SYNGENTA CROP PROTECTION, LLC v. WILLOWOOD, LLC et al
Filing
265
MEMORANDUM OPINION AND ORDER. Signed by JUDGE CATHERINE C. EAGLES on 7/20/2017, that the Willowood's motion to exclude the testimony of Dr. Benjamin Wilner, (Doc. 147 ), is GRANTED in part and DENIED in part for the reasons stated herein. (Daniel, J)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
SYNGENTA CROP PROTECTION,
LLC,
Plaintiff,
v.
WILLOWOOD AZOXYSTROBIN,
LLC, et al.,
Defendants.
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1:15-CV-274
MEMORANDUM OPINION AND ORDER
Catherine C. Eagles, District Judge.
Syngenta Crop Protection, LLC sued Willowood1 for patent infringement, seeking
millions of dollars in lost profits on its fungicides containing azoxystrobin. Willowood
seeks to exclude the opinions of Syngenta’s expert witness on damages, Dr. Benjamin
Wilner, as speculative and unreliable because he used inaccurate budget projections and
irrelevant product comparisons to calculate Syngenta’s lost profits. The Court will admit
Dr. Wilner’s opinions on lost profits for the 5,602,076 Patent and the 5,633,256 Patent
because they are based on sufficient facts and data. However, the Court will exclude his
opinions on lost profits for the 5,847,138 Patent and the 8,124,761 Patent because they
are not based on sufficient facts or reliable principles.
1
There are four affiliated defendants: Willowood, LLC; Willowood USA, LLC; Willowood
Azoxystrobin, LLC; and Willowood Limited. In this motion, the actions of the particular
defendants are not relevant and for simplicity, the Court will use the term “Willowood” to refer
collectively to the defendants.
Willowood also seeks to exclude Dr. Wilner’s testimony about Willowood’s
successful effort to obtain EPA registration of its fungicides. The Court will admit Dr.
Wilner’s testimony on Willowood’s early entry into the market because it is relevant to
his theory of damages. The Court will exclude his testimony on whether Willowood
misused the Formulators’ Exemption because it is not relevant to his calculation of
damages, nor does Dr. Wilner appear competent to testify to those facts.
The motion will be granted in part and denied in part.
I.
Background Facts on Infringement and Damages
Syngenta uses the patents-at-issue to manufacture fungicides containing
azoxystrobin, which it sells in the agricultural market. The ‘076 Patent and the ‘256
Patent claim a group of chemical compounds that includes azoxystrobin. The compound
patents expired in February 2014. Doc. 96-1 at ¶ 29. The ‘138 Patent, which expired in
December 2015, and the ‘761 Patent, which will expire in 2029, both claim methods of
manufacturing azoxystrobin. Id. at ¶¶ 30-31. Syngenta seeks damages for Willowood’s
infringement of each patent and an injunction to prevent Willowood’s continued
infringement of the ‘761 Patent. See Doc. 1 at pp. 26-27.
In 2013, Willowood imported five kilograms of azoxystrobin into the United
States, infringing the compound patents. Doc. 141 at 4. Willowood further infringed the
compound patents by commissioning a third party to use the azoxystrobin to formulate
fungicides. Id. at 6. Based on the formulations, the EPA approved Willowood’s
application to register its fungicides containing azoxystrobin in 2014. Docs. 164-26, 16427. Willowood began to sell its generic azoxystrobin fungicides in the United States that
2
same year at substantially lower prices than Syngenta. See Doc. 149-1 at 13. Syngenta
asserts that Willowood’s infringement caused lost profits through its early entry into the
market and through its infringing sales.
Syngenta contends that if Willowood had not infringed the compound patents,
Willowood would not have been able to formulate its products and register with the EPA
in 2014 and would not have entered the market until late 2015. Id. at 11, 36. Similarly, if
Willowood had waited until the ‘138 Patent expired to use azoxystrobin made with the
‘138 Patent’s claimed method, Willowood would have entered the market in 2016. See
id. at 40. According to Syngenta, Willowood’s head start caused Syngenta to lose sales,
forced it to reduce prices to compete before its exclusivity expired, and gave Willowood
a greater market presence than it would have had if it had entered the market later.2 Id. at
15-16. Syngenta seeks to recover lost profits for the compound and ‘138 Patents from
2014-2017 caused by Willowood’s head start in the market. Id. at 27-40.
Syngenta also asserts that Willowood’s importation and sales of azoxystrobin
infringed the ‘138 and ‘761 patents because Willowood’s azoxystrobin is made through
the patents’ claimed processes. See id. at 11. Syngenta seeks lost profit damages for
Willowood’s sales that infringed the ‘138 Patent from 2014-20153 and the ‘761 Patent
According to Dr. Wilner, generics have an initial “minimal impact” followed by a lingering
effect in the market, meaning that a generic’s head start in the market causes greater lost profits
over time. Doc. 149-1 at 15, 25-26, 40.
2
While Syngenta seeks lost profits on the ‘138 Patent for actually infringing sales from
2014-2015 and for head-start damages from 2014-2017, Dr. Wilner’s calculation of lost profits
accounts for these together. See Doc. 149-1 at 38-39.
3
3
from 2014-2017. Id. at 37-43. Syngenta’s expert, Dr. Benjamin Wilner,4 calculated
Syngenta’s head-start damages and damages from Willowood’s infringing sales together
through a lost profits analysis. See id. His methods and analysis are discussed in more
detail infra.
II.
The Law on Damages for Lost Profits
An award of damages for patent infringement should be “adequate to compensate
for the infringement, but in no event less than a reasonable royalty.” 35 U.S.C. § 284. A
patentee may prove lost profit damages by creating a hypothetical “but for world,” where
infringement has been “factored out of the economic picture.” Grain Processing Corp. v.
