mr.
Ballanco’s testimony as unreliable, citing to the fact that his methodology and opinion have
changed in response to criticism by Zurn’s experts. (R. 603 at 7).
A.

Zurn’s “Straight Line” Construction Fails

Specifically, Zurn contends that Mr. Ballanco’s infringement analysis relies on his
“interpretation that any two points on the plunger travel path may define an axis of plunger
travel, whether or not the path traveled by the plunger between those two points results in a full
or reduced flush volume.” (Id. at 12). This construction contrasts with Zurn’s interpretation of
the same claim term that “[a]n axis of plunger travel is the axis on which the plunger travels, and
that entire axis of plunger travel must provide either a full or a reduced flush. Any portion
thereof that does not, by itself, effectuate a full or reduced flush volume cannot constitute an axis
of plunger travel.” (Id.) (emphasis added).

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1.

The Court Has Previously Considered Zurn’s “Straight Line”
Argument

Zurn’s “entire axis” argument is strikingly similar to the “straight line” argument Zurn
presented to the Court during the Markman stage of this litigation. In its Markman brief, Zurn
proposed the following construction for the “axis of plunger travel”: “A straight line upon which
the plunger travels that is coincident with the longitudinal axis of the plunger.” (Markman
Order, at 32). The Court, however, declined to make this limitation part of its claim
construction, finding that “Zurn’s proposal of a ‘straight line’ . . . is unsupported by the evidence,
both intrinsic and extrinsic.” (Id. at 34). Contrary to Zurn’s present assertion, the Court has
never construed the ‘635 patent’s “axis of plunger travel” term to require a straight line or axis
extending for the entirety of the plunger’s travel. Therefore, Mr. Ballanco’s interpretation of the
claim term relied upon in his infringement analysis does not conflict with the Court’s claim
construction for failing to require an entire axis or straight line.
2.

Zurn’s Counsel Conceded That “A Portion” May Constitute an Axis
of Plunger Travel

During the Markman hearing, counsel for Zurn addressed its proposed “straight line”
construction on two separate occasions. First, without prompting by the Court, Zurn’s counsel
stated that “[w]ith respect to the – does it have to be only a straight line or does it have any of
this tilting component, Zurn concedes that the claims recite ‘comprising’ not ‘consisting of.’
Therefore, plunger travel, it has to have an axis somewhere within the path, but it’s not limited to
just one particular axis.” (Markman Hearing, 113:11-16, Aug. 28, 2012) (emphasis added).
Following this statement, the Court directed Zurn’s counsel to Figure 6 of the ‘635 patent and
asked whether, when the plunger tilts, “[i]s that necessarily a straight line? And what is your
support for that? I did not see anything in the submissions to the Court supporting that the axis
must be a straight line.” (Id. 114:10-13). In response, Zurn’s counsel stated:
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I don’t think I understand the question, your Honor, because our construction
would allow for the plunger to first tilt into the position; move into it – because
the claims recite ‘comprising’; and then move along an axis, which would be the
straight line. So, a portion of the plunger path would not have – the entire plunger
path does not have to be straight. A portion of it has to include an axis.
(Id. 114:14-21) (emphasis added).
The Court recognizes that Zurn’s counsel was, at least in part, referring to the fact that the
plunger must initially tilt into position before moving along the axis. That does not, however,
explain counsel’s prior statement that because the claim language includes the language
“comprising” the axis of plunger travel is “not limited to just one particular axis.” Moreover,
when given the opportunity to provide support for its “straight line” construction, Zurn’s counsel
failed to provide any such support and instead stated that “the entire plunger path does not have
to be straight” and “[a] portion of it has to include an axis.” Having explicitly conceded that
only a “portion” of the plunger path “has to include an axis,” Zurn cannot now argue that the
Court must exclude Mr. Ballanco’s expert report because, in accordance with Zurn’s concession,
Mr. Ballanco relied on “a portion” of the plunger path in performing his infringement analysis.
Accordingly, the Court denies this aspect of Zurn’s motion.
3.

