Loggerhead Tools, LLC v. Sears Holdings Corporation

Filing 455

MOTION by Defendants Apex Tool Group, LLC, Sears Holdings Corporation, Counter Claimants Apex Tool Group, LLC, Sears Holdings Corporation for judgment as a Matter of Law on Damages, for Remittitur, or for a New Trial on Damages (Attachments: # 1 Appendix 1, # 2 Exhibit A, # 3 Errata B, # 4 Exhibit C, # 5 Exhibit D)(Sernel, Marcus)

Download PDF
APPENDIX 1 1 1 IN THE UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION 2 3 4 5 6 LOGGERHEAD TOOLS, LLC, Plaintiff, vs. 7 SEARS HOLDINGS CORPORATION and APEX TOOL GROUP, LLC., 8 Defendants. 9 10 11 12 13 For the Plaintiff: 16 18 19 23 24 25 SKIERMONT DERBY LLP BY: MR. PAUL J. SKIERMONT MS. SARAH E. SPIRES MS. SADAF ABDULLAH 2200 Ross Avenue, Suite 4800W Dallas, Texas 75201 BARTLIT BECK HERMAN PALENCHAR & SCOTT BY: MR. JASON L. PELTZ MS. ASHA L.I. SPENCER MS. JEANNIE K. TINKHAM 54 West Hubbard Street, Suite 300 Chicago, Illinois 60654 17 22 Chicago, Illinois April 28, 2017 9:57 a.m. APPEARANCES: 15 21 Docket No. 12 C 9033 VOLUME 1 TRANSCRIPT OF PROCEEDINGS BEFORE THE HONORABLE REBECCA R. PALLMEYER, and a jury 14 20 ) ) ) ) ) ) ) ) ) ) For the Defendant Sears Holdings Corporation: WINSTON & STRAWN BY: MR. JAMES M. HILMERT 35 West Wacker Drive, Suite 4100 Chicago, Illinois 60606 For the Defendants Sears Holdings Corporation and Apex Tool Group: KIRKLAND & ELLIS LLP BY: MR. MARCUS E. SERNEL MR. IAN J. BLOCK MR. ERIC D. HAYES MS. KATHERINE E. RHOADES 300 North LaSalle Chicago, Illinois 60654 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Court Reporter: FRANCES WARD, CSR, RPR, RMR, FCRR Official Court Reporter 219 S. Dearborn Street, Suite 2144D Chicago, Illinois 60604 (312) 435-5561 frances_ward@ilnd.uscourts.gov 3 1 2 THE CLERK: 12 C 9033, LoggerHead versus Sears and Apex. 3 THE COURT: Okay. I believe our jurors are 4 completing their questionnaires. I will just check on that 5 and make sure we are making progress. 6 (A brief recess was taken at 9:57 a.m. until 10:20 a.m.) 7 THE COURT: We have got our questionnaires. Ladies 8 and gentlemen, I am ready to bring in the jurors and begin 9 the process of jury selection. 10 11 I did take a quick look at the questionnaires. I don't think that we have a large number of problems. 12 Are there any of the questionnaires that you think 13 right now should generate a cause challenge before we even 14 bring people in? 15 16 Did you see that we have a patent lawyer on our jury -- our panel? 17 MR. SERNEL: Yes. And that was one of the ones 18 that we had flagged. I think a patent lawyer, as he says in 19 his own comments, "I think I'd have undue influence." I 20 think that's somebody we should strike. 21 THE COURT: What's the plaintiff's view on that? 22 MR. SKIERMONT: No objection. 23 THE COURT: We will excuse him. That's kind of a 24 25 shame. Any other person who you think really is not likely 179 1 IN THE UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION 2 3 4 LOGGERHEAD TOOLS, LLC, 5 6 7 8 Plaintiff, vs. SEARS HOLDINGS CORPORATION and APEX TOOL GROUP, LLC., Defendants. 9 10 11 12 13 14 For the Plaintiff: 17 19 20 21 25 SKIERMONT DERBY LLP BY: MR. PAUL J. SKIERMONT MS. SARAH E. SPIRES MS. SADAF ABDULLAH 2200 Ross Avenue, Suite 4800W Dallas, Texas 75201 BARTLIT BECK HERMAN PALENCHAR & SCOTT BY: MR. JASON L. PELTZ MS. ASHA L.I. SPENCER MS. JEANNIE K. TINKHAM 54 West Hubbard Street, Suite 300 Chicago, Illinois 60654 18 24 Chicago, Illinois May 3, 2017 9:39 a.m. APPEARANCES: 16 23 Docket No. 12 C 9033 VOLUME 2 TRANSCRIPT OF PROCEEDINGS - Trial BEFORE THE HONORABLE REBECCA R. PALLMEYER, and a jury 15 22 ) ) ) ) ) ) ) ) ) ) For the Defendant Sears Holdings Corporation: WINSTON & STRAWN BY: MR. JAMES M. HILMERT 35 West Wacker Drive, Suite 4100 Chicago, Illinois 60606 180 1 APPEARANCES (Continued): 2 For the Defendants Sears Holdings Corporation and Apex Tool Group: KIRKLAND & ELLIS LLP BY: MR. MARCUS E. SERNEL MR. IAN J. BLOCK MR. ERIC D. HAYES MS. KATHERINE E. RHOADES 300 North LaSalle Chicago, Illinois 60654 Court Reporter: FRANCES WARD, CSR, RPR, RMR, FCRR Official Court Reporter 219 S. Dearborn Street, Suite 2144D Chicago, Illinois 60604 (312) 435-5561 frances_ward@ilnd.uscourts.gov 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 181 1 2 3 4 5 6 THE CLERK: 12 C 9033, LoggerHead versus Sears and Apex. On trial. THE COURT: I believe everybody else is here on LoggerHead, correct? Good. I believe all the jurors are here. I am going to double-check on that and we can bring them in. 7 Is everyone ready? 8 MR. SKIERMONT: Your Honor, we do have a couple of 9 10 11 12 13 14 15 disputes about the opening slide exchange that we did, that we could not resolve last night. THE COURT: Let's talk about those right now. (Document tendered.) MR. SKIERMONT: LoggerHead has some objections to the slides. There are three categories. What I would like to 16 handle is -- there are three slides, I believe it is, related 17 to the advice-of-counsel issue. 18 If you turn to their Slide DDX 19, DDX 19 has 19 document excerpts with Mr. John Owen as a recipient or an 20 author, and Mr. Owen, as you will recall, is the outside 21 patent counsel who Apex is relying on for the 22 advice-of-counsel defense to willfulness. 23 THE COURT: Right. 24 MR. SKIERMONT: These documents -- for example, the 25 one -- the second excerpt that says "from Owen to Broadaway" 284 1 THE COURT: You may be seated. 2 All right. The plaintiff is free to call their 3 first witness. 4 5 MS. SPIRES: Your Honor, plaintiff calls its first witness, Loggerhead's president, Dan Brown. 6 7 THE COURT: Mr. Brown, could you step forward, please? 8 DAN BROWN, PLAINTIFF'S WITNESS, DULY SWORN 9 THE COURT: You may proceed, Counsel. 10 11 MR. SKIERMONT: Your Honor, can you switch the connection? 12 THE COURT: Sure. 13 MR. SKIERMONT: Thank you. 14 THE COURT: Do you want to use your computer or the 15 -- 16 MS. SPIRES: Counsel table. 17 THE COURT: Counsel table. Got it. 18 (Brief pause.) 19 THE COURT: Is that right? 20 MS. SPIRES: Yes. Thank you. 21 DIRECT EXAMINATION 22 BY MS. SPIRES: 23 Q. Good afternoon. 24 A. Hello. 25 Q. Could you please introduce yourself to the jury? Brown, Sr. - direct 365 1 Q. 2 what did you do? 3 A. 4 of our wrench. And I went to the patents that I had and took 5 the image, and I sent an e-mail to Pete Hannon, who was our 6 rep at Sears to show him what we had found. 7 Q. 8 Max Axess to ask you for a license to your patents? 9 A. No, no. 10 Q. Have they ever contacted you to ask for a license to 11 your patents? 12 A. No. 13 Q. If Sears or Apex had contacted you in 2012 and said they 14 wanted to license your patents so they could sell this, would 15 you have done it? 16 A. Never. 17 Q. Why not? 18 A. Because they make -- they're a Chinese manufacturer. 