Kimberly-Clark Worldwide Inc v. First Quality Products Inc et al

Filing 1026

MEMORANDUM (Order to follow as separate docket entry) re. KC's MOTION in Limine #2 - to Exclude Portions of the Testimony and Opinions of Dr. Sumanth Addanki Pursuant to Federal Rules of Evidence 702, 403, and 402 848 Signed by Honorable William W. Caldwell on 11/13/13. (ma)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
KIMBERLY-CLARK WORLDWIDE, INC.,
Plaintiff

:
: CIVIL NO. 1:09-CV-1685

v.
:
FIRST QUALITY BABY PRODUCTS, LLC,
FIRST QUALITY PRODUCTS, INC.,
FIRST QUALITY RETAIL SERVICES, LLC,
FIRST QUALITY HYGIENIC, INC.,
Defendants and
Counterclaim Plaintiffs
v.

:
:
:
:

KIMBERLY-CLARK CORPORATION,
KIMBERLY-CLARK WORLDWIDE, INC.,
KIMBERLY-CLARK GLOBAL SALES, LLC,
Counterclaim Defendants

:
:

MEMORANDUM
I.

Introduction
Presently before the court is a motion in limine (Doc. 848) filed by Plaintiff

Kimberly-Clark Worldwide, Inc. (“KC”) on September 17, 2013. In its motion, KC requests
that the court prevent Dr. Sumanth Addanki, a purported economic expert for the
defense, from offering opinions or otherwise testifying regarding damages in this patent
infringement action. Specifically, KC contends that because the methodology employed
by Dr. Addanki is contrary to controlling Federal Circuit precedent, the court should
exclude his testimony pursuant to Federal Rule of Evidence 702.
Defendants First Quality Baby Products, LLC, First Quality Products, Inc.,
First Quality Retail Services, LLC, and First Quality Hygienic, Inc. (collectively, “FQ”)

oppose KC’s motion. The matter has been fully briefed (Docs. 849, 929, 982) and is ripe
for our review. For the reasons that follow, we will deny KC’s motion.
II.

Legal Standard
District courts have a “gatekeeping” function in connection with expert

testimony. ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254, 290 (3d Cir. 2012). Federal
Rule of Evidence 702, as amended in 2000 to incorporate the standards set forth by the
Supreme Court in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993),
requires district courts to ensure that expert testimony is not only relevant, but reliable.
ZF Meritor, 696 F.3d at 291 (citations omitted).
Rule 702 provides that:
A witness who is qualified as an expert by knowledge, skill,
experience, training, or education may testify in the form of an opinion
or otherwise if: (a) the expert’s scientific, technical, or other
specialized knowledge will help the trier of fact to understand the
evidence or to determine a fact in issue; (b) the testimony is based on
sufficient facts or data; (c) the testimony is the product of reliable
principles and methods; and (d) the expert has reliably applied the
principles and methods to the facts of the case.
Fed. R. Evid. 702.
The Third Circuit has explained that Rule 702 “embodies a trilogy of
restrictions on expert testimony: qualification, reliability and fit.” Schneider v. Fried, 320
F.3d 396, 404 (3d Cir. 2003); see also Pineda v. Ford Motor Co., 520 F.3d 237, 244 (3d
Cir. 2008) (“Rule 702 has three major requirements: (1) the proffered witness must be an
expert, i.e., must be qualified; (2) the expert must testify about matters requiring scientific,
technical or specialized knowledge; and (3) the expert’s testimony must assist the trier of
fact.”) (citation omitted). Qualification refers to the requirement that the witness possess
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“specialized expertise,” which should be evaluated “liberally” because “a broad range of
knowledge, skills, and training qualify an expert.” Schneider, 320 F.3d at 404. To
establish reliability, the expert testimony “must be based on the methods and procedures
of science rather than on subjective belief or unsupported speculation; the expert must
have good grounds for his o[r] her belief.” Id.; see also Calhoun v. Yamaha Motor Corp.,
U.S.A., 350 F.3d 316, 321 (3d Cir. 2003) (noting that district courts must ensure that “the
expert’s opinion [is] based on the methods and procedures of science rather than on
subjective belief or unsupported speculation”) (citations and internal quotation marks
omitted). To satisfy the fit requirement, “the expert’s testimony must be relevant for the
purposes of the case and must assist the trier of fact.” Schneider, 320 F.3d at 404.
The burden is on the party proffering expert testimony to demonstrate that it
satisfies the requirements of Rule 702. Mercedes-Benz USA, Inc. v. Coast Auto. Grp.,
Ltd., 362 F. App’x 332, 335 n.2 (3d Cir. 2010) (not precedential) (citation omitted);
Padillas v. Stork-Gamco, Inc., 186 F.3d 412, 418 (3d Cir. 1999) (noting that the burden is
on the proponent of the expert testimony to establish its admissibility by a preponderance
of the evidence) (citations omitted).1
III.