Am. Maize–Prods. Co., 185 F.3d 1341, 1350 (Fed. Cir. 1999). “Reconstructing the
market [is] by definition a hypothetical enterprise.” Id. “To prevent the hypothetical
from lapsing into pure speculation,” courts require “sound economic proof of the nature
of the market.” Id.; see also Versata Software, Inc. v. SAP Am., Inc., 717 F.3d 1255,
1265 (Fed. Cir. 2013).
The hypothetical nature of the evidence does not make it inadmissible. Indeed, the
Federal Circuit “has affirmed lost profit awards based on a wide variety of reconstruction
theories,” including the theories of lost sales and price erosion.5 Crystal Semiconductor
4
Dr. Wilner is an economist with a doctorate in managerial economics and decision science.
Doc. 149-1 at 3. He regularly testifies as an expert witness on financial damages, see id. at 5556, and his qualifications are not at issue.
“Lost sales and price erosion damages are inextricably linked.” Crystal Semiconductor
Corp. v. TriTech Microelecs. Int’l, Inc., 246 F.3d 1336, 1360 (Fed. Cir. 2001). For instance, an
increase in price will often decrease sales. See id.; Ericsson, Inc. v. Harris Corp., 352 F.3d 1369,
1378 (Fed. Cir. 2003).
5
4
Corp. v. TriTech Microelecs. Int’l, Inc., 246 F.3d 1336, 1355-56 (Fed. Cir. 2001); see
also Grain Processing, 185 F.3d at 1350 (collecting cases).
To obtain damages for lost sales, the patentee must show “a reasonable probability
that he would have made the asserted sales ‘but for’ the infringement.” Grain
Processing, 185 F.3d at 1349. Under the Panduit factors, the patentee satisfies this by
proving “(1) demand for the patented product, (2) absence of acceptable noninfringing
substitutes, (3) his manufacturing and marketing capability to exploit the demand, and (4)
the amount of the profit he would have made.” Panduit Corp. v. Stahlin Bros. Fibre
Works, Inc., 575 F.2d 1152, 1156 (6th Cir. 1978).
Similarly, to obtain damages under a price erosion theory, a patent owner must (1)
“show that ‘but for’ infringement, it would have sold its product at a higher price;” (2)
“present evidence of the (presumably reduced) amount of product the patentee would
have sold at the higher price;” and (3) “account for the nature, or definition, of the
market, similarities between any benchmark market and the market in which price
erosion is alleged, and the effect of the hypothetically increased price on the likely
number of sales at that price in the market.” Ericsson, Inc. v. Harris Corp., 352 F.3d
1369, 1378 (Fed. Cir. 2003) (quotations omitted). Experts can use the benchmark
methodology6 to calculate price erosion damages by “select[ing] a product similar to the
6
In patent litigation, experts also rely on the benchmark methodology to calculate a
reasonable royalty, using similar licenses as evidence of the hypothetical negotiation between the
patentee and infringer. See, e.g., AstraZeneca AB v. Apotex Corp., 782 F.3d 1324, 1335-37 (Fed.
Cir. 2015) (upholding use of licenses and settlements between the patentee and other parties for
the patented formulation as benchmarks to determine reasonable royalty); ActiveVideo Networks,
5
patented product and compar[ing] the performance of that benchmark in a market free of
infringement with the performance of the patented product in the market affected by
infringement.” Crystal, 246 F.3d at 1357; see Ericsson, 352 F.3d at 1378-79 (calculating
price erosion by comparing the actual performance of the patented product to the
performance of a benchmark product made by the patentee in a market with the same
conditions but without infringement).
III. Benchmarks
A. Overview of Dr. Wilner’s Evidence
In his report, Dr. Wilner calculated Syngenta’s lost profits caused by Willowood’s
infringement. For each year from 2014-2017 and for each of the patents-at-issue, he used
benchmarks to determine what Syngenta’s gross profits would have been for
azoxystrobin in a hypothetical market unaffected by Willowood’s infringement. See
Doc. 149-1 at 27-43. From these hypothetical gross profits, he subtracted both
Syngenta’s actual gross profits on azoxystrobin and the estimated incremental costs that
Inc. v. Verizon Commc’ns, Inc., 694 F.3d 1312, 1333 (Fed. Cir. 2012) (upholding admission of
expert’s testimony using licenses between the patentee and other parties for asserted patents and
other technologies to determine reasonable royalty). Additionally, the benchmark or yardstick
methodology can apply outside of patent litigation. See Dash v. Mayweather, 731 F.3d 303, 319
(4th Cir. 2013) (evaluating whether chosen benchmarks were insufficiently similar to calculate
music licensing fee); United States v. Broad. Music, Inc., 316 F.3d 189, 194 (2d Cir. 2003)
(noting determination of reasonable music licensing fee “is often facilitated by the use of a
benchmark—that is, reasoning by analogy to an agreement reached after arms’ length
negotiation between similarly situated parties.”)
6
Syngenta would have incurred to obtain the hypothetical gross profits.7 Id. at 25, 33-35,
67-68. The amount of money that remained was, in his opinion, Syngenta’s lost profits.
Id. at 35, 67. Stated another way: Hypothetical Gross Profits in a Non-Infringing World
minus Syngenta’s Actual Gross Profits minus Incremental Costs equals Syngenta’s Lost
Profit Damages.
Depending on the particular year and patents-at-issue, Dr. Wilner chose two
benchmarks,8 which he used to calculate Syngenta’s hypothetical gross profits. He used
the first benchmark—the extent to which a benchmark product’s actual gross profits
either met its budgeted gross profits or increased or decreased from the past year—to
adjust the second benchmark—Syngenta’s budgeted gross profits or past gross profits for
azoxystrobin. Dr. Wilner’s choice of benchmarks and his calculations are described in
more detail later in this opinion, as the Court examines the admissibility of his opinions.
