UNIVERSITY OF PITTSBURGH OF THE COMMONWEALTH SYSTEM OF HIGHER EDUCTION v. VARIAN MEDICAL SYSTEMS, INC.

Filing 600

MEMORANDUM AND OPINION on Pretrial Motions in Limine (see also doc. no. 594). Signed by Judge Arthur J. Schwab on 2-10-12. (Moschetta, Nicole)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
UNIVERSITY OF PITTSBURGH OF THE
COMMONWEALTH SYSTEM OF HIGHER
EDUCATION,
Plaintiff,

08cv1307
ELECTRONICALLY FILED

v.
VARIAN MEDICAL SYSTEMS, INC.,
Defendant.

MEMORANDUM OPINION ON PRETRIAL MOTIONS IN LIMINE
I.

Introduction/Procedural History

This is an action in patent infringement. Plaintiff, University of Pittsburgh of the
Commonwealth System of Higher Education (hereinafter “Pitt” or “plaintiff”), alleges that
defendant, Varian Medical Systems, Inc. (hereinafter “Varian” or “defendant”) has infringed its
patent (U.S. Patent No. 5,727,554) (hereinafter “the patent,” or “the ‘554 Patent”), by making
and selling the RPM Respiratory Gating System (hereinafter “the RPM System”). Defendant
filed an Answer and Counterclaim, seeking a declaration that the claims of the ‘554 Patent are
invalid, and that the products of Varian do not infringe any of the asserted claims of the ‘554
Patent, and asserted numerous defenses including failure to state a claim, patent invalidity,
estoppel, laches, and authorization and consent of the United States Government (doc. no. 355).
This lawsuit has a long and storied procedural history dating back to June 16, 2008,1
when Pitt filed the instant action against Varian alleging that Varian’s product, the RPM Gating
System, which is radiotherapy equipment for the treatment of cancer, infringes Pitt’s ‘554 Patent,
1

This action was originally filed in the Northern District of California (3:08-cv-02973) and,
upon motion of defendant, was transferred to this Court. Univ. of Pittsburgh v. Varian Med. Sys.
Inc., 2008 U.S. Dist. LEXIS 108783 (N.D. Cal. Sept. 16, 2008).
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which also concerns an application for radiation therapy. This lawsuit (“Varian II”) is the
second action which Pitt has commenced against Varian claiming an alleged infringement of the
‘554 patent. This Court dismissed the first action (“Varian I”) for lack of standing. Univ. of
Pittsburgh v. Varian Med. Sys. Inc., 2008 U.S. Dist. LEXIS 36098 (W.D. Pa. April 30, 2008).
During the pendency of the appeal to the United States Court of Appeals for the Federal Circuit
in Varian I, Pitt filed the instant action (Varian II). This Court dismissed Varian II on res
judicata grounds. Univ. of Pittsburgh v. Varian Med. Sys. Inc., 630 F.Supp.2d 576 (W.D. Pa.
2008). Pitt then appealed this decision (doc. no. 120). While Varian II was on appeal, the Court
of Appeals reversed this Court’s judgment and remanded Varian I. Univ. of Pittsburgh v. Varian
Med. Sys. Inc., 569 F.3d 1328 (Fed. Cir. 2009). The parties then reached an agreement pursuant
to which the dismissal of Varian II would be vacated, the appeal in Varian II would be
dismissed, and this case would proceeds on the merits (doc. no. 152). See also Univ. of
Pittsburgh v. Varian Med. Sys. Inc., 2010 U.S. App. LEXIS 9542 (Fed. Cir. Apr. 27, 2010).
During the pendency of the appeals in Varian I and II, Varian filed an ex parte request
with the United States Patent and Trademark Office (“PTO”) requesting a reexamination of all
of the “disputed” claims. The PTO reexamined the ‘554 Patent in light of the prior art, which
Varian claimed rendered the disputed patent claims invalid. The PTO issued a reexamination
certificate confirming the claims that were under reexamination, and added additional patent
claims (Claims 23-28) that Pitt had submitted during the reexamination proceedings. At the
conclusion of the reexamination proceedings, Claims 20-22 of the ‘554 Patent were deemed
valid.
By Order of this Court of June 18, 2010 (doc. no. 182), pursuant to Fed. R. Civ. P. 53,
this Court appointed the Honorable Donald E. Ziegler as Special Master in this action to conduct
2

