Sioux Steel Company v. Prairie Land Millwright Services, Inc.
Filing
462
MEMORANDUM Opinion and Order: This Court denies Plaintiff's motion to exclude Bruce Meyer 409 , denies Plaintiff's motion to exclude Paul Rodrigues 412 , denies Defendants' motion to exclude Krista Holt 418 , and denies Defendants' motion to exclude Jeffrey Decker 414 . Signed by the Honorable Mary M. Rowland on 11/23/2022. (See attached Order for further detail.)Mailed notice. (dm, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
Sioux Steel Company,
Plaintiff,
Case No. 16-cv-2212
v.
Prairie Land Mill Wright Services and
Duane Chaon,
Judge Mary M. Rowland
Defendants.
MEMORANDUM OPINION AND ORDER
The case comes before this Court on the parties’ pre-trial motions to exclude
experts pursuant to Federal Rule of Evidence 702 and Daubert v. Merrell Dow
Pharmaceuticals, Inc., 509 U.S. 579 (1993). The Court rules as follows below.
LEGAL STANDARD
Federal Rule of Evidence 702 and Daubert govern the admissibility of expert
testimony. Expert testimony is admissible under Rule 702 if technical or specialized
knowledge “will assist the trier of fact to understand the evidence or to determine a
fact
in
issue.”
District
courts
act
as
gatekeepers
that expert testimony “is not only relevant, but reliable.”
and
must
ensure
Kumho Tire Co. v.
Carmichael, 526 U.S. 137, 147 (1999) (internal quotation marks omitted). Relevant
factors in this determination include testing, peer review, error rates, and acceptance
by the relevant expert community. See Daubert, 509 U.S. at 593–94. The reliability
1
inquiry is flexible, however, and not all of these factors will apply in every
case. See Kumho, 526 U.S. at 141.
In assessing the admissibility of expert opinions, courts do not focus on “the
ultimate correctness of the expert’s conclusions,” Schultz v. Akzo Nobel Paints, LLC,
721 F.3d 426, 431 (7th Cir. 2013), but “solely on principles and methodology,”
Daubert, 509 U.S. at 595.
The “soundness of the factual underpinnings” and
“correctness of the expert’s conclusions” may affect any ultimate determination on
the merits, but do not govern admissibility. See Smith v. Ford Motor Co., 215 F.3d
713, 718–19 (7th Cir. 2000). The expert must explain his or her methodology and
cannot “simply assert a bottom line.” Metavante Corp. v. Emigrant Sav. Bank, 619
F.3d 748, 761 (7th Cir. 2010). Finally, the expert “may be qualified by knowledge,
skill, experience, training, or education.”
See Smith, 215 F.3d at 718 (internal
quotation marks omitted). District courts have “great latitude in determining not
only how to measure the reliability of the proposed expert testimony but also whether
the testimony is, in fact, reliable.” United States v. Pansier, 576 F.3d 726, 737 (7th
Cir. 2009).
ANALYSIS 1
I.
Jeffrey Decker
Defendants move to exclude Plaintiff’s infringement and damages expert,
Jeffrey Decker. [414].
This Court presumes familiarity with the facts of this case, as set forth in detail in this Court’s
summary judgment opinion.
1
2
Decker is the President and Owner of Decker Consulting and Investigations
Inc. [416-1] at 2. He has over thirty years of experience in the agriculture industry,
including in the grain storage and handling industry. Id.; [416-5] at 5–6. He
graduated from Eastern Illinois University with a bachelor of science degree in
industrial technology with a concentration in construction. [416-1] at 2. He is the
member of various professional affiliations, including the Grain Handling Safety
Coalition. Id. at 4. Decker has designed and developed various pieces of farm
equipment; among them, he also patented the Peanut TopDry Drying System. Id. As
part of his business, Decker provides consulting services for, among other things,
grain entrapment/engulfment prevention and rescue. [416-5] at 6. Defendants move
to exclude Dr. Decker’s opinions in their entirety based on his purported lack of
qualifications and his damages opinions as unreliable.
A.
Qualifications
First, they argue that Decker is not qualified to testify in this case. In patent
cases, a “witness may testify as a technical expert on issues such as noninfringement
and invalidity only if ‘the witness is qualified as an expert in the pertinent art.’”
Sonos, Inc. v. D & M Holdings Inc., 297 F. Supp. 3d 501, 508 (D. Del. 2017) (quoting
Sundance, Inc. v. DeMonte Fabricating Ltd., 550 F.3d 1356, 1363 (Fed. Cir. 2008)).
Decker’s declaration described a person of ordinary skill in the art as someone
“having a B.S. degree in engineer, or equivalent, with several years of experience in
the design and operation of commercial grain handling, including grain bins and
reclaim equipment.” [416-5] at 22. Decker continues that an “engineering degree is
3
not necessary and could be substituted by several additional years of experience in
the design and operation of commercial grain handling equipment.” Id. Defendants
do not disagree with Decker’s characterization of a person possessing ordinary skill
in the art. Rather, they argue that Decker does not meet his own definition because
he does not hold an engineering degree, does not possess design experience, and his
CV does not mention “grain bin sweeps.” [415] at 2–3.