B. Analysis
For his expert testimony to be admissible, Dr. Wilner must base his opinions “on
sufficient facts or data” and must employ “reliable principles and methods.” Fed. R.
7
To sell more product, Syngenta would have had to make more product, which would have
cost more money. By subtracting incremental costs, Dr. Wilner accounted for Syngenta’s
additional expenses in the hypothetical, non-infringing market. See Doc. 149-1 at 25.
Dr. Wilner uses the term “benchmark” to mean something different from the way the term
is often used in the case law about benchmarks. He does not directly compare the benchmark
product’s performance in a non-infringing market to the infringed product’s actual performance.
See, e.g., Ericsson, 352 F.3d at 1378-79. Instead he compares azoxystrobin’s actual performance
to its hypothetical gross profits in a non-infringing market, calculated by adjusting one
benchmark, Syngenta’s budgeted gross profits or past gross profits for azoxystrobin, with
another benchmark, Syngenta’s experience with another product.
8
7
Evid. 702. “[T]he trial judge must ensure that any and all scientific testimony or
evidence admitted is not only relevant, but reliable.” Daubert v. Merrell Dow Pharm.,
Inc., 509 U.S. 579, 589 (1993). However, the fact finder, not the court, must determine
whether an expert is credible and whether the expert’s opinions are correct. Apple Inc. v.
Motorola, Inc., 757 F.3d 1286, 1314 (Fed. Cir. 2014), overruled in part not relevant here
by Williamson v. Citrix Online, LLC, 792 F.3d 1339, 1349 (Fed. Cir. 2015) (en banc); i4i
Ltd. P’ship v. Microsoft Corp., 598 F.3d 831, 854 (Fed. Cir. 2010) (“Daubert and Rule
702 are safeguards against unreliable or irrelevant opinions, not guarantees of
correctness.”), aff’d, 564 U.S. 91 (2011). “Vigorous cross-examination, presentation of
contrary evidence, and careful instruction on the burden of proof are the traditional and
appropriate means of attacking shaky but admissible evidence.” Summit 6, LLC v.
Samsung Elecs. Co., 802 F.3d 1283, 1296 (Fed. Cir. 2015) (quoting Daubert, 509 U.S. at
596).
Willowood does not object to Dr. Wilner’s method: computing lost profits by
subtracting actual gross profits and incremental costs from hypothetical gross profits
calculated by adjusting one benchmark with another. While this method does not use a
typical lost sales or price erosion approach, as long as appropriate benchmarks are
selected, it accounts for lost sales and price erosion, and for inaccuracies in the
benchmarks. However, Willowood contends that Dr. Wilner’s opinions are inadmissible
because he did not base his choice of benchmarks on sufficient facts or data.
To rely on a benchmark for price erosion, the party must offer “substantial
evidence of the similarities” between the benchmark product and the infringed product
8
and between their two markets. Ericsson, 352 F.3d at 1379 (upholding price erosion
damages using benchmark of similar product with one technological difference, produced
by the same company, and sold in a similarly competitive market). As long as an expert
provides some evidence of their similarities, then “[t]he degree of comparability of” the
products and their markets and the failure “to control for certain variables are factual
issues best addressed by cross examination and not by exclusion.” ActiveVideo
Networks, Inc. v. Verizon Commc’ns, Inc., 694 F.3d 1312, 1333 (Fed. Cir. 2012); see also
i4i, 598 F.3d at 852 (“When the methodology is sound, and the evidence relied upon
sufficiently related to the case at hand, disputes about the degree of relevance or accuracy
. . . may go to the testimony’s weight, but not its admissibility.”).
1. The Compound Patents
a. Dr. Wilner’s Calculations
Dr. Wilner used two benchmarks to calculate damages for the compound patents:
Syngenta’s budgeted gross profits for azoxystrobin and the budgeted gross profits and
actual performance of mesotrione, an herbicide made by Syngenta. Doc. 149-1 at 30.
For 2014, Dr. Wilner calculated the extent to which Syngenta’s actual gross profits for
mesotrione met its budgeted gross profits. Id. at 33. He assumed that but for
Willowood’s infringement, Syngenta would have met its budgeted gross profits for
azoxystrobin to the same extent as it had for mesotrione. See id. Using this method, he
9
calculated that Syngenta’s hypothetical gross profits were $140,943,000.9 Id. at 34, 68
ln.4. After subtracting Syngenta’s actual gross profits and incremental costs from its
hypothetical gross profits, Dr. Wilner found that but for Willowood’s infringement,
Syngenta lost $20,020,000 in 2014. Id. at 67 lns.1-4, 68 lns.4-6. To determine the extent
of Syngenta’s lost profits due to Willowood’s head start in the market, he followed a
similar process for 2015, 2016, and 2017.10 Id. at 34-35, 67-68.
Explaining his choice of benchmark, Dr. Wilner opined that “Syngenta’s budgets
are an informative benchmark for what sales and profits would have been” for
azoxystrobin without Willowood’s infringement. Id. at 38; see Doc. 197 at 231:8-:21.
Dr. Wilner learned about “Syngenta’s exacting budgeting process” through discussions
with several employees, Doc. 149-1 at 30; see also Doc. 197 at 107:6-:18, 109:7-:14,
whom Syngenta intends to call as trial witnesses to testify about the budgeting process.
See Doc. 221 at 48:2-:15. In his report, Dr. Wilner also noted several factors evaluated in
9
Specifically, Syngenta budgeted that its gross profits of azoxystrobin would be
$166,594,000. Doc. 149-1 at 68 ln.1. Mesotrione missed its budgeted gross profits for 2014 by
15.4%, id. at 69, so Dr. Wilner assumed that azoxystrobin would have missed its budget
projections to the same extent. See id. at 68 lns.1-4. Using the mesotrione benchmark to adjust
the budget benchmark, Dr. Wilner concluded that Syngenta’s hypothetical gross profits for
azoxystrobin in 2014 were $140,943,000. Id. at 68 ln.4.