Zurn’s “Entire Axis” or “Straight Line” Constructions Would
Exclude the Preferred Embodiment of the ‘635 Patent

Even putting aside Zurn’s concession at the Markman hearing, Zurn’s “entire axis”
argument still fails because it would have the effect of excluding the ‘635 patent’s preferred
embodiment. Both Zurn’s and Sloan’s experts agree that the preferred embodiment disclosed in
the ‘635 patent would not satisfy a construction requiring that the “axis of plunger travel”
constitute an entire straight axis. (R. 544 at 9). (See also R. 606 at 10) (“Dr. Magee testified that
based on his testing of the Uppercut® and the prior art handles, it was his opinion that the Wilson
patent did not enable one to make and use the claimed invention because the inventor Wilson
11 

made an assumption regarding how the plunger traveled that was later determined to be
incorrect.”). Zurn’s expert, Dr. Magee, agreed during his deposition that “the invention
described in the patent would not have a straight axis of — horizontal axis of plunger travel all
the way across.” (R. 544 at 10) (citing Ex. 8, Magee Dep. 114:20-115:13, May 7, 2013). Sloan’s
expert, Mr. Ballanco, agreed with Dr. Magee’s position on this point. (Id. at 9-10). The Federal
Circuit has clearly stated that “a claim construction that excludes the preferred embodiment ‘is
rarely, if ever, correct and would require highly persuasive evidentiary support.’” Adams
Respiratory Therapeutics, Inc. v. Perrigo Co., 616 F.3d 1283, 1290 (Fed. Cir. 2010) (quoting
Victronics Corp. v. Conceptronic Inc., 90 F.3d 1576, 1583-84 (Fed. Cir. 1996); see also Anchor
Wall Sys. v. Rockwood Retaining Walls, 340 F.3d 1298, 1308 (Fed. Cir. 2003). Zurn fails to
present such highly persuasive evidentiary support.
Furthermore, it is unclear whether the “entirely straight path” construction proposed by
Zurn is, in practice, even mechanically realizable. Therefore adoption of Zurn’s proposal may
have the effect of not only excluding the patent’s preferred embodiment, but also of limiting the
claims to an embodiment that is physically inoperable. Zurn cites Lucent Technologies, Inc. v.
Gateway, Inc. for the proposition that “courts may not redraft claims to cure a drafting error
made by the patentee, whether to make them operable or to sustain their validity.” (R. 606 at 11)
(citing Lucent Techs., Inc. v. Gateway, Inc., 525 F.3d 1200, 1215 (Fed. Cir. 2008)). The Lucent
court, however, further explained that courts construed claims to exclude all disclosed
embodiments where “the claim language is unambiguous.” Where the claims are “amendable to
more than one reasonable construction,” on the other hand, courts construe claims to sustain their
validity. 525 F.3d at 1215-16. As a result, Zurn’s “entire axis” interpretation cannot be a correct
construction of the “axis of plunger travel” claim term.

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B.

Mr. Ballanco’s Testimony is Not Sufficiently Unreliable to Justify Exclusion

Zurn also argues that the Court should exclude Mr. Ballanco’s testimony because it is
“unreliable.” (R. 554 at 3). Zurn alleges that Mr. Ballanco’s “opinions are unreliable because
Sloan change[d] the methods used, the data used, and the type of analysis used” after submitting
Mr. Ballanco’s initial expert report. More specifically, Zurn alleges that Mr. Ballanco changed
his initial opinion in response to criticism by Zurn’s expert, Dr. Magee, by “chang[ing] the
method he used to analyze [the] plunger travel data” and “cherry-pick[ing] any portion of the
path to find a horizontal axis or an angled axis of plunger travel.” (Id. at 4-6).
The Court finds Zurn’s “unreliability” arguments unavailing. Unlike the expert report in
the non-binding decision cited by Zurn in support of its argument, Mr. Ballanco’s reports do not
dismiss or ignore evidence undermining his underlying conclusion. (R. 544 at 3) (citing FailSafe, L.L.C. v. A.O. Smith Corp., 744 F. Supp. 2d 870 (E.D. Wisc. 2010)). To the contrary, in
performing his infringement analysis, Mr. Ballanco uses scientifically reliable methods and an
interpretation of the claim terms in line with the Court’s interpretation and Zurn’s conceded
interpretation of the “axis of plunger travel” claim term. Moreover, it is not apparent that Mr.
Ballanco “cherry picked” favorable evidence to the exclusion of contrary evidence—based on
the Court’s claim construction and Zurn’s concessions, Mr. Ballanco merely identified arguably
reasonable potential candidates for the “axis of plunger travel” in the accused devices. Zurn can
certainly challenge Mr. Ballanco’s selection of evidence on cross-examination.
While it does appear that Mr. Ballanco changed his expert opinion in response to
criticism by Zurn’s expert, this by itself is insufficient to exclude Mr. Ballanco’s opinions. Mr.
Ballanco did not change his opinion simply because his first opinion was proven wrong, nor does
he rely on the same data as was used in his first opinion in reaching a different result. Rather,