19 They make their products in China. And I wanted to control 20 where my product was made. I explained that -- you know, I 21 proved the business model. I proved that we can make a 22 product in the States and sell it and do it in a socially 23 responsible way. I'm not dissing anybody else, but I feel I 24 have the right to do with my invention what I believe in, and 25 that's my value system. Yes. Once you got over the shock of seeing the photos, Well, I was shocked, because we patented this embodiment Did Sears or Apex ever contact you prior to selling the Brown, Sr. - direct 366 1 Q. Has LoggerHead ever licensed its patents? 2 A. Never. 3 Q. Since you formed LoggerHead, have you ever considered 4 licensing your patents? 5 A. Been approached and not interested. 6 Q. Why not? 7 A. Well, because I -- not everybody believes in 8 American-made and doing it this way that I do; and if you 9 give a license out, they can make it wherever they want, and 10 it destroys, I think, the overall value of what I did. 11 Q. What about the effect on your brand? 12 A. It would -- well, the rest of our products, it would 13 destroy -- this is our keystone product. This is the 14 flagship. I don't know how I could keep the business afloat 15 without having another flagship in my back pocket to run to. 16 This is the cornerstone of our business. 17 Q. 18 forced to license your patents to Sears and Apex in 2012 19 right before they started selling this, what would you have 20 asked them to pay? 21 A. 22 could they pay per wrench to destroy my business? That's 23 what you're asking me? 24 Q. 25 2012 to Sears and Apex so they could make the Max Axess, what Now, assuming that you didn't have a choice, you were Well, I -- the premise is -- I just said -- how much I'm asking if you were forced to license your patents in Brown, Sr. - direct 367 1 would you have charged? 2 A. 3 But I don't want -- I wouldn't give somebody a gun to shoot 4 me with in the marketplace. They would have to be -- have 5 the -- no advantage of going offshore. If they want to make 6 it in the States -- well, one, I would want to be convinced 7 that they're not going to use those -- put them on the 8 Internet or whatever, drop the price in the market, you know, 9 to kill the market price and sink my boat. Well, it is a hypothetical. I mean, I wouldn't do it. 10 They have to -- they have to have an equivalent 11 price to the American-made price. We sell the wrench for 12 13.99, so if you make it for four or five bucks in China, 13 it's got to be -- it's got to be 8 or 9, $10.00. 14 Q. Is that per wrench? 15 A. Yes. 16 Q. I want to talk to you about the first time you actually 17 saw the Max Axess in person, not from photos. When was that? 18 A. 19 Sears to try to find it. I didn't see it at our Sears. I 20 asked a customer to go out there and get some and send them 21 overnight to me, and I would pay him back. So, he sent them 22 to me I think probably the following Tuesday or Wednesday. 23 Q. Where were you when you saw them for the first time? 24 A. In the LoggerHead office. 25 Q. And what was your reaction when you saw them? So, I had asked a customer to go to Sears -- I went to Brown, Sr. - direct 373 1 you know, we'd been to the shows. We'd done all the 2 paperwork. We had worked out everything. And all of a 3 sudden, they dropped -- they said, "We're not going with 4 you." The buyer said, "It wasn't my call. I was overruled." 5 I found out on Black Friday that it was -- the Max 6 Axess had somehow overruled it. 7 Q. When did -- 8 A. That's how we live, right? We live on these Christmas 9 sales and programs. 10 Q. When did you file this lawsuit? 11 A. October -- the fall of 2012. 12 Q. Why did you file this lawsuit against Sears and Apex? 13 A. I filed it because it's my dignity. It's my right to 14 file it. And I'm trying to save this business. And frankly, 15 I want to recoup the losses. I'm on the hook. 16 I started this company by, you know, using up money 17 I had and taking basically a paid-off house and refinancing 18 it and borrowing and getting money for the tooling. I owe 19 $400,000 still on tooling. This is not just a wham-bam 20 thing. You know, you've got to run a business. 21 I've taken so much risk, it's unbelievable. And 22 I've done it -- I'm proud to say I don't mind taking the 23 risk. I don't mind competing fairly. But this is wrong. I 24 followed the rules. I did it right. I got an American 25 dream. It worked. Brown, Sr. - direct 1 374 I filed this suit because this is wrong, not just 2 for me, but for anybody in my shoes. How are we going to 3 ever get jobs in this -- if we can't create new products and 4 at least make the new products here, if everything's got to 5 go offshore, who's going to work? Are we going to sell ice 6 cream and shirts to each other forever? It just doesn't make 7 any sense to me. 8 9 10 I want -- I would love to have the win here and a statement that this is wrong. Now, this -- for a patent, for the inventor, this 11 is it. I get a jury of my peers. This is it. I think -- 12 well, I'm not going to go there, but if we can't say that 13 this is wrong, why invent? Why take the risk? Why do it? I 14 don't know how I could face my students. It's almost a joke. 15 We have rules. We have laws. And then people that 16 don't follow them, they don't get punished, or the 17 punishment's so low that they make more money doing it and 18 getting away with it, it doesn't work. So they do it and do 19 it and do it. And maybe they get caught once in a while, but 20 this is ridiculous. 21 So, I'm fighting this. It's a principle fight, and 22 I want to recoup my losses. And I want to build that 23 American-made company that I dreamed of, and I want to make 24 it happen. And I don't feel it's fair to have somebody take 25 my intellectual property and destroy my marketplace. Brown, Sr. - cross 404 1 A. 2 another misrepresentation of what I said over and over again. 3 I disagree with that. 4 Q. 5 13.99 -- can you let me finish the question, please. 6 A. Okay. No problem. 7 Q. The price that you sent to Sears February 16 was 13.99, 8 and there was going to be no subsidy, DRTV subsidy 9 whatsoever, correct? Yeah. And that's not a 55 percent price increase. It's The price that you sent to Sears February 16 was 10 A. 11 we started at our normal price. And we were willing -- I've 12 got to tell you, as you know, there was a lot of conversation 13 after that. We negotiated from our standard price back down, 14 and we never got to a -- Sears signing the agreement that we 15 agreed to, but they ended up just going off and canceling our 16 orders. We cleared the deck, and so there would be no confusion, 17 But after this, just to represent, if you're saying 18 my intent was to walk away and go somewhere else, we 19 continued to negotiate, but we negotiated from our standard 20 price so there was no confusion that you're trying to spin 21 right now. 22 Q. So -- 23 A. We didn't give them that price increase that you said. 24 Q. So, if you can pull back up what we had, the next 25 sentence. Bokhart - direct 590 1 A. 2 believe so. 3 Q. 4 toward the bottom where they state, "The only competitor I 5 could identify was LoggerHead." I believe so. I would need to see the full email, but I In this email, I am going to call out the sentence 6 Do you see that? 7 A. Yes. 8 Q. And what does this tell you about whether or not the 9 Bionic Wrench and the Max Axess were direct competitors in 10 the marketplace? 