Decker is sufficiently qualified to testify as a person possessing ordinary skill
in the relevant art. Although he does not possess an engineering degree, by his
definition of one possessing skill in the ordinary art, the lack of engineering degree
can be supplanted by years of experience with commercial grain handling equipment.
Decker meets that definition because he holds a degree in industrial technology, has
had over thirty years of experience consulting in the agriculture industry, and,
according to his declaration, has many years of experience in designing and operating
grain handling equipment, including grain bins and grain reclaim equipment. [4162] at 3. Defendants complain that Decker does not possess specialized knowledge in
paddle sweeps (a component of a grain storage structure), but that argument “draws
the scope of the pertinent art too narrowly.” Sonos, 297 F. Supp. 3d at 509. Decker’s
lack of specialized knowledge in paddle sweeps can be explored during crossexamination.
B.
Damages Opinions
Defendants next move to exclude Decker’s damages opinions on the basis that
Decker lacks a verifiable methodology. Patent laws allow two categories of
4
compensation for infringement: the patentee’s lost profits and the reasonable royalty
the patentee would have received through arms-length bargaining. Lucent Techs.,
Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed Cir. 2009).
Defendants here focus on Decker’s lost profits opinions. To recover lost profits
in a patent case, the fact-finder must determine “what would the patent holder have
made (what would his profits have been) if the infringer had not infringed.” Mentor
Graphics Corp. v. EVE-USA, Inc., 851 F.3d 1275, 1285 (Fed. Cir. 2017). A patentee
can recover lost profit damages if it can establish four things: (1) demand for the
patented product; (2) the absence of acceptable non-infringing alternatives; (3)
manufacturing and marketing capability to exploit the demand; and (4) the amount
of profit it would have made.” Id. Relevant here, the second factor—"absence of noninfringing alternatives”—considers demand for particular limitations or features of
the invention. Id. If “there is a non-infringing alternative which any given purchaser
would have found acceptable and bought, then the patentee cannot obtain lost profits
for that particular sale.” Id. at 1286. The determination “is made on a customer-bycustomer basis.” Id.
In his expert report, Decker opines:
I understand that the Defendants contend that auger sweeps, the Sukup
paddle sweep, an Illinois Grain and Seed sweep, a Hutchinson auger
with add-on paddle sweep, a Skandia Elevator sweep, a Boubiela Moret
sweep, the GSI Balloon Bladder System, funnel systems, and vacuum
systems are acceptable non-infringing alternatives to the claimed
technology in the Asserted Patent and Sioux Steel’s Commercial
Embodiments. I disagree with the Defendants for the following reasons.
5
[416-5] at 48. Decker then walks through why he believes each of these products do
not constitute non-infringing alternatives. For instance, he opines that the auger
sweep is not an acceptable alternative because it contains a helical blade instead of
paddles to move the grain. [416-5] at 49. Those helical blades, Decker opines, become
clogged and individuals can, and have, suffered injuries from the spinning blade,
while, in contrast, paddle sweeps like the one in the Patent pose no such risks. Id.
Defendants fault Decker with relying on customer conversations and input in
coming to his opinions that no customers would find auger sweeps, other paddles
sweeps, or other grain removal products to be acceptable alternatives. [415] at 7–9.
Defendants criticize Decker’s reliance on these conversations as “undisclosed
hearsay.” Id. But information “of a type reasonably relied upon by experts in the
particular field in forming opinions or inferences upon the subject” need not be
admissible in order for the court to admit the opinion testimony, Fed. R. Evid. 703;
see United States v. Brownlee, 744 F.3d 479, 481–82 (7th Cir. 2014) (noting that
“an expert witness is permitted to rely on any evidence, whether it would be
admissible
or
inadmissible
if
offered
by
a
lay witness,
that experts in
the witness's area of expertise customarily rely on”).
Defendants also argue that Decker lacks a methodology for analyzing
acceptable non-infringing substitutes. [415] at 6–15. Although lengthy, Defendants’
argument boils down to the notion that Decker failed to apply a customer-bycustomer analysis regarding the non-infringing alternatives and did not conduct any
consumer or market surveys, rather relying on his own “general knowledge” and
6
unspecified conversations with consumers as the basis for his opinions. Id. There is,
however, no set methodology for establishing lost profit damages. See Numatics, Inc.
v. Balluff, Inc., 66 F. Supp. 3d 934, 952 (E.D. Mich. 2014) (rejecting argument that
an expert failed to “apply a customer-by-customer analysis or market-share
approach” in his lost profits analysis). It is sufficient that Decker considered the
possible non-infringing alternatives Defendants offered and concluded that none “had
the advantages” of Plaintiff’s patented products based on his general knowledge of
the industry and his conversations with consumers. Id.; see also, e.g., Emerson Elec.