For 2014, Dr. Wilner started with Syngenta’s 2014 Gross Profits Budget, but for 20152017, Dr. Wilner had to calculate the budgeted gross profits for the hypothetical, non-infringing
world. Doc. 149-1 at 33-35. To do so, he increased the actual gross profits budget to the same
extent the previous year’s hypothetical gross profits for azoxystrobin exceeded the actual gross
profits. Id. at 34-35, 68 lns.8-10, 18-20, 28-30.
Dr. Wilner’s calculations for damages in 2016 and 2017 on all of the patents-at-issue rely on
limited information because Dr. Wilner completed his report on August 19, 2016. See id. at 46.
For instance, for 2016, he relied on the latest projections from June 2016 rather than data from
the full year. See id. at 31, 68 ln.25, 76 ln.17, 84 ln.17.
10
10
the budgeting process, including the product’s exclusivity status, the crops it protects, and
the weather patterns and geographic pressures affecting those crops. Doc. 149-1 at 3031.
Dr. Wilner also found mesotrione to be an appropriate benchmark for
azoxystrobin. Id. at 31-32; Doc. 197 at 243:3-244:1. The compound patents and
Syngenta’s data exclusivity11 for mesotrione created similar barriers against generics
entering both markets. Doc. 149-1 at 31-32; see Doc. 149-10 at 3. Mesotrione protects
the same major crops as azoxystrobin and both are top-sellers for Syngenta. Doc. 149-1
at 31. Finally, the products have comparable lifecycles, such as evolving mixtures of
active ingredients. Id. at 31-32; see Doc. 167-2 at 265:12-267:14; Doc. 197 at 242:4-:23
(noting similar post exclusivity strategies for mesotrione and azoxystrobin).
Dr. Wilner verified his calculations in two ways. First, he determined that
mesotrione was a conservative benchmark. In 2014, non-azoxystrobin fungicides12
missed their budgeted gross profits by only 4.2% and all other Syngenta products by
10.2%, while mesotrione missed its budgeted gross profits by 15.4%. Doc. 149-1 at 33.
Second, Dr. Wilner confirmed that Willowood gained a one-year head start through its
infringement. See id. at 36, 70. He found that Syngenta’s hypothetical gross profits for
2015—when generics were expected to enter the market after the compound patents’
expiration—were roughly equal to its actual gross profits for 2014—when Syngenta
This data exclusivity prevented generics from relying on Syngenta’s mesotrione data in
their own mesotrione registration applications before June 4, 2014. Doc. 149-1 at 32.
11
12
Infra note 13.
11
effectively lost exclusivity for the compound patents due to Willowood’s infringement
and early entry into the market. Doc. 221 at 49:21-50:20 (discussing Doc. 149-1 at 70).
b. Admissibility
Dr. Wilner tied his theory of damages to the facts of this case. See i4i, 598 F.3d at
855-56; see also Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1315-17 (Fed. Cir.
2011) (requiring basis in the facts of the case for application of a particular damages
theory). His benchmark methodology provides a reasonably reliable method of
calculating gross profits in a hypothetical, non-infringing world. See Grain Processing,
185 F.3d at 1350; Ericsson, 352 F.3d at 1377, 1378-79 (approving expert’s market
construction and benchmark methodology). Dr. Wilner opined that Syngenta’s budgets
and mesotrione sales provide appropriate benchmarks for azoxystrobin. See Doc. 149-1
at 29-31, 38. He discussed the budgeting process with Syngenta’s employees and
Syngenta will provide further evidence of that process at trial. He also analyzed the
similarities between azoxystrobin, mesotrione, and their markets. Id. at 31-32; see
Ericsson, 352 F.3d at 1379. Dr. Wilner’s opinion is based on “sufficient facts” and
“reliable principles.” Fed. R. Evid. 702. The Court will admit Dr. Wilner’s opinion on
damages for the compound patents.
Willowood asserts that Syngenta’s budgets are inappropriate benchmarks because
they are wildly inaccurate: past budgets have overestimated and underestimated gross
profits by almost 30%. See Docs. 149-3 (azoxystrobin), 149-4 (mesotrione). Willowood
also contends that Dr. Wilner did not adequately verify the budgets and cherry picked
budgets, without explaining his choice.
12
If an expert’s damages calculations “lack a reasonable basis in fact,” Rondigo,
L.L.C. v. Casco Twp., 537 F. Supp. 2d 891, 899 (E.D. Mich. 2008), or are based on
budget projections with “no coherent explanation” of their methodology, Sunlight
Saunas, Inc. v. Sundance Sauna, Inc., 427 F. Supp. 2d 1022, 1030 (D. Kan. 2006), then
the court should exclude the expert’s testimony. Here, Dr. Wilner has provided facts and
data sufficient to support his opinion, and Willowood’s concerns on the accuracy of the
budgets and his testimony are not for the Court to resolve. See Galaxy Comput. Servs.,
Inc. v. Baker, 325 B.R. 544, 560-61 (E.D. Va. 2005) (denying motion to exclude expert
testimony that was based on a budget and supported by data). Dr. Wilner concluded, as
an economist and with his experience calculating damages, that Syngenta’s budget
process was exacting and reliable. Doc. 149-1 at 55; supra p. 10-11. He provided an
overview of the process in his report and Syngenta will offer further evidence at trial. Id.
at 30-31; Doc. 221 at 48:2-:15. Most importantly, Dr. Wilner also accounted for
imperfections in Syngenta’s azoxystrobin budgets by adjusting them based on how well
Syngenta budgeted gross profits for mesotrione. Doc. 149-1 at 33. Finally, he verified
his analysis, considering other possible benchmarks and comparing his calculation of
hypothetical gross profits with Syngenta’s actual experience. Supra p. 11-12. A history
of inaccurate budgets, the failure to consider particular aspects of the budget process, and
Dr. Wilner’s choice of budgets affect the weight of his testimony, not its admissibility.