11 A. 12 look to, source documents. So this is a sample of one of the 13 things I look to, to indicate that there were no other 14 competitors. 15 16 Well, again, as I said, there are numerous things that I MS. SPENCER: Your Honor, we would like to offer Plaintiff's Exhibit 154 into evidence. 17 MR. HAYES: No objection, your Honor. 18 THE COURT: That will be admitted. 19 (Plaintiff's Exhibit 154 was received in evidence.) 20 BY MS. SPENCER: 21 Q. 22 to the Bionic Wrench impact LoggerHead? 23 A. 24 thing you are going to suffer -- or the first thing they 25 suffered is, he is not selling the Bionic Wrench now in the How does the fact that Max Axess is a direct competitor Well, as a result of having a competitor, the first Bokhart - direct 1 same volumes, because he is losing those sales to the Max 2 591 Axess. So he would have had those Max Axess sales. 3 But we have additional problems and additional 4 losses that they are incurring, the first of which is price 5 erosion. As Mr. Brown testified to and as the type of 6 documents have indicated, the price that he is able to charge 7 now for the Bionic Wrench is going down. He can't charge as 8 much for it nor can't increase his price. That's causing him 9 to lose money. 10 But beyond that, Mr. Brown testified that, as a 11 result of the competition and Max Axess out there with the 12 product, because he is no longer unique with being the only 13 one out there with the Bionic Wrench, he is having a hard 14 time making inroads to new customers or expanding sales with 15 current customers. So he is losing sales to those types of 16 customers. 17 Q. 18 Let's start with price erosion. And you mentioned Mr. Brown's testimony. I am 19 putting up the transcript from Mr. Brown's testimony. I want 20 to talk about if this is the testimony that you are 21 referencing? 22 So at the top of the page Mr. Brown is asked, "Once 23 Sears and Apex started selling the Max Axess, what kind of 24 impact did that have on LoggerHead?" 25 And what was Mr. Brown's response? Bokhart - direct 1 A. 2 592 summary. I would go down to, basically, Line 4 to get the 3 4 "We have a competitive wrench that's a copy in the market selling at lower prices." 5 He is indicating that now he has got the Max Axess 6 as a competitor, and they are selling at lower prices. 7 I think he continues on after that. 8 Q. 9 where he says, "We lost sales to Sears. We lost sales to Now, when you say "he continues on," are you referencing 10 other retailers. It's like doing business with a black cloud 11 over your head"? 12 A. Yes. 13 Q. And is this the testimony you are referencing when you 14 say, as part of the information to help you determine that 15 the presence of the Max Axess in the market caused price 16 erosion and also lost sales to other customers to LoggerHead? 17 A. 18 documents, and I have analysis that would support that. 19 Q. 20 evaluate whether, in fact, prices for the Bionic Wrench have 21 dropped since the Max Axess was introduced by Sears and Apex? 22 A. 23 look to those prices. And it was clear, after looking at it 24 over a period of years, that the prices did go down. 25 Q. Well, this is one thing. I have also seen other Beyond Mr. Brown's testimony, did you independently Yes. Part of my study and part of the report, I did You have talked about the impact that Sears and Bokhart - direct 1 defendants selling the Max Axess had on LoggerHead and 2 593 Mr. Brown in the form of lost sales and price erosion. 3 Did you determine the appropriate form of damages 4 to compensate Mr. Brown for that harm? 5 A. 6 would be in what's called a reasonable royalty. It's how 7 much Sears and Apex would pay Mr. Brown basically for the use 8 of his patents. 9 Q. Yes, I did. It was my opinion that the appropriate form And just so we can slow down and describe for the jury, 10 how do you best describe what a reasonable royalty is? 11 A. 12 fair for one side to pay another side for the use of their 13 technology that both would agree to. 14 Q. 15 that based on total sales? Is that based on each wrench? 16 Well, a reasonable royalty is an amount that has to be And is the reasonable royalty that you determined, is What's the base of your reasonable royalty? 17 A. 18 6-inch and an 8-inch wrench and we have unit numbers, I look 19 at it on a per-wrench basis rather than a big dollar amount. 20 So it would be so much for a 6-inch wrench and so much for a 21 4-inch wrench on a per-wrench basis. 22 Q. 23 appropriate royalty rate, did Dan Brown ever agree with the 24 defendants on a royalty to let them license his patent? 25 A. Well, the way I have looked at it, since we have a Now, before we talk about your determination of an No, he never did. As he testified to, he didn't want Bokhart - direct 594 1 to. He didn't want to give up control. And he didn't want 2 to license to someone who would use an offshore model to just 3 increase their profits at the expense of what he was trying 4 to do. 5 Q. 6 rate for licensing his invention, how do you figure out what 7 the rate should be? 8 A. 9 financial information and the other information you have and So if Mr. Brown never agreed with the defendants on a Well, you do it by -- you have to take a look at all the 10 determine a range that they would negotiate it in. What's 11 the minimum amount that Mr. Brown would be willing to accept, 12 and what's the maximum amount that Sears and Apex would be 13 willing to pay? 14 Once you have this bracket, then you go through 15 this negotiation to decide who has the strength and who has 16 the weakness, what are their various negotiating points, to 17 try and find a point somewhere in between that they would 18 agree to. 19 Q. 20 21 So let's start with what you first said. You have to think about a negotiation between Dan Brown and the defendants. 22 Why are we talking about a negotiation between Dan 23 Brown and the defendants? 24 A. 25 negotiation that we have to construct because it never We are talking about a negotiation. It's a hypothetical Bokhart - direct 598 1 And the gross profits would be at that upper end. That 2 really, in my mind, would represent where the ceiling would 3 be. 4 Q. 5 all of their gross profits to license Mr. Brown's technology? 