Co. v. Suzhou Cleva Elec. Appliance Co., No. 4:13CV1043SPM, 2015 WL 8916113, at
*9 (E.D. Mo. Dec. 15, 2015) (admitting defense expert’s opinions about non-infringing
alternatives which were based upon conversations with defendant’s president about
the defendant’s “capacity to substitute noninfringing products for infringing
products”); AU New Haven, LLC v. YKK Corp., No. 15-CV-3411 (GHW)(SN), 2019 WL
1254763, at *20 (S.D.N.Y. Mar. 19, 2019) (finding expert testimony on non-infringing
alternatives sufficiently reliable where the expert testified “based on his decades of
experience in the outdoor apparel industry” that “three zippers . . . are in fact used
by brands as a possible substitute to the allegedly infringing zippers”); TV Interactive
Data Corp. v. Sony Corp., 929 F. Supp. 2d 1006, 1013 (N.D. Cal. 2013) (holding that
“the fact Mr. Byrd relied on his own expertise to assess the cost and time required to
implement the alternative, as opposed to retrieving data from Sony, does not render
Mr. Byrd’s methodology unreliable”). Thus, Decker’s analysis of non-infringing
alternatives is sufficiently reliable to be admissible. The concerns Defendants raise
7
regarding the bases for his opinion go to the weight of his opinion and not its
admissibility.
For the foregoing reasons, Defendants’ motion to exclude Jeffrey Decker [414]
is DENIED.
II.
Bruce Meyer
Plaintiff moves to exclude the opinions of Defendants’ infringement expert,
Bruce Meyer. [409]. Meyer has over fifty years of experience in grain handling on
farms, including the use of various types of grain sweeps and over thirty-years of
experience on automation of various types of agricultural equipment. [411-1] at 4. He
holds a bachelor of science in electronic engineering. Id.
A.
Qualifications
Plaintiff argues that Meyer is unqualified to testify as a person with ordinary
skill in the pertinent art because his education and experience is too generalized and
unrelated. [411] at 7–8. Plaintiff points specifically to Meyer’s lack of experience with
mechanical or structural aspects of sweeps, and with design, repair, or fabrication of
grain bin sweeps. Id. As Plaintiff argues, Meyer’s experience with grain sweeps is
working with the electronic, rather than mechanical, components of such machines.
Id. at 3–4.
This Court finds Meyer sufficiently qualified to opine on infringement.
Although he is not experienced with the design of grain bin sweeps, he holds a degree
in engineering and his “technical background is sufficiently related to that pertinent
art”—here, the design of a grain bin sweep. Sport Dimension, Inc. v. Coleman Co.,
8
Inc., No. CV1400438BROMRWX, 2015 WL 12732710, at *5 (C.D. Cal. Jan. 29,
2015), aff’d, 820 F.3d 1316 (Fed. Cir. 2016). Any lack of experience Meyer has with
the design of grain sweeps can properly be addressed through cross-examination. See,
e.g., Evans v. John Crane, Inc., No. CV 15-681 (MN), 2019 WL 5457101, at *8 (D. Del.
Oct. 24, 2019) (explaining that an expert’s inexperience in a particularized area goes
to the weight, not the admissibility, of his or her opinion).
B.
Non-Infringement Opinions
Next, Plaintiff contends that Meyer’s opinions should be excluded because they
are conclusory and because some of them conflict with other facts contained in the
record. [411] at 9–10, 13–14. Upon review of Meyer’s report, the Court concludes that
Meyer’s report is sufficient. On literal infringement, Meyer compares the limitations
in claim 1 of the Patent and explains his opinions that Prairie Land’s Accused
Products lack certain limitations. [411-1] at 12–16. Under the doctrine of equivalents,
Meyer describes how the Accused Products do not perform in substantially the same
way as the sweep described in the Asserted Patent. [411-1] at 14, 15, 16. Plaintiff
argues that Meyer provides “nothing to support his statements—not even a drawing,
illustration, or photograph” of the Accused Products. [411] at 10. But they cite no
authority requiring such specificity. Their disagreement with Meyer’s opinions, or
with the factual bases underlying them, are more properly addressed through crossexamination.
Plaintiff also argues that Meyer impermissibly opines that the “pivot unit” and
“drive unit” of the Accused Products are not “configured to” support the weight of the
9
paddles. [411] at 10–11. 2 Meyer opines that Prairie Land’s pivot unit and drive unit
are not configured to carry the weight of the paddles because they are not designed
to “accomplish the objective of supporting the weight of the paddles, which simply
travel through the pivot and drive units with their chain unsupported by a sprocket
or the like.” [411-1] at 13. With respect to Prairie Land’s Bin Gator sweep, Meyer
elaborates that the sweep’s return area floor is not “configured to” to support the
weight of the paddles because they are not “specially designed” to do so. Id. Plaintiff
argues that Meyer’s opinion imposes a requirement of subjective intent that is based
on an erroneous construction of “configured to.” [410] at 10–11. But this Court
explained in its summary judgment opinion that, consistent with Meyer’s opinion,
“configured to carry” requires a particular intent or objective of the inventor—that is,
the phrase is “most naturally understood to mean . . . designed or configured to
accomplish the specified objective, not simply that they can be made to serve that
purpose.” Aspex Eyewear, Inc. v. Marchon Eyewear, Inc., 672 F.3d 1335, 1349 (Fed.