See i4i, 598 F.3d at 852. Dr. Wilner’s failure to account for particular facts and
Willowood’s other challenges to his opinion are best addressed by cross-examination, not
by exclusion. ActiveVideo, 694 F.3d at 1333.
13
Willowood also asserts that mesotrione is not sufficiently comparable to
azoxystrobin to provide a reliable benchmark because Syngenta retained exclusivity over
mesotrione while the compound patents expired in 2014. See Doc. 149-10 at 3 (noting
Syngenta sold 88% of its mesotrione in mixtures still protected by patent). First, Dr.
Wilner did not suggest that gross profits on azoxystrobin would have been the same as
mesotrione. Rather, he used the mesotrione benchmark to adjust the budgeted gross
profits for azoxystrobin to account for market factors overlooked by the budgeting
process. Doc. 149-1 at 33; see Doc. 197 at 248:20-249:22. Second, Dr. Wilner analyzed
the similarities between azoxystrobin and mesotrione and their markets. Doc. 149-1 at
31-32. The law does not require the markets of the infringed and benchmark products to
be identical for the benchmark to be helpful to the jury. See Ericsson, 352 F.3d at 137879 (requiring price erosion theory to account for similarities, but allowing for differences,
between the benchmark product and the infringed product and their markets). Dr.
Wilner’s analysis, which provides several points of comparison including exclusivity, is
sufficient. The degree of comparability between mesotrione and azoxystrobin is best
addressed on cross-examination. See ActiveVideo, 694 F.3d at 1333; i4i, 598 F.3d at 852.
2. The ‘138 Patent
a. Dr. Wilner’s Calculations
For the ‘138 Patent, Dr. Wilner used one set of benchmarks to calculate
hypothetical gross profits in 2014 and 2015, when Willowood’s importation and sales of
azoxystrobin allegedly infringed the patent. He used another set of benchmarks to
calculate hypothetical gross profits in 2016 and 2017, after the ‘138 Patent expired and
14
when Willowood’s allegedly infringing head start continued to cause Syngenta to lose
profits.
For 2014, Dr. Wilner calculated the extent to which Syngenta’s gross profits for
non-azoxystrobin fungicides13 increased or decreased from the past year. Doc. 149-1 at
39. He assumed that but for Willowood’s infringement, Syngenta would have
experienced the same increase or decrease in its gross profits for azoxystrobin from the
past year. Id. According to his calculations, Syngenta’s hypothetical gross profits in
2014 were $154,142,000.14 Dr. Wilner used the same method to calculate lost profits for
2015, beginning with the hypothetical gross profits he calculated for 2014 and reducing
them by 3%, because gross profits for non-azoxystrobin fungicides decreased by 3% in
2015 from 2014. Id. at 39, 76 ln.8.
Dr. Wilner opined that Willowood’s head start in the market continued to cause
Syngenta to lose profits in 2016 and 2017. Id. at 40. Dr. Wilner used Syngenta’s gross
“Non-azoxystrobin fungicides” refers to a group of crop protection fungicides that
excludes azoxystrobin fungicides. Dr. Wilner refers to this aggregation of products as “Crop
Protection Fungicides.” See Doc. 149-1 at 38 & n.209. For clarity, and because Dr. Wilner
excluded azoxystrobin from this group, the Court will use the term “non-azoxystrobin
fungicides.”
13
Specifically, Syngenta’s gross profits for azoxystrobin in 2013 were $140,037,000. Doc.
149-1 at 76 ln.1. Gross profits for non-azoxystrobin fungicides in 2014 exceeded those in 2013
by 10.1%, so Dr. Wilner assumed that gross profits for azoxystrobin would have increased to the
same extent. Id. at 39, 76 lns.1-4. Using the non-azoxystrobin fungicides benchmark to adjust
the past profits benchmark, Dr. Wilner concluded that Syngenta’s hypothetical gross profits for
azoxystrobin in 2014 were $154,142,000. Id. at 76 ln.4. After subtracting Syngenta’s actual
gross profits and incremental costs from its hypothetical gross profits, Dr. Wilner found that but
for Willowood’s infringement, Syngenta lost $33,206,000. Id. at 75 lns.1-4, 76 lns.5-6.
14
15
profits for azoxystrobin in 2014, when Willowood effectively ended Syngenta’s
exclusivity, as the benchmark for 2016, when Syngenta actually lost exclusivity. 15 Id. at
39. He calculated the extent to which Syngenta’s gross profits for azoxystrobin in 2014
decreased from 2013. He then assumed that but for Willowood’s infringement, Syngenta
would have experienced the same decrease from its hypothetical gross profits in 2015.
Id. Using this method, he calculated that in 2016, Syngenta’s hypothetical gross profits
for azoxystrobin were $129,046,000.16 Dr. Wilner used the same method to calculate lost
profits for 2017.
Dr. Wilner again verified his analysis. First, Dr. Wilner opined that Syngenta’s
experience in 2014 was a conservative benchmark for 2016, because 2014 experienced a
general decline in the agricultural economy. Id. at 39. Second, he confirmed his theory
that Willowood gained a two-year head start by infringing the ‘138 Patent. See id. at 40,
78. He found that Syngenta’s hypothetical gross profits from 2016 and 2017, when
Willowood does not object to Dr. Wilner’s use of actual data on azoxystrobin fungicides
from 2014-2015 in his calculations for 2016-2017. There is hardly a better benchmark than
Syngenta’s actual experience.