6 A. 7 than what you would otherwise, sure. But they are not going 8 to do that. They have got other costs and other factors they 9 have to consider. Are you saying that defendants would be willing to pay From an economic standpoint, if you make one penny more 10 So as you go through the negotiation, they are 11 going to want to come down and should come down from that 12 maximum ceiling. 13 Q. 14 it, the minimum amount that Mr. Brown would accept. So let's turn to the floor, then, or, as you described 15 How did you determine the minimum amount that Dan 16 Brown would accept, which sets the floor for the negotiation 17 range? 18 A. 19 has been harmed and the direct loss of sales of the Max Axess 20 wrench, where he should have sold a Bionic Wrench, but we 21 also have the price erosion and the loss of sales to other 22 customers or the expansion. 23 As I mentioned before, the various ways that Mr. Brown So Mr. Brown would want to negotiate something that 24 wouldn't make him any worse off than what he would be had 25 Sears and Apex never introduced the product. Bokhart - direct 1 599 So that would represent the floor. 2 Q. 3 floor is for the negotiating range in this case? 4 A. 5 would start to calculate where the floor begins, but yes. 6 Q. 7 of losses LoggerHead has suffered -- lost sales, price 8 erosion, lost customers -- and you said that LoggerHead would 9 suffer these losses because every sale of the Max Axess is a Did you prepare a slide to show us what you believe the Well, I represented it, actually, at a point where you So you talked about earlier that, because of the types 10 lost sale of the Bionic; is that right? 11 A. Correct. 12 Q. How do you know that LoggerHead even had the 13 manufacturing capability to supply enough Bionic Wrenches if 14 the Max Axess wasn't on the market? 15 A. 16 had sufficient capacity, and I've also seen documents that 17 suggested that they had capacity. 18 Well, Mr. Brown testified that his manufacturer, Penn, And it always comes down to, given the lead time, 19 you can produce it. 20 Q. 21 of slides to help us understand or calculate how much 22 LoggerHead lost because competitors bought the Max Axess 23 instead of the Bionic Wrench? 24 A. Yes, I did. 25 Q. What is the first step you have to ask to figure out the Turning back to lost sales, then, did you prepare a set Bokhart - direct 607 1 Apex for the year 2012, on a per-unit basis, it would be 2 $12.15 for the 6-inch wrench and $13.54 for the 8-inch 3 wrench. 4 Q. 5 negotiating range? 6 A. Yes. That would be the ceiling. 7 Q. And we were about to talk about how you figured out the 8 low end, or the floor, of the negotiating range; is that 9 right? And is that what you called the ceiling of the 10 A. Yes. 11 Q. And I believe you prepared some slides to help us walk 12 through a calculation to figure that out? 13 A. Yes. 14 Q. To determine the low end, or the floor, of the 15 negotiating range, what's the first step? 16 A. 17 example. We have two wrenches, the 6 and the 8. Rather than 18 have you go through lots of calculations, I am just going to 19 explain the 8-inch, and the same methodology would apply to 20 the 6. 21 Well, the first step -- and again, I'm using 2012 as an But the first thing I have to do -- or I did was 22 determine the number of 8-inch wrenches that were sold that 23 were Max Axess. And there were 275,448 wrenches sold. 24 Q. And is that in the year 2012? 25 A. That is in the year 2012. Bokhart - direct 608 1 Q. 2 next step? 3 A. 4 selling price. In this case, the selling price is $13.99. 5 Q. 6 is selling it to who at that price? 7 A. 8 would charge to Sears or others for the sale of a LoggerHead 9 wrench. Once you knew the number of wrenches sold, what was your Well, to get the gross revenue number, I need to have a When you say a "selling price," that's the price -- who That would be the price that Mr. Brown and LoggerHead 10 Q. 11 that has been marked as Plaintiff's Exhibit 280. I want to stop here, and I am going to put up a document 12 MS. SPENCER: Your Honor, I don't believe there are 13 any objections to this document, so I would move to admit it. 14 MR. HAYES: No objections. 15 THE COURT: That will be admitted. 16 (Plaintiff's Exhibit 280 was received in evidence.) 17 BY MS. SPENCER: 18 Q. 19 This document, Plaintiff's Exhibit 280, is an email. Can you tell us who this email is between? 20 A. 21 Kaleta and Dan Brown, Jr. 22 Q. 23 us who Stephanie Kaleta is. 24 A. 25 Mr. Brown, Jr., were negotiating with. Well, it's emails back and forth between Stephanie In the email from Stephanie Kaleta -- and can you remind She is an employee at Sears that Mr. Brown and Bokhart - direct 609 1 Q. 2 email? 3 A. 4 conversation of last week, I've approved cost changes on the 5 8-inch and 6-inch Bionic Wrench in IMA to $13.99 and 6 $12.59 respectively." 7 Q. 8 charged the defendants -- would have charged for each sale of 9 the Max -- if the Max Axess wrench had been a Bionic Wrench? And what is Ms. Kaleta telling Dan Brown, Jr., in this Well, basically it says, "Hi, Dan. Following up on our Does this tell you how much LoggerHead would have 10 A. 11 to, and the documents and the records show that the price was 12 charged to many other customers as well. 13 Q. 14 and 12.59, to Sears for the Bionic Wrench? 15 A. 16 was tens of thousands of units. And the prices they paid 17 were the 12.99 and -- I'm sorry. It just went away. But the 18 13.99 and 12 -- I'm sorry. There is a lot of numbers. 19 Yes. And that's the same price that Mr. Brown testified Did LoggerHead ever actually charge these prices, 13.99 Yes. They did continue to make some sales. In fact, it But the prices that were on there and the prices I 20 used are what they actually did receive and Sears paid. 21 Q. 22 Let's turn back to your calculation. You had explained that, once you have the number of 23 Max Axess wrenches sold and the price that LoggerHead would 24 have sold those wrenches for, you get lost gross revenue. 25 What's the next step in your calculation? Bokhart - direct 1 A. 2 the costs, because there are costs to manufacture, 3 610 distribute, and sell the product. Well, the next step to calculate lost profits is deduct 4 So what I did is, I went back to Mr. Brown and 5 LoggerHead's financial statements, and I went through on a 6 line-by-line basis to determine which costs would have 7 increased had volume increased. 8 9 And as a result, I have determined that for the $3.8 million in sales, LoggerHead would have incurred 10 $2.9 million of additional costs and would have had 11 additional profits or, in this case, lost profits of an extra 12 $887,000. 13 Q. 14 step in your calculation? 