Cir. 2012) (emphasis added). Thus, Meyer’s opinion is not based on an erroneous
construction of the phrase “configured to.”
Plaintiff also argues that Meyer impermissibly speculates that Defendants’
Bin Gator’s return area floor is not “specially designed” to support the weight of the
paddles, but rather is designed to prevent the escape of residual grain. [411] at 11–
Claim 1 contains the following limitation: “at least one of the at least two units comprising a drive
unit configured to carry a portion of the succession of interconnected paddles and move the sweep
assembly with respect to a surface of the bin below the sweep assembly . . . at least one of the at least
two units comprising a pivot unit configured to carry a portion of the succession of interconnected
paddles. . . .” [395] at 15–16.
2
10
12. On this point, the Court agrees that Meyer may not offer impermissible
speculation about any individual’s specific intent in designing the return area floor.
Fed. R. Evid. 602. Meyer may, however, offer an opinion consistent with the Federal
Circuit’s opinion in Aspex. That is, he is free to opine, based on his knowledge and
expertise, that the return area floor does not accomplish the specific objective of
carrying the weight of the paddles. 672 F.3d at 1349. For instance, Meyer opines in
his report that the Bin Gator sweep “does not require that the weight of the paddle
be supported . . . as its chain orbits in a horizontal plane: any chain sag will simply
result in the paddles dragging across any surface beneath,” and that this chain sag
“is not problematic.” [411-1] at 14. This opinion does not impermissibly speculate
about the inventor’s intent and remains relevant to the question of whether a feature
of the Bin Gator sweep was made “to accomplish the specified objective” of carrying
the weight of the paddles. Aspex, 672 F.3d at 1349.
Plaintiff additionally argues that, in opining that the Accused Products are not
“configured to” support the weight of the paddles, Meyer does not compare the
features of the Accused Products to the limitations in claim 1 but rather compares
claim 1 to a patent Defendants own that covers the Accused Products. [411] at 12. It
is true, as Plaintiff argues, that a literal infringement analysis should compare the
claims of the relevant Patent to the features of the Accused Products because literal
infringement “exists when every limitation recited in the claim is found in the accused
device.” Akzo Nobel Coatings, Inc. v. Dow Chem. Co., 811 F.3d 1334, 1341 (Fed. Cir.
2016). Here, Meyer does describe the features of the Accused Products. He explains
11
in detail his opinion that the Accused Products lack a pivot unit or drive unit
configured to carry a portion of the succession of interconnected paddles. He does
reference a patent for Prairie Land’s sweep, [411-1] at 13, but only as evidence to
buttress his opinion that the Bin Gator sweep’s return area is not configured to
support the weight of the paddles.
This Court is also unpersuaded by Plaintiff’s argument that Meyer applied an
erroneous legal standard to support his opinions regarding the doctrine of
equivalents. Contra [411] at 13–14. In his report, Meyer opines “there is no Doctrine
of Equivalents infringement because the return floor doesn’t perform substantially
the same function in substantially the same way to obtain the same result.” [411-1]
at 15 (emphasis added). Plaintiff argues that Meyer’s opinion employs a stricter
standard than that allowed by the law and that infringement can be found if the
accused products obtain substantially the same, not the same, result. Id. Plaintiff’s
argument highlights an inconsistency in Federal Circuit case law: some cases suggest
that Plaintiff’s “substantially the same” standard applies to function, way, and result,
while others appear to require that the result be the “same.” Compare, e.g., Edgewell
Pers. Care Brands, LLC v. Munchkin, Inc., 998 F.3d 917, 924 n.1 (Fed. Cir. 2021)
(noting the “doctrine of equivalents analysis requires only that” the accused products
perform “substantially the same” in function, way, and result) with Ajinomoto Co. v.
Int’l Trade Comm’n, 932 F.3d 1342, 1356 (Fed. Cir. 2019) (explaining that a product
can infringe under the doctrine of equivalents “if it performs substantially the same
function in substantially the same way to obtain the same result.”) (quoting Duncan
12
Parking Techs., Inc. v. IPS Grp., Inc., 914 F.3d 1347, 1362 (Fed. Cir. 2019)). This
Court cannot say that Meyer applies the wrong standard. To the contrary, he applies
one of the standards—the stricter one—found in the Federal Circuit’s jurisprudence.
C.