15
Specifically, Syngenta’s hypothetical gross profits for azoxystrobin in 2015 were
$149,467,000. Doc. 149-1 at 76 ln.13. Syngenta’s gross profits on azoxystrobin in 2014
decreased from its gross profits in 2013 by 13.7%, so Dr. Wilner assumed that gross profits for
azoxystrobin in 2016, after the ‘138 Patent expired, would have decreased to the same extent. Id.
at 76 lns.14-15. Using the 2014 gross profits for azoxystrobin as a benchmark to adjust the past
year’s hypothetical gross profits benchmark, Dr. Wilner concluded that Syngenta’s hypothetical
gross profits for azoxystrobin were $129,046,000. Id. at 76 ln.16. After subtracting Syngenta's
actual gross profits and incremental costs from its hypothetical gross profits, Dr. Wilner found
that but for Willowood’s infringement, Syngenta lost $36,010,000. Id. at 75 lns.9-12, 76 lns.1718.
16
16
Syngenta actually lost exclusivity, were roughly equal to its actual gross profits in 2014
and 2015, when Syngenta effectively lost exclusivity. Id.; Doc. 221 at 51:19-52:5.
b. Admissibility
Despite his heavy reliance on the non-azoxystrobin fungicides benchmark,17 Dr.
Wilner provided scant analysis for how or why non-azoxystrobin fungicides provide “a
proper benchmark” for azoxystrobin. See Doc. 149-1 at 38. His only explanation
consists of a single sentence: “[M]y analysis of the damages due to infringement of the
‘138 Patent is based on Syngenta’s gross profits on sales of [non-azoxystrobin
fungicides], which contain products for which Syngenta maintained exclusivity through
2015.” Id. He does not provide any further analysis or explanation of why these nonazoxystrobin fungicides are an appropriate benchmark.18 Nor has Syngenta directed the
Court’s attention to any other evidence in the record that would establish nonazoxystrobin fungicides as an appropriate benchmark. Unlike his explanation of the
17
Though Dr. Wilner used a different benchmark for 2016-2017, those calculations relied on
the hypothetical gross profits from 2015, which were calculated with the non-azoxystrobin
fungicides benchmark. See Doc. 149-1 at 76 lns.7-10, ln.13. Thus, Dr. Wilner’s entire
calculation of damages for the ‘138 Patent is based on the non-azoxystrobin fungicides
benchmark.
The beginning of Dr. Wilner’s analysis for the compound patents has two sections, one
called “Budgets as a Benchmark” and another called “Mesotrione as a Benchmark.” Doc. 149-1
at 30-32. He did not discuss the non-azoxystrobin fungicides benchmark there, nor is there a
corresponding section at the beginning of his analysis for the ‘138 Patent. See id. at 37-38.
Instead, Dr. Wilner adopted his earlier “Budgets as Benchmarks” discussion. Id. at 38. He also
explained that mesotrione would be “an over-conservative benchmark,” because mesotrione lost
exclusivity in 2014, while the ‘138 Patent did not expire until the end of 2015. Id. Dr. Wilner
concluded that non-azoxystrobin fungicides provide “a proper benchmark” and briefly explained
that Syngenta maintained exclusivity through 2015 for some products in this group. Id. His
report then begins the year-by-year analysis of gross profits for the ‘138 Patent, and includes no
other discussion of non-azoxystrobin fungicides as a benchmark.
18
17
mesotrione benchmark, Dr. Wilner does not address potential similarities between nonazoxystrobin fungicides and azoxystrobin fungicides and their markets, such as what
crops they protect or whether they are similarly affected by changes in commodity prices.
See id. at 31-33. Nor did he explain which non-azoxystrobin fungicides retained
exclusivity, the nature of the exclusivity, or how far beyond 2015 that exclusivity
extended.
Dr. Wilner has not provided “substantial evidence of the similarities between the
two products and their markets.” Ericsson, 352 F.3d at 1379. Retained exclusivity by
some non-azoxystrobin fungicides and the use of azoxystrobin and non-azoxystrobin
fungicides to protect crops against fungus does not make the benchmark reliable.
Without “sound economic proof of the nature of the market,” Dr. Wilner’s calculations
for the hypothetical, non-infringing world lapse “into pure speculation.” Grain
Processing, 185 F.3d at 1350. Dr. Wilner’s opinions relying on the non-azoxystrobin
fungicides benchmark are not based on sufficient facts or reliable principles. See Fed. R.
Evid. 702. The Court will exclude Dr. Wilner’s opinion on damages for the ‘138 Patent.
In his report, Dr. Wilner asserted that lost profit damages for the ‘138 Patent
“would be no less than the amounts calculated…for infringement of the ’076 and ‘256
Patents.” Doc. 149-1 at 37 n.208, 38. While mesotrione was an “over-conservative
benchmark” in comparison with non-azoxystrobin fungicides, it was still an apt
benchmark for sales of azoxystrobin and, in Dr. Wilner’s opinion, provided a floor for
damages for the ‘138 Patent. See id. Dr. Wilner may testify that his damages analysis for
the compound patents applies to damages for the ‘138 Patent.
18
Syngenta asserts that Dr. Wilner’s choice of non-azoxystrobin fungicides as a
benchmark rather than mesotrione, see id. at 38, provides a sufficient foundation for its
use as a benchmark. However, the lack of a better comparison does not justify the use of
a poor benchmark. See Crystal, 246 F.3d at 1358-59 (affirming that benchmark of
similar technology was unreliable because of important differences in the products’
markets); cf. Eleven Line, Inc. v. N. Tex. State Soccer Ass’n, 213 F.3d 198, 208-09 (5th
Cir. 2000) (reversing award of damages in antitrust case based on benchmark analysis
when “the only evidence of comparability” was the plaintiff’s common ownership of
other indoor soccer arenas).