15 A. 16 way you have seen in a lot of the documents is, everything is 17 talked about on a per-wrench basis. So I determined and 18 calculated the royalty again on a per-wrench basis. And once you figured out lost profits, what is the last Well, my opinion and the way I have looked at it and the 19 For the 8-inch model, it would be $3.22. 20 Q. 21 model? 22 A. 23 $2.88 per unit. 24 Q. 25 3.22 for the 8-inch wrench and 2.88 for the 6-inch wrench, is And did you do this same calculation for the 6-inch Yes. Using the same methodology, it would come out to So these prices that we have right up on this screen, Bokhart - direct 611 1 this the floor of the negotiating range? 2 A. 3 Mr. Brown still has other losses in the form of price 4 erosion, because Sears and Apex, with the sales of the Max 5 Axess wrench, is undercutting his price. So he is suffering 6 that. 7 It's not quite the floor because, as I said before, And he is also losing his sales to other customers 8 and inability to expand sales. So those numbers aren't 9 included in here. 10 So the 3.22 and the 2.88 aren't the floor. The 11 floor is going to be something above that. 12 Q. 13 are pulled off the market, and there is only Bionic Wrenches 14 left to buy. 15 Let's say that tomorrow all of the Max Axess wrenches Can LoggerHead start charging the prices it used to 16 be able to charge for the Bionic Wrench again? 17 A. 18 product and the price goes down and you have you have been 19 buying it and see it -- if you are a purchaser for a 20 department store or hardware store or whatever and are going 21 to be approached to buy more product and the product price is 22 high, you are going to say, wait a second. Yesterday this 23 price was X; now you're telling me it's Y. You are going to 24 have a hard time selling that. 25 Q. No, they wouldn't be able to. If you have been buying a Based on this, did you determine the floor of the Bokhart - direct 612 1 hypothetical negotiating range? 2 A. 3 north of, or greater than, the $2.88 for the 6-inch wrench 4 and the $3.22 for the 8-inch wrench because of these other 5 factors. 6 Q. 7 parties are going to be negotiating at this hypothetical 8 negotiation. Well, the absolute floor, no. But it would be something So now we have figured out the range in which the 9 But how did you determine where they would actually 10 end up, what price they would settle on? 11 A. 12 case out there called Georgia-Pacific that gives you some of 13 the business and economic criteria you should consider as to 14 who has the bargaining power in this negotiation. Well, it's a business negotiation. And there is a court 15 If you go through these factors, it helps you 16 narrow it down to come to where they would end up. 17 Q. 18 factors. You mentioned the factors and the Georgia-Pacific 19 Did you prepare a slide that discusses these 20 factors? 21 A. Yes, I did. 22 Q. Is this that slide? 23 A. Yes. 24 Q. It's a lot of factors. We are going to talk about them, 25 hopefully, briefly. Bokhart - direct 627 1 A. 2 states they have a lot of negotiating power right now. And 3 based on my review, I would agree with that. 4 Q. 5 Georgia-Pacific factors and this email that we have just 6 discussed, in the hypothetical negotiation, what is your 7 conclusion about what reasonable royalty rate the parties 8 would have agreed to? 9 A. Well, I guess I would agree with this letter, because he Going back to your overall determination, based on the Well, again, I did everything on a per-unit basis. I 10 did it between the 6-inch and the 8-inch wrench. It's my 11 opinion that, at a minimum, the parties would have agreed to 12 a rate for the 6-inch wrench at something less than $5 a 13 unit -- a bit less than $5 a unit, and a bit less for the 14 8-inch wrench, at a bit less than $6 for the 8-inch wrench. 15 Q. 16 said just under $5 for the 6-inch, just under $6 for the 17 8-inch -- how do you actually determine the total amount of 18 damages? 19 A. 20 but you have 180-some-odd thousand 6-inches and 500,000 of 21 the 8-inch. You would take a dollar rate and multiply it by 22 it. It's simple math. 23 Q. Have you prepared a slide laying out this calculation? 24 A. Yes, I have. 25 Q. Does this slide walk through essentially what you just Now, once we have this per-wrench royalty rate -- you Well, what you would do -- I can't see the chart here, Bokhart - direct 1 628 described? 2 MR. HAYES: Your Honor, we would just like to 3 maintain our objection to No. 4 and the Daubert objection 4 throughout this. 5 THE COURT: So noted for the record. 6 BY MS. SPENCER: 7 Q. You can continue. 8 Does this slide that we are discussing lay out your 9 calculation for how you determined the total dollar amount of 10 damages once you have determined a reasonable royalty rate? 11 A. 12 6-inch at $4, $5, and $6. Again, it's simple math. And for 13 $5, $6, and $7 for the 8-inch. 14 Q. 15 based on just the hypothetical negotiation, the parties would 16 agree to a royalty rate just under $5 or just under $6. 17 Yes. It gives what the royalty rate would be for the I think you said that your determination would be that, So what does that tell you about the total dollar 18 amount of the damages in this case? 19 A. 20 than the $5 and $6. After going through everything, it would 21 be about, roughly, no more than 10 percent less than that. 22 So approximately -- if we have 4.4 million for -- well, I can 23 clear it here -- 4.4 million for the $6 and the $5 rate, it 24 would really be the minimum amount they would agree to. It 25 is something more in the neighborhood -- it would be in the Well, again, the minimum amount would be something less Bokhart - direct 629 1 neighborhood of 4 to 4.1 million. 2 Q. 3 is appropriate, how do they figure out the dollar amount that 4 that sets, in terms of total damages? 5 A. 6 multiply it by a number. And you would do the same for the 7 586,928 8-inch wrenches. 8 Q. 9 Brown testify about what royalty rate he would require if he And if the jury determines that a different royalty rate It's very simple. Again, you would take the 183,456 and Now, I believe you were here when you heard Mr. Dan 10 was forced to license his patent in a hypothetical 11 negotiation. 12 A. Yes. 13 Q. Do you remember what Dan Brown testified is the rate he 14 would require if he was forced to license his patents in a 15 hypothetical negotiation? 