Damages Opinions
Plaintiff argues that Meyer employs an incorrect legal standard in rendering
opinions on reasonable royalty damages, specifically, with regard to the “smallest
salable patent practicing unit” principle. A patent owner can sue for reasonable
royalties that it would have received from the defendant’s use of the patented
features; these damages compensate the patentee for “its lost opportunity to obtain a
reasonable royalty that the infringer would have been willing to pay if it had been
barred from infringing.” 360Heros, Inc. v. Gopro, Inc., No. CV 17-1302-MFK-CJB,
2022 WL 1746854, at *9 (D. Del. May 31, 2022) (quoting AstraZeneca AB v. Apotex
Corp., 782 F.3d 1324, 1334 (Fed. Cir. 2015)). As part of the reasonable royalty
analysis, the smallest salable patent practicing unit (SSPPU) principle recognizes
that “in any case involving multi-component products, patentees may not calculate
damages based on sales of the entire product, as opposed to the [SSPPU], without
showing that the demand for the entire product is attributable to the patented
feature.” Finjan, Inc. v. Blue Coat Sys., Inc., 879 F.3d 1299, 1310–11 (Fed. Cir. 2018)
(quoting LaserDynamics, Inc. v. Quanta Comput., Inc., 694 F.3d 51, 67–68 (Fed. Cir.
2012)); see Power Integrations, Inc. v. Fairchild Semiconductor Int'l, Inc., 904 F.3d
965, 977 (Fed. Cir. 2018) (instructing that in calculating royalties “the royalty base
13
should not be larger than the smallest salable unit embodying the patented
invention”).
Meyer offers the following opinion about the SSPPU:
The Sioux Steel sweeps are manufactured, shipped, and delivered in
modules. One or more of the modules may include a pivot structure or
pivot unit covered by the ‘937 Patent. The Sioux Steel sweeps can be
assembled with or without the module(s) containing a pivot structure or
pivot unit. As evidenced by Sioux Steel’s deposition testimony, Sioux
Steel sells its paddle sweep without a pivot section or pivot structure in
smaller diameter bins. Sioux Steel could simply lengthen these shorter
sweeps through addition of additional modules not having pivot units or
pivot structures. In my opinion, the smallest saleable patent practicing
unit is the pivot unit or any module with a pivot structure.
[411-1] at 16–17 (emphasis added).
Plaintiff argues that Meyer uses the wrong legal standard for determining the
SSPPU. Plaintiff focuses on Meyer’s deposition testimony that the pivot unit is the
SSPPU because if it were taken out of Defendants’ Accused Products, the products
would not then infringe the Patent. [411-2] at 26 (“Q. What does ‘Smallest Saleable
Patent Practicing Unit’ mean to you? A. It is the unit that, if it were not included,
would cause there not to be infringement.”). Plaintiff argues that this testimony
expresses an erroneous legal standard because identifying the SSPPU requires
examining whether the Patent’s claim covers the Accused Product as a whole. [411]
at 15. But Meyer did not express an erroneous legal standard. Meyer’s testimony
correctly reflects the principle that “the value to be measured is only the value of the
infringing features of an accused product.” Ericsson, Inc. v. D-Link Sys., Inc., 773 F.3d
1201, 1226 (Fed. Cir. 2014).
14
Although somewhat difficult to understand, Plaintiff’s complaint with Meyer’s
opinion appears to boil down to Plaintiff’s disagreement with Meyer’s use of SSPPU
to calculate royalties. Indeed, instead of adopting the SSPPU method of calculating
royalties, Plaintiff ostensibly relies on the “entire market value” methodology; this
methodology avoids the need for apportionment between patented and unpatented
features of a product if the patentee demonstrates “that the patented feature creates
the basis for customer demand or substantially create[s] the value of the component
parts.” Shire Viropharma Inc. v. CSL Behring LLC, No. CV 17-414, 2021 WL
1227097, at *23 (D. Del. Mar. 31, 2021) (alteration in original) (quoting Uniloc USA,
Inc. v. Microsoft Corp., 632 F.3d 1292, 1318 (Fed. Cir. 2011)); see [411] at 15 (arguing
that claim 1 of the Patent covers the whole of the Accused Products, not just the pivot
unit component). This “entire market value” rule is a “narrow exception” to the
general rule that royalties must be based on the SSPPU. LaserDynamics, Inc. v.
Quanta Computer, Inc., 694 F.3d 51, 67 (Fed. Cir. 2012). But Plaintiff’s use of a
different methodology than Meyer in calculating royalty damages does not make
Meyer’s methodology unreliable; rather, the differences present a conflict in
credibility that is more appropriately submitted to the jury. See MediaTek Inc. v.
Freescale Semiconductor, Inc., No. 11-CV-5341 YGR, 2014 WL 2854890, at *4 (N.D.
Cal. June 20, 2014) (declining to exclude an expert who assessed damages based on
the entire market of the defendant’s accused chips, rather than apportioning damages
based on the patent-practicing components on the accused chips, because issues with
15
the expert’s conclusions and factual underpinnings “bear on the weight to be accorded
the testimony” and not its reliability or probative value).