3. The ‘761 Patent
a. Dr. Wilner’s Calculations
Dr. Wilner again used non-azoxystrobin fungicides as a benchmark to calculate
hypothetical gross profits for the ‘761 Patent. Doc. 149-1 at 41-42. For 2014 and 2015,
he used the same calculation for the ‘761 Patent as he did for the ‘138 Patent. Id. at 42.
He then calculated damages for 2016 and 2017 with the same method.
b. Admissibility
Dr. Wilner’s opinions on lost profit damages for the ‘761 Patent are inadmissible
for two reasons. First, Dr. Wilner’s use of the non-azoxystrobin fungicides benchmark
lacks a sufficient basis. Neither he nor Syngenta has provided evidence of the similarities
between non-azoxystrobin fungicides and azoxystrobin fungicides or their markets, nor
has he explained why or how non-azoxystrobin fungicides provide a reliable benchmark.
Supra pp. 17-18. Second, Dr. Wilner did not address but-for causation, or whether there
19
were non-infringing alternatives, for the ‘761 Patent. Moreover, his assumption of butfor causation contradicts other information in his report.
To obtain lost profit damages, the patentee must show that but for the
infringement, the patentee would have made those profits. See Ericsson, 352 F.3d at
1378 (requiring patentee to show “that ‘but for’ infringement, it would have sold its
product at a higher price”); Panduit, 575 F.2d at 1156 (requiring an absence of acceptable
non-infringing substitutes for lost sales). Non-infringing products or processes “available
or on the market at the time of infringement” might otherwise account for the patentee’s
lost profits, breaking the causal link between infringement and lost profits. Grain
Processing, 185 F.3d at 1349 (quotation omitted). “[S]ubstitutes only theoretically
possible” do not preclude lost profit damages. Id. at 1353; see also Minn. Mining & Mfg.
Co. v. Johnson & Johnson Orthopaedics, Inc., 976 F.2d 1559, 1578 (Fed. Cir. 1992)
(upholding absence of non-infringing substitutes when alternative source only produced
products below commercially acceptable standards).
At the beginning of his damages analysis for the ‘761 Patent, Dr. Wilner
concluded that “Syngenta meets the first three Panduit factors for the ‘761 Patent,”
adopting his earlier analysis on the compound and ‘138 patents. Doc. 149-1 at 41.19 For
the compound patents, Dr. Wilner found that other potential sources for azoxystrobin
were actually “Syngenta-based private label[s],” participated in another market, such as
19
Dr. Wilner cited sections IV.A.1-3 and III.B of his report. Doc. 149-1 at 41. However,
from context, Dr. Wilner meant sections IV.A.1-3 and IV.B. See id. at 28-30, 37-38.
20
the seed care sector, or targeted different segments of the market, such as particular
customers, geographies or crops. Id. at 29. Based on this information, Dr. Wilner
concluded that but for Willowood’s infringing products, customers would have bought
Syngenta’s azoxystrobin. Id. For the ‘138 Patent, Dr. Wilner further stated that he knew
of no way that azoxystrobin “could have been economically manufactured without the
method of the ‘138 Patent.” Id. at 38. Dr. Wilner provided no additional analysis or
findings for the ‘761 Patent.
However, there is an obvious non-infringing substitute for the ‘761 Patent: the
‘138 Patent. The process claimed by the ‘138 Patent undisputedly provides a method
capable of producing azoxystrobin without infringing the ‘761 Patent. Doc. 159-2 at
66:14-67:6. Syngenta’s long-standing and successful use of the ‘138 Patent’s claimed
method shows that it is a viable alternative to the ‘761 Patent. See Doc. 149-1 at 6, 8;
Doc. 159-2 at 101:20-102:3, 193:2-:14.
Dr. Wilner’s report also states that Syngenta expected some generic competition
by 2014, after the expiration of the compound patents, suggesting that there are noninfringing alternatives to both the ‘138 and ‘761 patents. See Doc. 149-1 at 15, 38. In his
calculations of lost profits, Dr. Wilner used benchmarks with the same exclusivity status
as the compound and ‘138 patents, indicating that he expected competition to enter the
market when those patents expired, despite the ‘761 Patent’s continued enforceability.
See id. at 31-32, 38.
Because Dr. Wilner did not address how these non-infringing alternatives affected
lost profit damages for the ‘761 Patent, he has not shown the but-for causation necessary
21
to prove lost profits. See Ericsson, 352 F.3d at 1378; Grain Processing, 185 F.3d at
1349; Panduit, 575 F.2d at 1156. The Court will exclude Dr. Wilner’s opinion on
damages for the ‘761 Patent as speculative and unreliable because they are based on the
non-azoxystrobin fungicides benchmark and because they do not account for acceptable
non-infringing substitutes. See Fed. R. Evid. 702; Daubert, 509 U.S. at 589.
Syngenta asserts that it met its burden to show but-for causation because there
were no products on the market using azoxystrobin made without the ‘761 Patent’s
claimed process. However, non-infringing alternatives are not limited to products on the
market, but extend to alternative, non-infringing methods of manufacture available to the
defendant. See Grain Processing, 185 F.3d at 1349, 1353-54 (finding non-infringing
alternative process was available when the infringer could have obtained the necessary
materials and had the necessary equipment, know-how, and experience).