a claim construction hearing, and to set forth his findings in a Report and Recommendation,
which the Court received on April 6, 2011. Univ. of Pittsburgh v. Varian Med. Sys. Inc., 2011
U.S. Dist. LEXIS 52078 (W.D. Pa. Apr. 6, 2011). After hearing the objections of the parties, and
the motions to adopt/modify the Report and Recommendation, this Court issued a Memorandum
Opinion and Order thereon. Univ. of Pittsburgh v. Varian Med. Sys. Inc., 2011 U.S. Dist. LEXIS
52059 (W.D. Pa. May 16, 2011); doc. no. 303. This Court affirmed and adopted the Report and
Recommendation of the Special Master as the Opinion of the Court with only three (3)
modifications (doc. no. 303).
After a status conference, the parties then filed cross-motions for summary judgment
which were fully briefed on December 20, 2011. Pitt moved for partial summary judgment (as to
liability) on the basis that: (1) Varian’s RPM System infringes Claim 20 of the ‘554 Patent as a
matter of law; (2) the RPM System infringes Claims 21, 25, 26 and 36 of the ‘554 Patent as a
matter of law; and (3) the combination of the RPM System and Clinac and Trilogy Linear
Accelerators infringes Claims 38 and 22 of the ‘554 Patent. Doc. No. 363.
Varian, on the other hand, moved for summary judgment on the grounds of invalidity for
lack of enablement, lack of damages (Entire Market Value Rule allegedly precludes Pitt from
obtaining royalties on sales of linear accelerators), non-infringement due to “incapacity” (which
was subject of Pitt’s previously granted Motion to Strike), non-infringement of the redesigned
(or modified) RPM System, and willfulness. Doc. No. 364.
The Court granted Pitt’s Motion for Partial Summary Judgment, finding infringement as
a matter of law. The Court also denied Varian’s Motion for Summary Judgment regarding
invalidity, denied Varian’s Motion for Summary Judgment regarding damages, found the
redesigned RPM System infringes as a matter of law (literally and under the doctrine of
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equivalents), and struck Varian’s belated defense of non-infringement due to “incapacity.” Univ.
of Pittsburgh v. Varian Med. Sys. Inc., 2011 U.S. Dist. LEXIS 149685 (W.D. Pa. Dec. 30, 2011).
The Court also found that the issue of willfulness should proceed before a jury, and thus
the Court denied Varian’s Motion for Summary Judgment as to the issue of willfulness. Id. On
December 21, 2011, the same day this Court entered an Order granting Pitt’s Motion for (Partial)
Summary Judgment and denying Varian’s Motion for Summary Judgment, this Court also issued
a Pretrial Order setting a trial on the issue of willfulness (see Section II below) to commence on
January 23, 2012.
The trial on willfulness concluded on January 26, 2011, with a verdict in favor of Pitt and
against Varian on all issues before the jury. The second part of the trial (damages) is scheduled
to commence on February 21, 2012 (doc. no. 452), and part three of the trial (invalidity) is
scheduled to commence on April 16, 2012 (doc. no. 543). Currently pending before this Court
are several motions in limine/pretrial motions (doc. nos. 560, 567, 554, 559, 563 and 565), all of
which will be addressed in this Opinion.
II.