Relatedly, Plaintiff contends that Meyer offers a legally erroneous opinion that
the pivot unit of the patented technology does not form the basis for the “demand” of
either Plaintiff’s products or the Accused Products. [411] at 15. According to Plaintiff,
under a lost profits analysis, the concept of “demand” does not consider the demand
for a particular unit within the product but rather the product as a whole. Id. Yet as
Defendants explain in their response brief, Meyer’s opinion on this point is not
directed at a lost profits analysis; instead, it is directed as a rebuttal to Plaintiff’s
expert, Jeffrey Decker’s, opinion that the pivot unit is a “key element” to the success
of Plaintiff’s products. [438] at 13. This opinion is relevant to rebut Decker’s and
Plaintiff’s position that the entire market value methodology should apply to the
royalty damages calculations. Therefore, this Court will not exclude Meyer’s opinion.
For the reasons explained above, this Court DENIES Plaintiff’s motion to
exclude Bruce Meyer [409].
III.
Krista F. Holt
Defendants move to exclude Plaintiff’s damages expert, Krista F. Holt. [418].
Holt is a managing director at Econ One Research, Inc, a national research and
consulting firm. [419-2] at 6. She holds a bachelor’s degree from Wake Forest
University and an MBA from the University of Louisville. Id. at 7. Holt is a Certified
Licensing Professional (CLP), lecturer on intellectual property topics, and has worked
many years in accounting and market management for private sector companies. Id.
16
at 6–7. Holt provides an opinion regarding the “measurement of damages arising
from the acts of patent infringement” alleged in this case. Id. at 7. Defendants move
to exclude Holt on multiple grounds.
A.
Qualifications
Initially, the Court rejects Defendants’ attempt to exclude Holt based on her
qualifications. Defendants move to exclude Holt arguing that she is a psychology
major, is not an accountant or CPA, did not conduct surveys for this case, and has
never seen a grain sweep in person. [420] at 6. The facts that Holt lacks specialized
experience in grain sweeps and did not conduct surveys for this case is not a bar to
her testimony. She is a damages expert only and will not be offering any opinions on
infringement. Indeed, her damages opinions are based on the assumption that the
Court has already made the “predicate findings” of liability. [419-2] at 7. Moreover,
despite not being an accountant or CPA, Holt worked for eleven years in accounting
and market management and served in the most senior financial position
(comptroller) for two companies. Id. at 6. She possesses the “knowledge, skill, [and
experience] required to testify under Rule 702. Any issues Defendants have with
Holt’s educational background or lack of CPA status is more “properly explored on
cross-examination.” Pulse Med. Instruments, Inc. v. Drug Impairment Detection
Servs., LLC, 858 F. Supp. 2d 505, 512 (D. Md. 2012) (denying motion to disqualify
valuation expert).
17
B.
Plaintiff’s and Defendants’ Financial Information
Next, Defendants take issue with Holt’s data and factual assumptions
underlying her calculations regarding Plaintiff’s and Defendants’ financial
information in calculating damages. [420] at 6–9. Defendants complain, for instance,
that Holt did not consider Plaintiff’s general ledger, used her own pro-rata
calculations on Prairie Land’s 2016 revenue instead of running a revenue report from
its general ledger to determine revenue, and did not consider Prairie Land’s
externally compiled financial statements. Id. But to “the extent [an expert]’s
credibility, data, or factual assumptions have flaws, these flaws go to the weight of
the evidence, not to its admissibility.” Summit 6, LLC v. Samsung Elecs. Co., 802 F.3d
1283, 1299 (Fed. Cir. 2015). The “proper way” to challenge an expert’s reliance on
certain data, or her non-reliance on other data, “is through cross-examination of the
expert.” DSU Med. Corp. v. JMS Co., 296 F. Supp. 2d 1140, 1148 (N.D. Cal.
2003), aff’d, 471 F.3d 1293 (Fed. Cir. 2006); see also, e.g., Manpower, Inc. v. Ins. Co.
of Pa., 732 F.3d 796, 808 (7th Cir. 2013) (noting an expert’s decision of which
“variables to include in a regression analysis is normally a question that goes to the
probative weight of the analysis rather than to its admissibility”).
C.
Royalty Calculation
Defendants argue that Holt’s royalty calculation is methodologically unsound.
A reasonable royalty theory of damages “seeks to compensate the patentee not for
lost sales caused by the infringement, but for its lost opportunity to obtain a
reasonable royalty that the infringer would have been willing to pay if it had been
18
barred from infringing.” AstraZeneca AB v. Apotex Corp., 782 F.3d 1324, 1334 (Fed.
Cir. 2015). There are several ways to establish a reasonable royalty; here, Holt has
elected to opine on the hypothetical negotiation theory of damages. The hypothetical
negotiation approach “attempts to ascertain the royalty upon which the parties would
have agreed had they successfully negotiated an agreement just before infringement
began.” Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir. 2009)
(citing Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y.
1970) (hereinafter “Georgia-Pacific”)). In determining a reasonable royalty rate,
courts are guided by fifteen factors contained in Georgia-Pacific. Probatter Sports,
LLC v. Sports Tutor, Inc., 586 F. Supp. 3d 80, 88 (D. Conn. 2022) (citing ResQNet.com,
Inv. v. Lansa, Inc., 594 F.3d 860, 869 (Fed. Cir. 2010)).