16 17 18 19 20 21 MR. HAYES: Your Honor, we have an objection to this. This is outside the scope of the expert report. THE COURT: I want to talk to you about this for a minute at sidebar. (The following proceedings were had at sidebar:) THE COURT: I don't know what the report says about 22 this, but my problem with it is, I feel like, did you hear 23 this witness say this or that? The jurors heard whatever it 24 is they heard. We should just get to whatever the issue is. 25 MR. SERNEL: Is the issue, then, we are going to do Bokhart - direct 1 630 a multiplication based on what Mr. Brown threw out versus -- 2 MR. HAYES: I got it, Marc. 3 He threw out 8, 9, and 10, and I don't expect to 4 see 8, 9, and 10 go up on the board or even talked about 5 here. 6 MS. SPENCER: Your Honor, we have no intention of 7 setting out a multiplication. We simply want and think it's 8 appropriate for Mr. Bokhart to discuss the information he 9 heard, in terms of evidence, and say how you figure out what 10 a rate -- what the outcome is based on, the rate that the 11 jury sets. 12 13 He is essentially just explaining math, and he is not going to come to a total. 14 THE COURT: He is welcome to explain that, but I 15 still don't know what that has to do with what Mr. Brown 16 says. 17 Remember, Mr. Brown's position was, I wasn't going 18 to license -- you know, there is no amount of money that you 19 could pay me for this. That's essentially what he was 20 saying, which is silly. All we ever do in the court is award 21 money. So if he doesn't want money because he just wants 22 justice, he is in the wrong place. 23 But that having been said, if you just want to ask 24 him about math, that's fine. I just don't like this 25 predicate. Bokhart - cross 665 1 head-to-head competitors, and there are, as the testimony has 2 shown, no other wrenches like that. It's basically a 3 two-party market, and that's the test or a test. 4 Q. 5 that Craftsman is a well-known brand, right? 6 A. I own Craftsman tools or some Craftsman tools, yes. 7 Q. And you would agree with me that some people buy a tool 8 just because it's Craftsman, right? 9 A. You recognized in your opinions in this case, though, Well, if they are going out to a store and they would go 10 to buy it from Sears for Craftsman, sure. I mean, people do 11 that. Sure. 12 Q. 13 the Craftsman advantage, right? 14 A. 15 per se as separate from Craftsman. 16 Q. 17 testified on direct you have been here for every day of the 18 testimony, right? 19 A. Yes. 20 Q. And there has been a lot of discussion about the 21 Craftsman advantage? 22 A. 23 an advantage of Craftsman. 24 Q. 25 discussed. And people sometimes buy Craftsman tools just because of I'm not sure what you mean by "the Craftsman advantage" You have been here for the testimony. I think you You are talking about the positioning of the tool, not That's right. The Craftsman advantage that we have Bokhart - cross 666 1 A. Okay. 2 Q. So just to be sure, it's your testimony that not one 3 person buys the Max Axess because of the Craftsman branding? 4 A. 5 reasonable to assume that they would have? Yes. And I think 6 that's a safe assumption. 7 Q. 8 because of the Craftsman advantage? 9 A. The standard is to a reasonable degree. Is it And is your opinion that one person buys the Max Axess That in absence of the Max Axess being on the market, a 10 Bionic Wrench would have been sold for each of those Max 11 Axess wrenches. 12 Q. 13 the handle grips in place, right? 14 A. Yes. 15 Q. And that's a feature that the LoggerHead Bionic Wrench 16 does not have, right? 17 A. That's correct. 18 Q. And you were here for Mr. Pope's testimony when he said 19 what this lock allows is you to lock it in place. And then 20 for folks with smaller hands or not as strong hands, they can 21 use all of their force to actually turn it and not have to 22 hold it or hold the wrench together anymore. And the Max Axess has a locking feature here that holds 23 Did you hear him testify to that? 24 A. Yes. 25 Q. So it's your testimony here today that not one person Bokhart - cross 1 bought the Max Axess because of this locking feature that 2 LoggerHead's Bionic Wrench does not have? 3 A. 667 I think your question is a little bit off. 4 The question is, if that Max Axess was not on that 5 shelf, would they have bought a Bionic Wrench? And the 6 answer there is yes. 7 Q. My question was not that. It's a little simpler. 8 9 Sitting here today, it's your opinion that not one person would go out and buy this Max Axess when they see -- 10 someone maybe with smaller hands or not as strong hands -- 11 when they see this locking feature, and they realize, I can 12 use this around the home. It's beneficial because it has the 13 lock? 14 A. 15 The test for lost sales is, if that product is not in the 16 market, would they have bought the Bionic Wrench? And the 17 answer is yes. 18 Q. 19 to apply common sense. Okay? 20 Again, it's the wrong test to prove and show lost sales. Okay. I understand you want to apply your test. I want Would you agree with me that at least one person or 21 more would buy the Max Axess Locking Wrench because of the 22 lock feature? 23 A. 24 that, yes, but that's not the test for damages. 25 Q. Is it possible that you may have had some customers do Your next bases to prop up your royalty in this case Bokhart - cross 1 677 instruction. 2 MR. PELTZ: Judge, how about this? Could we just 3 reserve ruling on whether it's in evidence? He displays it, 4 and then we can -- 5 THE COURT: All right. That's fine. 6 MS. SPENCER: Thank you. 7 (End of sidebar proceedings.) 8 9 MR. HAYES: Josh, can we pull up the KPMG report that we have been talking about. 10 BY MR. HAYES: 11 Q. 12 report from KPMG talking about the profitability and royalty 13 rates across industries. Mr. Bokhart, you can see on your screen there this 14 Do you see that? 15 A. Yes. It follows up with preliminary evidence. 16 Q. Let's take a look at Chart 2 on Page 12. 17 Mr. Bokhart, you would agree with me that Chart 2 18 is the reported royalty rates and gross profit margins for 19 various industries. 20 Do you see that? 21 A. Yes. 22 Q. I have got an arrow there. The arrow was actually on 23 the original document that talks about energy, machines, and 24 tools industry. 25 Do you see that? Bokhart - cross 1 A. Yes, I do. 2 Q. And it reports that the average royalty rates are 3 somewhere between 4 and 6 percent. Is that fair? 4 A. 5 were -- only those that were reported for this study, and 6 this was marked "preliminary." 7 Q. 8 information in this study, didn't they? 9 A. 678 Well, it's the average royalty rate for those that they There were hundreds of companies that provided Within this segment, I don't believe so. There were 10 hundreds overall. But within the energy, machine, and tool, 11 I'm not sure that is right. I would have to go through and 12 read the report. 13 Q. So if you take a look at Page 19 in the appendix -- 14 A. That's where I'm looking now. 15 MR. HAYES: Could you pull that up for us, Josh. 16 BY MR. HAYES: 17 Q. 18 Tools." You see all the way over in the right column the 19 number of companies reporting information, 380. 20 We are looking at the row that says "Machines and Do you see that? 21 A. That's correct. 