Discussion
In a patent infringement action such as the case at bar, a successful

plaintiff is entitled to recover “damages adequate to compensate for the infringement, but

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Neither party has requested a Daubert hearing. Such a hearing is not required
every time an objection is raised under Daubert, and it is within our discretion to hold
one should we determine that it is necessary to resolve the pending motion. Padillas,
186 F.3d at 418. Instantly, we conclude that a Daubert hearing is not necessary as
KC’s motion is premised on a purely legal question.
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in no event less than a reasonable royalty rate for the use made of the invention by the
infringer, together with interest and costs as fixed by the court.” 35 U.S.C. § 284
(emphasis added). A reasonable royalty rate can be calculated from, inter alia, “a
hypothetical negotiation between the patentee and infringer” that “attempts to ascertain
the royalty [for use of the invention] upon which the parties would have agreed had they
successfully negotiated an agreement just before the infringement began.” Wordtech
Sys., Inc. v. Integrated Networks Solutions, Inc., 609 F.3d 1308, 1319 (Fed. Cir. 2010)
(citations and internal quotation marks omitted).
Here, KC contends that the court should preclude Dr. Addanki from offering
an opinion on damages because his calculations regarding the reasonable royalty rate for
infringement of the patents-in-suit are based on “a methodology rejected by the Federal
Circuit.” (Doc. 848 at 2). Specifically, KC asserts that Dr. Addanki’s calculations run afoul
of Mars, Inc. v. Coin Acceptors, Inc., 527 F.3d 1359 (Fed. Cir. 2008), by impermissibly
“establishing a cap” on the range of potential reasonable royalty rates in the hypothetical
negotiation by concluding that FQ would not pay a royalty rate higher than the cost
associated with forgoing use of the infringing products and instead using available,
noninfringing alternatives. FQ, in turn, disagrees with KC’s broad reading of Mars and
contends that exclusion of Dr. Addanki’s opinions is unwarranted. (Doc. 929 at 3).
In Mars, the Federal Circuit expressly rejected the defendant’s contention
that the trial court erred “by awarding a reasonable royalty rate higher than the cost to
[the defendant] of implementing acceptable noninfringing alternatives.” Id. at 1372. The
Federal Circuit explained that reasonable royalty rate damages are not, as a matter of

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law, “capped at the cost of implementing the cheapest available, acceptable,
noninfringing alternative.” Id. at 1373. Instead, “an infringer may be liable for damages,
including reasonable royalty damages, that exceed the amount that the infringer could
have paid to avoid infringement.” Id. (emphasis added).
KC presently contends that Dr. Addanki’s damage calculations violate this
principle and should be excluded for misapplying the law on damages. We disagree.
In Ergotron, Inc. v. Rubbermaid Commercial Products, LLC, No. 10-2010
ADM/JJG, 2012 WL 3733578 (D. Minn. Aug. 28, 2012), the Honorable Ann D.
Montgomery addressed this identical argument in a thorough and well-reasoned opinion.
There, as here, the plaintiff argued that a damages expert’s testimony should be
excluded for running afoul of Mars because the expert “used [the defendant’s] profit
expectations and design-around cost as an absolute ceiling capping damages.” Ergotron,
2012 WL 3733578 at *12. Finding this argument “unavailing,” the court concluded that
the expert’s opinions were not based “on a misapplication of the law—i.e. a belief that
damages should always be capped based on an infringer’s expected profits or designaround costs—but rather her analysis of the facts of this case.” Id. Specifically, the expert
reasoned that the availability of personnel on the defendant’s staff who could engineer a
noninfringing alternative at low cost would provide sufficient bargaining power such that
the defendant would not agree to pay a higher royalty rate. Id. Additionally, the court
examined the pertinent case law–including Mars–and concluded that it did not prohibit
experts from testifying regarding the behavior of economically rational actors. Rather, it
stood for the proposition that courts could not cap infringement damages as a matter of

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law at the cost of creating a noninfringing alternative or at a level that would guarantee a
certain profit margin for the infringer. Id. (collecting cases).
We find this persuasive reasoning to be equally applicable to the case sub
judice. Dr. Addanki’s proposed testimony does not stem from the mistaken belief that
infringement damages must be capped at the cost of using a noninfringing alternative.
Instead, he examines the economic circumstances of this particular case, notes the
availability of acceptable noninfringing alternatives to FQ, and concludes that no other
factors would compel FQ to accept a higher royalty rate during the hypothetical
negotiations. Such analysis does not, as KC contends, misapply the law on damages.
See Ergotron, 2012 WL 3733578 at *12; see also Grain Processing Corp. v. Am. MaizeProducts Co., 185 F.3d 1341, 1347 (Fed. Cir. 1999) (upholding district court’s finding that
difference in production costs between infringing and noninfringing products “effectively
capped the reasonable royalty award”); Riles v. Shell Exploration & Prod. Co., 298 F.3d
1302, 1312 (Fed. Cir. 2002) (stating that “[t]he economic relationship between the
patented method and non-infringing alternative methods, of necessity, would limit the
hypothetical negotiation”).
Accordingly, we will deny KC’s request to preclude Dr. Addanki from
testifying in this matter.

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IV.

Conclusion
For the reasons discussed above, we conclude that KC’s motion in limine

(Doc. 848) should be denied. We will issue an appropriate order.

/s/ William W. Caldwell
William W. Caldwell
United States District Judge
November 13, 2013

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