One Trial in Three Parts

In accordance with Fed. R. Civ. P. 42(b), at the conclusion of the summary judgment
proceedings, instead of scheduling one lengthy and cumbersome jury trial on all remaining issues
before this Court (willfulness, damages, invalidity, etc.), the Court instead exercised its
discretion to break the trial of this matter into three (3) discreet subparts, and ultimately decided
the entire trial should be tried before the same jury. See Gardco Mfg., Inc. v. Herst Lighting Co.,
820 F.2d 1209, 1213 (Fed. Cir. 1987) (holding that “[A] separation [of issues in patent litigation]
is precisely the type contemplated by Rule 42(b) and does not run afoul of the Seventh
Amendment.”) Consistent therewith, the Court set forth three separate Pretrial Orders (doc. nos.
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426, 452 and 543), after consulting with the parties on the order or secession of the issues to be
presented to the jury on several occasions. The Court selected the issue of willfulness as the first
trial issue, primarily because defendant had taken the position in its summary judgment filings
that the issue of willfulness was so clear and uncomplicated, and that defendant was entitled to
summary judgment on this basis.
Although the Court did not ultimately agree with defendant’s position on summary
judgment, and ruled instead that numerous issues of fact were present such that a summary
judgment finding in defendant’s was not appropriate, the Court also believed, and continues to
believe, that the issue of willfulness was an appropriate topic upon which to begin the jury trial
in this case (and as previously discussed by this Court during conference, if anything, would
have been an issue that would be favorable to Varian, given the heightened burden of proof) (see
doc. no. 442 at 5-8, Transcript of January 4, 2012 Status Conference).
Much to the surprise of this Court, defendant appeared to change course from its prior
position on summary judgment (that willfulness was an issue on which defendant had a strong
argument on the merits), and on December 23, 2011, filed a motion for reconsideration and to
stay the trial of this matter (doc. no. 428). Within that motion, defendant seemed to be taking the
position that a trial on willfulness should come after any determination on invalidity. In an
attempt to heed the advice of, and give deference to, the parties, at the January 13, 2012
Preliminary Pretrial Conference, the Court offered Varian the option to combine the portion of
the trial dealing with invalidity defenses with the willfulness trial, but Varian responded “there
would be no way to do it.” In re Varian Med. Sys. Inc., 2012 U.S. App. LEXIS 1196, at *3 (Fed.
Cir. Jan. 20, 2012).

5

Then, on January 15, 2012, Varian filed a motion for the Court to certify the issue for
interlocutory appeal, and contended that “allowing a trial on willful infringement in a
circumstance where a defendant is not allowed to meaningfully present invalidity evidence
violates defendant’s due process and Seventh Amendment rights.” Doc. No. 468 at 6. Varian
went on to state that an invalidity trial was necessary prior to a willfulness trial because it would
help to avoid inconsistent verdicts, would clarify defendant’s rights, and it would materially
advance the ultimate termination of the litigation. On January 18, 2012, this Court entered an
Order denying Varian’s motion to certify an interlocutory appeal. Univ. of Pittsburgh v. Varian
Med. Sys. Inc., 2012 U.S. Dist. LEXIS 5720 (W.D. Pa. Jan. 18, 2012).
Then, on the eve of trial, Varian filed a Petition for Writ of Mandamus before the United
States Court of Appeals for the Federal Circuit, seeking a last minute stay of the first part of the
trial (the willfulness subpart), and a ruling that defendant’s invalidity defenses be tried to the jury
prior to any determination on willfulness. However, as the Federal Circuit Court of Appeals
aptly pointed out in its Order denying Mandamus, “the district court offered a trial on invalidity
and Varian refused. . . .” In re Varian, 2012 U.S. App. LEXIS 1196, at *5. Despite the prior
offers of this Court to combine the willfulness trial with the invalidity trial, perplexingly Varian
declined this Court’s attempt to accommodate Varian.
The jury trial on willfulness commenced on January 23, 2012, and the jury began (and
concluded) deliberations on January 26, 2012. Upon the conclusion of the willfulness trial, and
while the jury was still deliberating, during a status conference on January 26, 2012, the Court
again sought the positions of the parties (while stating on the record that it would give the
position of Varian due weight) about whether the parties (especially Varian) would prefer to try
the invalidity defenses prior to the damages trial, currently scheduled for February 21, 2012.
6