In attacking her damages opinions, Defendants first argue that Holt commits
the same errors for which another district court excluded her in an unrelated patent
case. In Open Text S.A. v. Box, Inc., the court excluded Holt’s damage opinion based
on the Georgia-Pacific factors because Holt failed to explain “the link, if any, between”
the considerations Holt took in reaching a final royalty amount. No. 13-CV-04910JD, 2015 WL 349197, at *6 (N.D. Cal. Jan. 23, 2015). Indeed, as the court explained,
rather “than spelling out the steps she took to go from the data to the royalty rate
opinion, Holt cites her ‘experience’—an abstraction not visible to the eyes of the
Court, the jury, and opposing counsel, or testable in the crucible of crossexamination.” Id. The Court cannot find that Holt commits the same errors in this
report. Here, Holt evaluates each of the fifteen Georgia-Pacific factors and explains
19
how each factor results in an upward, downward, or neutral impact on her royalty
calculation. [419-2] at 65–87. The Court has reviewed Holt’s discussion and believes
that, unlike in Open Text, she explains how each factor impacts the royalty analysis
and thus makes it testable for the purposes of cross-examination.
Defendants also contend that Holt commits various errors in determining
reasonable royalties. This Court finds that none of these alleged errors warrant
exclusion of Holt’s testimony. For example, Defendants argue that Holt failed to
“isolate the value of the patent” when calculating damages, [420] at 11–12, but this
argument rests on a fundamental disagreement between the parties—whether the
royalty calculation should be based upon the entire sweep, or alternatively, a smaller
component like the pivot unit. This disagreement does not make Holt’s opinion
unreliable; it merely creates a jury question of how to apportion damages. Defendants
also criticizes Holt’s royalty rate analysis by reference to licensing agreement that
Plaintiff executed with an unrelated party for a bin sweep. See [420] at 12–13. Again,
however, Defendants’ criticisms amount to disagreements with how Holt interpreted
the data points in the licensing agreement and with other facts that Holt supposedly
ignored. Those criticisms can be explored on cross-examination. See i4i Ltd. P'ship v.
Microsoft Corp., 598 F.3d 831, 854 (Fed. Cir. 2010) (“Microsoft’s quarrel with the facts
Wagner used go to the weight, not admissibility, of his opinion.”), aff’d, 564 U.S. 91
(2011).
Equally unconvincing is Defendants’ attempt to exclude Holt’s analysis of the
Georgia-Pacific factors. Defendants argue that Holt merely makes statements on
20
whether each factor impacts the royalty rate in an upward, downward, or neutral
direction without attempting to quantify the effect of each Georgia-Pacific factor.
[430] at 13–17. Yet the law does not require Holt to make quantitative assessments
of each factor. Indeed, “many of the Georgia-Pacific factors are qualitative, not
quantitative,” and therefore experts may supplement quantitative evidence with the
expert’s own experience and judgment.” Plastic Omnium Adv. Innovation & Rsch. v.
Donghee Am., Inc., 387 F. Supp. 3d 404, 414 (D. Del. 2018) (internal quotation
omitted), aff’d, 943 F.3d 929 (Fed. Cir. 2019). Holt’s qualitative assessments of the
Georgia-Pacific
factors
constitute
an
“acceptable
methodology,”
and
any
disagreements with Holt’s analysis should be addressed by “proper cross-examination
and/or presentation of competing evidence.” Id.
Defendants next argue that Holt commits other methodological flaws in
coming to her reasonable royalty conclusions, namely: (1) she considers evidence
outside the relevant time period for her hypothetical negotiation analysis; and (2) she
fails to reliably apportion the royalty base to the SSPPU. [430] at 17–19. These
arguments fare no better because, at bottom, they are complaints with the data Holt
did or did not use. See id. at 18 (arguing that Holt “ignores key data relating to the
value of the patented feature), 17 (arguing that Holt “improperly considers” certain
evidence). Quibbles with Holt’s data can, again, be addressed through crossexamination and presentation of competing evidence.
D.
Lost Profits Calculations
21
Finally, Defendants’ arguments to exclude Holt’s lost profits damages analysis
are rejected. Like their arguments concerning reasonable royalties, Defendants’
arguments boil down to disagreements with the facts Holt used in coming to her
opinions. Defendants argue that Holt’s opinions regarding lost profits are based solely
on interviews of Plaintiff’s personnel and expert, Jeffrey Decker; that she did not rely
on experiences from customers in determining the availability of non-infringing
alternatives; and relies on inconsistent and unreliable financial information to
establish the amount of profit Plaintiff would have made in the but-for damages
analysis. [420] at 21–27. At their core, these arguments are disagreements “with the
conclusions reached by” Holt “and the factual assumptions and considerations
underlying those conclusions, not [her] methodology.” ActiveVideo Networks, Inc. v.
Verizon Commc'ns, Inc., 694 F.3d 1312, 1333 (Fed. Cir. 2012). These disagreements
again go to the weight of Holt’s testimony and do not warrant its exclusion.
For the foregoing reasons, this Court denies Defendants’ motion to exclude
Holt.
IV.