22 Q. Okay. So let's switch back to Chart 3. 23 A. I'm sorry. We are back to Page 12, Chart 3? 24 Q. Yes. Another chart with some additional analysis here. 25 This time they are reporting median royalty rates? Bokhart - cross 1 A. Sorry. Give me a second just to catch up. 2 3 679 That is Page 14. Okay. Q. That's right. 4 So there on Page 14, we have got another chart, 5 reported median royalty rates and average operating profits 6 for the machines and tools industry somewhere between 3 and 4 7 percent. Is that accurate? 8 A. That's what it shows, yes. 9 Q. Okay. 10 MR. HAYES: Can we go back to Exhibit 17, please, 11 Josh. I would like to highlight the far right column. I 12 don't know if we can get it any bigger. 13 BY MR. HAYES: 14 Q. 15 of entries there -- I'll give you a minute to get it. 16 A. Okay. I have my copy. 17 Q. You have a number of entries there in the far right 18 column that you pulled down from a subscription service 19 called Royalty Source; is that right? 20 A. Yes. 21 Q. That's a leading data provider in the IP industry; is 22 that right? 23 A. Yes. Well, it's one of. 24 Q. And they have been tracking IP licenses related to 25 technology for over 30 years? But if you look at that, Mr. Bokhart, you have a number Bokhart - cross 1 684 this case. 2 MR. HAYES: Josh, if we could, pull up DDX 37. 3 BY MR. HAYES: 4 Q. 5 expressing your royalty in this case in dollars and cents -- 6 almost 5, almost $6 per unit -- is that right? 7 A. 8 a minimum. 9 Q. Mr. Bokhart, if I understood you correctly, you are Well, at a minimum, it would be slightly under that. At At a minimum. At a minimum, $5 for the 6-inch and $6 10 for the 8-inch; is that right? 11 A. That's correct. 12 Q. We can easily calculate the effective rate of 5 and $6 13 by dividing that into the average selling price; is that 14 right? 15 A. 16 Effective royalty rate is going to be, roughly, 30-some-odd 17 percent, leaving about 37 percent profit remaining for Sears 18 and Apex. 19 Q. 20 6-inch, 2012 to 2015, $16.75. You remember we went through 21 that at your deposition? 22 A. 23 talking about 2012 as the negotiating time period. Since 24 Apex and Sears have been lowering their price, 2012 would 25 probably be a better reflector. Yeah. $20 selling price, deduct the cost out. So in this case, the average selling price for the Yeah, since the price has gone down, you know, if we are Bokhart - cross 1 Q. You have been doing this work for 38 years, right? 2 A. 35, 36. 3 Q. Since you graduated from Purdue? 4 A. Correct. 5 Q. 689 Right. 6 You testified over 100 times? 7 A. Yes. 8 Q. And never before this case can you remember giving an 9 opinion in which the royalty -- reasonable royalty is larger 10 than the lost profits number. Is that fair? 11 A. 12 where I have done that. I can't say I haven't, but I can't 13 think of any. 14 Q. As I sit here right now, I can't think of any instance Thank you. 15 MR. HAYES: No further questions, your Honor. 16 THE COURT: Thank you. 17 Cross-examination. 18 MS. SPENCER: Your Honor, plaintiffs have no 19 20 21 22 23 24 25 redirect. THE COURT: I should have said "redirect." All right. No redirect examination. Ladies and gentlemen of the jury, do you have any questions for this witness? We will give the jurors a short recess. All rise. (Jury out at 3:56 p.m.) Kaleta - direct 1 how they make their sales. 2 Q. 714 Now, if you could turn to Exhibit 282 in your binder. 3 What was the next step -- 4 MR. BLOCK: And this exhibit has also been 5 pre-admitted. It's DTX 282. 6 BY MR. BLOCK: 7 Q. 8 this February 16th ultimatum? 9 A. Now, what was the next step in the negotiation after So I was very shocked by the response. It was not what 10 I expected at all. So I got my boss Adam involved. I wasn't 11 successful getting Mr. Brown on the phone. So then my boss 12 Adam tried to get him on the phone so that we could talk it 13 through. 14 Q. 15 call? 16 A. 17 phone. Instead, he referred him to his son, Mr. Brown, Jr. 18 Q. 19 happened? 20 A. 21 about an hour. It was just kind of a round-and-round 22 circular argument. And it basically ended with Mr. Brown, 23 Jr., giving him an ultimatum again and saying we either need 24 to pay 13.99 or they won't do business with us. 25 Q. And were you able -- was Mr. Whitney able to have that No. Mr. Brown, Sr., wouldn't even speak to him on the And what was your takeaway from that call, based on what It didn't go well. Mr. Brown, Jr., and Adam spoke for Now, did it make any business or financial sense for Kaleta - direct 715 1 Sears to enter into a long-term supply agreement with 2 LoggerHead for the Bionic Wrench at 13.99 per unit? 3 A. No, not at all. 4 Q. Why not? 5 A. Because, obviously, it's substantially higher than what 6 we had been paying, so it represented margin risk for Sears. 7 Q. 8 Sears have to look to any other products for DRTV? So if these February 16th terms weren't feasible, did 9 Strike that. Withdrawn, please. 10 What did this proposal, this ultimatum proposal, 11 mean for the likelihood of DRTV with LoggerHead going 12 forward? 13 A. 14 like they clearly weren't willing to partner with us. We 15 couldn't count on any kind of a TV campaign with them if they 16 weren't even going to ship us product. So as a buyer, then, 17 obviously, I needed to come up with different alternatives in 18 order to drive my sales. 19 Q. 20 that point? 21 A. 22 Craftsman lighted pliers. We looked at, like, a clench 23 wrench multitool, some other tools within my assortment, and 24 then we also considered new product development. 25 Q. Well, obviously, it put it at risk. I mean, it seemed And what were some of the alternates you considered at So we considered several other tools. We looked at And could you describe the new product development that Skiermont - opening statement 1397 1 that are in green on this slide. And those are not part of 2 the second element, because the second element must be 3 unified with the handle. The grasping portion must be 4 integral to the tool head, meaning you can't assemble three 5 parts and have a second element. That's how the Court has 6 construed the claim, and that's why Buchanan -- apart from 7 the fact that there is no evidence that it has a gripping 8 element as claimed, it also doesn't have a second element. 9 10 11 I want to talk now just for a couple of minutes about damages. There is no dispute about the number of Max Axess 12 Locking Wrenches sold, 770,384. There is no dispute that 13 selling the Bionic or the Max Axess lifts the entire business 14 for Sears because of the halo effect. You have heard lots of 15 evidence of that. 16 The defendants -- remember, the defendants did not 17 bring -- we had Mr. Bokhart come and explain the hypothetical 18 negotiation and that there would be this range between two 19 numbers and how they would bargain and, in his opinion, you 20 would get to this reasonable royalty that was just below $5 a 21 unit for the 6-inch, just below $6 a unit for the 8-inch. 22 23 24 25 You heard no one from Sears or Apex come and talk to you about damages. No expert. The only evidence on damages from expert testimony about a hypothetical negotiation is from Mr. Bokhart and from Skiermont - opening statement 1 Mr. Brown. 