While Pitt took the position that it would be amenable to trying the invalidity portion of
the trial prior to damages, again to the surprise of this Court, Varian orally responded that it did
not wish to conduct the invalidity portion of the trial prior to the damages portion of the trial (a
position which would seem inconsistent with Varian’s prior positions before this Court and the
Court of Appeals for the Federal Circuit that invalidity determinations should have been put
before the jury prior to willfulness/damages) (see doc. no. 573 at 3, Transcript of January 26,
2012 Status Conference).
Most recently, by Text Order of Court of February 3, 2012, the Court stated as follows:
Since the remaining portions of the jury trial (i.e. damages, set to begin
2/21/2012, and invalidity defenses, set to begin 4/16/2012) are the continuation
of the prior willfulness portion of the trial, and are before the same jury, the
evidence previously offered in the willfulness trial is part of the remaining
portions of this trial. Therefore, evidence previously offered to the jury need
not be re-addressed in the forthcoming damage and invalidity trials. See Fed.
R. Civ. Pro. 1 (The rules “should be construed and administered to secure the
just, speedy, and inexpensive determination of every action and proceeding.”)
In sum, the Court believes that this case was better suited to be tried in three distinct
subparts, and exercised its discretion under Fed. R. Civ. P. 42(b) to do so. In essence though,
since the Court is employing the same jury for all three subparts, these subparts actually
constitute one trial. By ordering the trial in this manner, the Court has built in lapses of time,
whereby the attorneys, and the Court, are given more time to prepare each subpart, and the jury
has been relieved of the responsibility of determining all of the issues in one trial, after having
been presented with a rather unwieldy amount of evidence, and an extraordinarily long set of
jury instructions, and verdict slip.

7

III.

Defendant’s Motion to Seat New Jury For Damages Trial (doc. no. 563)

Defendant now seeks to seat an entirely new jury and alleges that there is a danger of
unfair prejudice because the jury will be unable to dispassionately decide the issue of
compensatory damages without taking into consideration their prior findings of willful
infringement.
As explained immediately hereinabove (Section II), although the trial of this matter has
been split into three distinct subsections or subparts, the trial of this matter still only really
constitutes one trial, with the same jury. The Court, within its discretion and after consulting
with the parties on numerous occasions (as discussed above), split the trial of this case into three
(3) subparts in order to give the attorney’s more time to prepare each segment of the trial, and to
hopefully reduce the overall length of the trial time by narrowly tailoring the issues to be tried in
each subpart. See Fed. R. Civ. P. 1; Weiss v. Regal Collections, 385 F.3d 337, 342 (3d Cir.
2004) (citing Canister Co. v. Leahy, 182 F.2d 510, 514 (3d Cir. 1950)) (holding that the Federal
Rules of Civil Procedure are interdependent).
The Court has also chosen to keep the same jury so as to avoid the inefficiency of having
to select three (3) separate juries, who would each be required to learn anew the technology at
issue, not to mention the intricate details of patent law. Thus, to select two new juries (one for
damages, and one for invalidity) for the remaining subparts of the trial, would result in great
duplication and inefficiency.
Simply put, the Court ordered the trial in this manner as an exercise of its discretion.
Fed. R. Civ. P. 42(b). Another equally permissible exercise of this Court’s discretion could have

8

been to try the entire case in one lengthy and exhausting trial, and all the issues still would have
been before the same jury anyway. Id.
Accordingly, to the extent that defendant now argues that requiring the same jury to
decide issues of compensatory damages after having ruled on willfulness would be prejudicial,
this Court does not agree. Defendant is in the same position, and certainly no worse of a position
from a “prejudice” perspective than it would have been had the Court decided (as is the most
common practice) to allow a trial of the entire case at one time. The lengthy verdict slip would
have then included willfulness questions as well as damages and invalidity. Thus, there is no
increased risk of undue prejudice by employing the same jury to consider damages, and
invalidity.
IV.

Damages
(A) Plaintiff’s Expert Report – John Hansen

In Pitt’s expert report on damages (and two subsequent submissions), John Hansen, of
TM Financial Forensics, calculated what he believes the outcome of a hypothetical license
negotiation between Varian and Pitt would have been prior to the infringement. Doc. No. 314.
Mr. Hansen made the assumption that there was no uncertainty as to the validity of the ‘554
patent or whether Varian infringed the ‘554 patent. Mr. Hansen then employed the factors set
forth in the seminal case of Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116
(S.D.N.Y. 1970), modified and aff’d, 446 F.2d 295 (2d Cir. 1971), to calculate a reasonable
royalty rate. Mr. Hansen determined that after considering all of the Georgia-Pacific factors, a
reasonable royalty rate on the RPM system alone would be 12% of net sales, and that a
reasonable royalty on the linear accelerators (Clinac and Trilogy) would be between 1% and 3%.