In his report, Dr. Wilner opined that, “[e]ven if a generic was able to manufacture
azoxystrobin without the ‘761 Patent, lost profit damages would be no less than the
amounts calculated…for infringement of the ’076 and ‘256 Patents.” Doc. 149-1 at 41
n.215. Because Dr. Wilner’s calculations for the compound patents used a benchmark
with the same exclusivity, the calculations assume non-infringing alternatives for the later
expiring patents. Dr. Wilner asserted that his calculation of head-start damages for the
compound patents provided a floor for damages on the ‘761 Patent, just as they did for
the ‘138 Patent. Dr. Wilner may testify that his damages analysis for the compound
patents applies to damages for the ‘761 Patent.
22
IV. Formulators’ Exemption
The Formulators’ Exemption provides expedited EPA registration to applicants
using a registered pesticide from another producer to formulate their own pesticides. 7
U.S.C. § 136a(c)(2)(D); 40 C.F.R. § 152.85. In 2013, Willowood used the Formulators’
Exemption to register its azoxystrobin fungicides with the EPA. Doc. 149-1 at 10; Doc.
1-16. It has already been determined that Willowood infringed the compound patents to
obtain the formulation that it submitted to the EPA. Doc. 141 at 4, 6. Willowood began
to sell azoxystrobin shortly after receiving approval in 2014. See Doc. 149-1 at 11, 13;
Docs. 164-26, 164-27.
In his report, Dr. Wilner asserted that without Willowood’s infringement and use
of the Formulators’ Exemption, Willowood would not have obtained EPA approval so
quickly and would not have been able to sell azoxystrobin “as early as it did.” Doc. 1491 at 10-11; see Doc. 167-2 at 41:22-43:15 (noting six- to nine-month benefit of
Formulators’ Exemption); Doc. 167-4 at 40:20-:25 (noting initial registration process
takes a minimum of two years). Dr. Wilner based his lost profits calculations on this
“head start” in the market. See Doc. 149-1 at 10-11, 25-26. Willowood’s actions seeking
expedited approval and a quick entry into the market are relevant to Dr. Wilner’s theory
of head-start damages. See id. at 25, 36. To the extent he testifies on Willowood’s early
entry into the market, the Court will admit his testimony.
Dr. Wilner also asserted that Willowood misused the Formulators’ Exemption. He
did not offer an opinion on such misuse, but relied on documents showing that
Willowood initially told the EPA that it used azoxystrobin from Syngenta, see Docs. 53-4
23
to 53-7, and later admitted that it had not obtained its azoxystrobin from Syngenta. Doc.
12 at ¶ 48 (admitting allegations in Doc. 1 at ¶ 48); Doc. 33 at ¶ 48 (same). Dr. Wilner
does not appear to have personal knowledge of Willowood’s registration process and any
testimony by Dr. Wilner on Willowood’s alleged misuse would likely be hearsay.
Finally, neither Dr. Wilner nor Syngenta explain how Willowood’s alleged misuse of the
Formulators’ Exemption affects Dr. Wilner’s lost profits analysis. The Court will
exclude any testimony by Dr. Wilner on whether or not Willowood misused the
Formulators’ Exemption.
The Court’s decision to exclude Dr. Wilner from testifying on this alleged misuse
does not affect Syngenta’s ability to offer other evidence on whether Willowood
improperly used the Formulators’ Exemption. Willowood’s motion is not directed to any
evidence other than Dr. Wilner’s testimony and thus the larger question is not properly
before the Court. Evidence that Willowood intentionally infringed as part of a scheme to
obtain early entry into the market may inform both the jury’s finding on willfulness and
the Court’s decision on whether to enhance damages. Doc. 1 at p. 27 (seeking treble
damages for Willowood’s willful infringement); see 35 U.S.C. § 284; Halo Elecs., Inc. v.
Pulse Elecs., Inc., 136 S. Ct. 1923, 1931-32 (2016). However, it may raise Rule 403
issues of confusion or undue delay. Fed. R. Evid. 403. A motion in limine has been filed
addressed to this issue, and the Court will not resolve it here.
V.
Conclusion
Dr. Wilner’s calculation of lost profits using one benchmark to adjust another to
create a hypothetical, non-infringing market has not yet been addressed by the courts, but
24
the Court concludes it can be a reliable method if the benchmarks are appropriate. He
provided sufficient facts and data to support his use of Syngenta’s budgets, past gross
profits, and mesotrione as benchmarks. The Court will admit his opinion on damages for
the compound patents. In his damages calculations for the ‘138 and ‘761 Patents, Dr.
Wilner did not support his choice of non-azoxystrobin fungicides as a benchmark with
sufficient facts or data. Nor did he adequately consider non-infringing alternatives for the
‘761 Patent. Consequently, the Court will exclude his opinions on damages for the ‘138
and ‘761 patents.
The Court will admit Dr. Wilner’s testimony on Willowood’s early entry into the
market because it is relevant to his theory of damages. The Court will exclude his
testimony on Willowood’s alleged misuse of the Formulators’ Exemption because it is
not relevant to his calculation of damages, nor is he competent to testify on the subject.
It is ORDERED that the Willowood’s motion to exclude the testimony of Dr.
Benjamin Wilner, Doc. 147, is GRANTED in part and DENIED in part as follows:
1. The Court denies the motion as to Dr. Wilner’s calculation of lost profits on the
‘076 and ‘256 patents.
2. Dr. Wilner may also rely on his calculation of damages for the ‘076 and ‘256
patents to discuss damages for the ‘138 and ‘761 patents.
3. The Court otherwise grants the motion as to Dr. Wilner’s calculation of lost profits
for the ‘138 and ‘761 patents.
25
4. The Court grants the motion to exclude as to Dr. Wilner’s testimony on whether
Willowood misused the Formulators’ Exemption, but otherwise denies the motion
as to his testimony on Willowood’s early entry into the market.
5. The Court denies the motion as moot as to Dr. Wilner’s opinion on copyright
damages.
This the 20th day of July, 2017.
__________________________________
UNITED STATES DISTRICT JUDGE
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