13 

Mr. Ballanco altered his opinion in response to what was perceived as valid criticism by Zurn
and based his new opinion on a changed method and a new data set. (R. 544 at 7). The fact that
Mr. Ballanco changed his opinion after submitting his initial expert report cannot, by itself,
justify the exclusion of his testimony on unreliability grounds. Zurn is free to question Mr.
Ballanco about this change at trial.
Finally, although Mr. Ballanco’s infringement analysis may be challenged on the data set
used, his choice of methodology, and his ultimate conclusions, these arguments go to the
persuasiveness of the expert testimony, not its admissibility. Smith v. Ford Motor Co., 215 F.3d
713, 718 (7th Cir. 2000) (“The soundness of the factual underpinnings of the expert’s analysis
and the correctness of the expert’s conclusions based on that analysis are factual matters to be
determined by the trier of fact.”). While Zurn certainly disagrees with the conclusions reached
by Mr. Ballanco and the methodology he chose to reach them, it can address these issues through
rigorous cross-examination at trial if it so chooses. Stollings v. Ryobi Techs., Inc., 725 F.3d 753,
766 (7th Cir. 2013); Lapsley v. Xtek, Inc., 689 F.3d 802, 805, 810-11, 817 (7th Cir. 2012).
Zurn’s unreliability argument fails.
IV.

Ballanco’s Price Erosion Opinions
As the Federal Circuit teaches:
Lost revenue caused by a reduction in the market price of a patented good due to
infringement is a legitimate element of compensatory damages. Indeed, an
infringer’s activities do more than divert sales to the infringer. They also depress
the price [of the patented product]. Competition drives price toward marginal
cost.

Power Integrations, Inc. v. Fairchild Semiconductor Intern., Inc., 711 F.3d 1348, 1378 (Fed.
Cir. 2013) (citations omitted). Accordingly, infringement damages can include both lost sales
and any price reduction due to infringement. Id. The Federal Circuit therefore “recognize[s] the

14 

economic principle of ‘price erosion’ in calculating compensatory damages for patent
infringement.” Id.
In order to prove price erosion damages, a patent owner must prove “that ‘but for’
infringement, it would have sold its product at higher prices.” SynQor, Inc. v. Artesyn Techs.,
Inc., 709 F.3d 1365, 1381 (Fed. Cir. 2013), quoting Crystal Semiconductor Corp. v. TriTech
Microelectronics Int’l, Inc., 246 F.3d 1336, 1357 (Fed. Cir. 2001). In addition, “a credible butfor analysis must account for the ‘effect of [a] higher price on demand for the product.” Id.
“Further, because ‘a rational would-be infringer is likely to offer an acceptable noninfringing
alternative, if available, to compete with the patent owner rather than leave the market
altogether,’ the analysis must consider the impact of such alternate technologies on the market as
a whole.” Id., quoting Grain Processing Corp. v. Am. Maize–Prods. Co., 185 F.3d 1341, 1350–
51 (Fed.Cir. 1999). Further, “the patentee’s price erosion theory must account for the nature, or
definition, of the market, similarities between any benchmark market and the market in which
price erosion is alleged, and the effect of the hypothetically increased price on the likely number
of sales at that price in the market.” Id. at 1357.
Sloan relies on Mr. Ballanco to supports is price erosion damages assertion. Specifically,
Mr. Ballanco opines as follows:
In addition, in light of the fact that manual dual mode flush valves are the quickest route
to water savings, in my opinion it is reasonable that Sloan could have charged higher
prices for its dual flush valves and handles without experiencing an impact on sales
volume if Zurn did not offer a less expensive, competing product. It is my opinion that, if
Zurn had not been able to offer well performing, acceptable manual dual flush handles
and manual dual flush valves from 2006 to the present, Sloan would have been able to
increase the price of its Uppercut flush valves and handles by $20 - $30 each without any
diminishing sales. A price increase of $20-$30 per water closet is not significant in the
context of new building construction or retrofitting projects, and it would not stop a
building owner from going “green.”
(R. 554-1, Ballanco I at 45.)
15 