2 3 1398 Now, you remember Mr. Bokhart said, just below 5 or just below 6. 4 Mr. Brown said he wouldn't license his patents at 5 all. But if he did, he would hold out for something between 6 8 and 10. 7 And the Judge is going to instruct you on all the 8 factors that you have to consider about what that reasonable 9 royalty should be. And once you get to your number, you 10 multiply it by the Max Axess Locking Wrench, and that's the 11 damages. 12 I have reserved some time for rebuttal, and I will 13 come back and talk to you a little bit more about that 14 damages ask, but my time is up. So I want to just thank you 15 for your service. 16 I know that many of you -- I remember the day we 17 picked the jury that, at least for some of you, when you got 18 selected, I could actually see some disappointment on your 19 face, because I knew how burdensome this is. And I know also 20 that many of you are traveling a long distance, because the 21 district is so big. So people are coming from all over the 22 place every day to court. 23 I just wanted to say, on behalf of Mr. Brown and 24 LoggerHead Tools and my team, that we appreciate how 25 attentive you have been and the sacrifice that you have made Skiermont - final argument 1 1446 The reason why we said Buchanan doesn't have an arm 2 is because the examiner said 24 is a body, period. Every 3 statement they have shown you is misleading. 4 The Court, having seen it all, construed the claim. 5 You apply that claim construction to the arm portion of the 6 Max Axess Locking Wrench, which is undisputed, and there is 7 infringement. 8 I want to turn to damages. 9 Oh, and he did not talk about the claim 10 construction. The jury instruction to you said, you must 11 apply the Court's definition of the term "arm portion." We 12 have proved it. 13 Let's talk about damages. They have had slides in 14 opening and closing that said LoggerHead had the negotiating 15 power. 16 You remember Mr. Bokhart said the way you determine 17 damages in this case is a hypothetical negotiation between 18 LoggerHead on the one hand, Sears and Apex on the other. 19 They have conceded that in that negotiation, 20 LoggerHead had all the negotiating power, because right 21 around the time this hypothetical negotiation would happen, 22 they are saying in slides in the opening and closing, we had 23 Sears -- that LoggerHead was leveraging their negotiating 24 power. That's helpful for damages in a hypothetical 25 negotiation, because it means, when we come to the table, we Skiermont - final argument 1447 1 have the product, we have the patent. They need the product 2 on DRTV to make their margin. So we would have had the 3 negotiating power. 4 And they don't even address the Georgia-Pacific 5 factors. You haven't heard them say one thing about the 6 Georgia-Pacific factors that the Judge instructed you, you 7 will have to apply in this case. 8 You learned that they made 18 million in revenue, 9 almost 8 million in profits selling the copy version of the 10 Bionic Wrench. No fact witness came here from Sears and Apex 11 and said what reasonable royalty they think they would have 12 taken in that reasonable negotiation. 13 Dan Brown testified it would have been 8 to $10. 14 Mr. Bokhart said it would have been in the 5 to $6 range. If 15 it's -- and he said that the negotiation would start at 16 about -- for the 8-inches at about 3.22 -- $3.22 on the low, 17 about $13.54 on the high. He came out at about around 5 to 18 6. It would be around 4.1, 4.2 million, if you came out 19 exactly with Mr. Bokhart. 20 But if, in considering Mr. Bokhart and Mr. Brown's 21 testimony about he didn't want to license at all and he would 22 have had to hold out for $8, because it's the only way he can 23 compete when they are buying Max Axess Locking Wrenches for 4 24 or $5 from Great Knives, he said, the only way I can compete 25 in a market where I license is if the royalty is $8. 1448 1 If the royalty is in that $8 range, damages are 2 more like 6.16 million. If they are at 10, which was the 3 high of Mr. Brown's range, you add a zero to the units, and 4 you get to about 7.7 million. 5 It's up to you to decide what you think a 6 reasonable royalty would have been when Dan Brown negotiated 7 with Apex and Sears. 8 There are multiple data points. We have explained 9 it before. You have got Mr. Bokhart coming in at the 5 and 10 $6 royalty range for the 6-inch and 8-inch. You heard what 11 Mr. Brown said, who said first, before he gave any number -- 12 we almost couldn't even get him to tell a number, because he 13 said, I wouldn't license my patents. It would destroy my 14 business. It would destroy the business I built, that I 15 spent eight years and hundreds of thousands of dollars 16 developing. 17 But if I was forced to license in this 18 hypothetical, since we are in a hypothetical, I would have to 19 hold out for a number that I could still compete in this 20 market when a competitive product comes in and is taking our 21 sales. 22 Thank you again for your service and your time. 23 THE COURT: That concludes the arguments, ladies 24 25 and gentlemen. The court security officer is here. We will have 1627 1 MR. SERNEL: I would suggest we confer and then 2 communicate with the court staff to schedule something. We 3 can call in Monday. Is that okay? 4 THE COURT: All right. That sounds good. If you 5 could, contact Judge Pallmeyer's chambers on Monday to set a 6 next court date. 7 Are you going to be taking back any exhibits? 8 THE CLERK: She usually has them take them. 9 THE COURT: On the record, I am returning the 10 exhibits to the parties. Take home whichever exhibits go 11 to -- refer to your party. 12 The parties will call regarding next court date. 13 And other than that, all I have to do is enter judgment on 14 the last portion of the verdict. 15 Anything else the Court needs to address today? 16 MR. SERNEL: I don't think so, your Honor. 17 MR. SKIERMONT: No, your Honor. 18 THE COURT: Thank you, everybody. 19 MR. SKIERMONT: Thank you. 20 21 22 23 24 25 (An adjournment was taken at 5:05 p.m.) * * * * * I certify that the foregoing is a correct transcript from the record of proceedings in the above-entitled matter. /s/ Frances Ward_________________________May 15, 2017. Official Court Reporter F

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.

Why Is My Information Online?