Paul Rodrigues
Plaintiff moves to exclude Paul Rodrigues, Defendants’ damages expert. [412].
Rorigues is a certified public accountant, a certified fraud examiner, certified in
financial forensics, and obtained a masters degree in taxation. [417-1] at 7.
A.
Qualifications
Initially, this Court rejects Plaintiff’s motion to exclude Rodrigues on the basis
of his qualifications. Plaintiff argues that Rodrigues lacks experience serving as an
22
expert in the patent context, [417] at 3, 8, but Rodrigues is offered as a damage expert.
As a CPA and economics expert, Rodrigues has the scientific, technical, or other
specialized knowledge needed to assist the trier of fact determine damages. Fed. R.
Evid. 702(a). Moreover, despite Rodrigues’ lack of patent experience, in coming to his
opinions, he is entitled to rely on the opinions of Bruce Meyer, Defendants’ technical
expert, for background. DataQuill Ltd. v. High Tech Computer Corp., 887 F. Supp. 2d
999, 1026 (S.D. Cal. 2011) (“It is routine and proper for a damages expert in technical
patent case to rely on a technical expert for background.”). Thus, while Rodrigues will
not be allowed to offer his own opinions on the technical aspects of infringement, he
may rely on facts and assumptions obtained from Meyer’s opinion in coming to his
own conclusions about damages.
B.
Reliability
Plaintiff also challenges the reliability of Rodrigues’ opinions. But none of
Plaintiff’s challenges warrant Rodrigues’ exclusion. Plaintiff focuses on various
weaknesses in Rodrigues’ analysis of two license agreements to determine a
reasonable royalty rate. [417] at 10–11. Specifically, Plaintiff argues that Rodrigues,
unlike Holt, failed to account for “differentiating circumstances” between the license
agreements and the facts of this case, which resulted in Rodrigues’ arrival at an
erroneous royalty rate. [417] at 11. But the “degree of comparability of. . . license
agreements as well as any failure on the part of [an] expert to control for certain
variables are factual issues best addressed by cross examination and not by
23
exclusion.” Active Video Networks, Inc. v. Verizon Commc'ns, Inc., 694 F.3d 1312,
1333 (Fed. Cir. 2012).
Plaintiff also criticizes Rodrigues’ analysis for basing damages on only “one
component of the patented invention” rather than the whole. [417] at 11–14. This
again goes to the parties’ fundamental disagreement with how to apportion damages.
Plaintiff believes the claimed invention comprises an entire “modular bin sweep
system of which the pivot unit is only one component.” [417] at 13; Defendants, in
contrast, base their damages calculations upon a smaller unit within the sweep. See
[446] at 10–14. The parties’ dispute regarding the experts’ competing apportionment
analyses is more properly submitted to the jury. See, e.g., Albritton v. Acclarent, Inc.,
No. 3:16-CV-03340-M, 2020 WL 11627275, at *19 (N.D. Tex. Feb. 28, 2020)
(“Defendant's expert has provided a competing apportionment analysis, and the jury
can decide at trial which, if either, is correct.”); Shire Viropharma Inc. v. CSL Behring
LLC, No. CV 17-414, 2021 WL 1227097, at *28 (D. Del. Mar. 31, 2021) (“Defendants
will be free to cross-examine Dr. Bell on his factual assumptions underlying his
reasonable royalty opinion. To the extent Defendants can establish at trial that Dr.
Bell improperly applies the entire market value rule and fails to apportion between
patented and non-patented components of Haegarda, Dr. Bell's testimony may be
deemed an insufficient basis on which to support a damages award.”).
Plaintiff’s remaining arguments also lack merit. Plaintiff critiques Rodrigues’
rebuttal to Holt’s opinions, arguing that he relied on inaccurate data and failed to
consider certain facts. [417] at 14. Plaintiff also disputes the accuracy of Rodrigues’
24
opinions on non-infringing alternatives, specifically, his “misunderstandings” about
what constitutes an acceptable alternative to customers and the temporal scope of his
consideration of those alternatives. Id at 14. Plaintiff additionally faults Rodrigues’
sole use of Defendants’ financial information, rather than other pertinent data, in
calculating lost profits. Id. at 14–15. Finally, Plaintiff argues about weaknesses in
Rodrigues’ opinions concerning customer demand and interchangeability of the two
sides’ products. [417] at 15–16. Again, these are disagreements with Rodrigues’ use
of underlying facts and assumptions, not his methodology, and do not warrant his
exclusion. ActiveVideo, 694 F.3d at 1333.
For these reasons, this Court denies Plaintiff’s motion to exclude Rodrigues.
CONCLUSION
For the reasons stated above, this Court denies Plaintiff’s motion to exclude
Bruce Meyer [409], denies Plaintiff’s motion to exclude Paul Rodrigues [412], denies
Defendants’ motion to exclude Krista Holt [418], and denies Defendants’ motion to
exclude Jeffrey Decker [414].
E N T E R:
Dated: November 23, 2022
MARY M. ROWLAND
United States District Judge
25
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?