As an initial matter, in its April 5, 2013 Order, the Court did not opine on the
admissibility of Mr. Ballanco’s expert opinions regarding price erosion. Instead, the Court noted
that an expert may render opinions based on his experience in a certain area, but the basis of Mr.
Ballanco’s price erosion opinions was uncertain. It was unclear from Mr. Ballanco’s initial
deposition testimony if he relied solely on his expertise. Although Mr. Ballanco testified at his
deposition that he had spoken to contractors who confirmed his price erosion opinion, he refused
to disclose the identities of the contractors to Zurn’s counsel. When Zurn brought the issue to
the Court’s attention, the Court ordered another deposition of Mr. Ballanco in order for Mr.
Ballanco to testify regarding the basis for his opinions on price erosion. After taking this
deposition, Zurn now challenges Mr. Ballanco’s qualifications under Daubert and Rule 702 to
render such opinions because he made clear that the sole basis for such opinions is his experience
in the industry. Zurn contends that Mr. Ballanco’s price erosion opinion is not based on sound
economic proof or personal experience with price concessions to specific customers2. The Court
agrees.
At his deposition, Mr. Ballanco confirmed that his opinion regarding the $20-$30 price
increase is based solely on his “experience in the industry.” (R. 554-7, 5/15/13 Dep at 513; R.
554-4, 2/25/13 Dep. at 218.) He did not perform any economic studies to reach his opinion and
did not conduct any studies to determine whether Zurn’s customers would pay an additional $20
or $30 for a manual dual flush. (2/25/13 Dep. at 218.) Instead, Mr. Ballanco testified that he
based his opinion on:

2

 Sloan spends several pages of its memorandum explaining why Mr. Ballanco is qualified to

testify regarding the water savings afforded by dual flush valves and the technological reasons
other products do not provide the same benefits. As Sloan notes, however, Zurn has not
challenged the admissibility of these opinions.
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My years of experience in the profession. I’ve worked in this profession a long
time. You know what pricing is and what you can get away with and what you
can’t get away with. Water conservation is a major concern.
So when you can show a savings and a price, that was my thought. I was asked
what I thought you could get more and that’s the price I – the differential I came
up with.
(Id.)
Mr. Ballanco further testified that he based this $20-30 figure on “[t]he desire to have
water conservation and what the public is willing to pay for that water conservation for an easy
changeout.” (Id. at 214.) In addition, Mr. Ballanco testified that the price increase applied
“across the board” – in both new and old construction. (Id.)
While Mr. Ballanco may have decades of experience in the flush valve industry, he is not
an economist and does not have any experience in conducting economic analyses. Further, Mr.
Ballanco does not have experience in the sale or pricing of flush valves. His firm provides
engineering consulting in the area of codes and standards. He does not have the requisite
experience to render an economic analysis regarding pricing. Simply put, Mr. Ballanco is not
qualified to render the $20-$30 price erosion opinion.
In addition, Mr. Ballanco’s methodology is unreliable and lacks an adequate foundation.
Mr. Ballanco did not know the price difference between the dual flush and the 1.28 GPF
flushometer – a viable non-infringing alternative to the dual flush. (5/15/13 Dep. at 519.) He
was not aware of any specific sales where Sloan needed to lower its prices to compete with
Zurn’s product during the period of alleged infringement or where Sloan lost a sale because of its
pricing. Mr. Ballanco also did not conduct or rely on any analysis regarding the impact the
effect a higher price would have on the product demand. As the Federal Circuit has noted, “in a
credible economic analysis, the patentee cannot show entitlement to a higher price divorced from

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the effect of that higher price on demand for the product. In other words, the patentee must also
present evidence of the (presumably reduced) amount of product the patentee would have sold at
the higher price.” Crystal Semiconductor, 246 F.3d at 1357. As such, his methodology is
unreliable. See id. at 1357-58 (affirming district court’s ruling that expert’s methodology for
price erosion opinions was unreliable).
Sloan’s reliance on Honeywell Int’l Inc. v. Hamilton Sundstrand Corp., 166 F. Supp.2d
1008, 1032-33 (D. Del. 2001), aff’d in part and vacated in part on other grounds, 370 F.3d 1131
(Fed. Cir. 2004) does not save Mr. Ballanco’s price erosion opinion. Even if courts have the
discretion to permit price erosion expert testimony without the support of an economic study as
Sloan urges, the Court will not permit Mr. Ballanco to do so for the reasons discussed above.
His $20-$30 opinion is not based on any reliable methodology or analysis.
CONCLUSION
For the reasons discussed above, the Court grants in part without object, grants in part,
and denies in part Zurn’s Motion to Exclude Testimony of Julius Ballanco.

Dated: October 15, 2013

ENTERED:

AMY J. ST. EVE
United States District Court Judge

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