9

Therefore, consistent with the prior rulings of this Court in its Memorandum Opinion on
Summary Judgment, Univ. of Pittsburgh, 2011 U.S. Dist. LEXIS 149685 at *45-47, Mr. Hansen
calculated a royalty or license rate in all three (3) product lines (RPM Gating System, Clinac and
Trilogy accelerators). The total royalty he calculated, through his report(s), was $30,349,000 $63,401,000.
(B) Defendant’s Expert Report – Bruce McFarlane
In Varian’s expert report on damages (and one subsequent submission), Bruce
McFarlane, of LitiNomics, also calculated what he believes the outcome of a hypothetical license
negotiation between Varian and Pitt would have been prior to the infringement. Doc. No. 329.
Mr. McFarlane also assumed that there was no uncertainty as to the validity of the ‘554 patent or
whether Varian infringed the ‘554 patent. Mr. McFarlane’s expert report had different sections
because of the uncertainty with respect to how the Court would rule on certain issues.
The part of Mr. McFarlane’s report that is relevant in light of the Court’s previous
holdings (and holdings in this opinion) is Section 17. Doc. No. 329, at 85. The first thing that he
did was to go through previous Varian license agreements with outside organizations and then
previous Pitt license agreements with outside organizations. This set a baseline royalty rate of
1.5% that he then adjusted upwards after consideration of the Georgia-Pacific factors for a final
royalty rate of 2% for RPM systems. Unlike Pitt’s expert, Mr. McFarlane based his calculation
only on the RPM Gating System, and he did not consider a royalty rate for the linear
accelerators. The total royalty he calculated, through his report, was $2,304,000.

10

(C) Plaintiff’s Omnibus Motion in Limine to Exclude Evidence From Trial
on the Issue of Damages (doc. no. 560)
Pitt has filed an Omnibus Motion in Limine (doc. no. 560), and Varian has filed its
Response thereto (doc. no. 588). Pitt’s arguments will be addressed seriatim.
(1) Pitt first argues that Varian should be precluded from offering evidence and argument
that non-treatment RPMs should be excluded from the royalty base. Pitt correctly notes that this
Court already found in the Memorandum Opinion on Summary Judgment, Univ. of Pittsburgh,
2011 U.S. Dist. LEXIS 149685 at *52-54, that the Non-Treatment RPMs infringe the ‘554 patent
under the Doctrine of Equivalents. Accordingly, the Court hereby GRANTS Subpart I of the
Motion in Limine.
(2) Second, Pitt contends that Varian should be precluded from offering evidence and
argument regarding the parties’ pre-lawsuit license negotiations. The Court finds that under
factor 15 of Georgia-Pacific, any evidence bearing on the amount Varian would have been
willing to pay, and the amount Pitt would have been willing to accept, for a license for the ‘554
patent is relevant to the result of a hypothetical negotiation that would have occurred prior to
infringement.
Pitt argues that because the issues of validity and infringement had not been decided at
the point of the pre-lawsuit negotiations that this evidence should not be admitted pursuant to
Fed. R. Evid. 403. However, Pitt’s own expert (Mr. Hansen) used license agreements that were
negotiated prior to a patent being even issued, much less after a final determination on validity
and infringement. Mr. Hansen then (appropriately) points out that these license figures should be
adjusted upwards because of the certainty of validity and infringement that is assumed during the
hypothetical negotiation for a reasonable royalty.
11

The pre-lawsuit negotiations can serve as a baseline from which the jury can adjust
upwards (or downwards) depending on the Georgia-Pacific factors. Pitt is free to cross-examine
Mr. McFarlane on this subject during the damages phase of the trial. Accordingly, the Court
hereby DENIES Subpart II of Pitt’s Omnibus Motion in Limine (doc. no. 560).
(3) Third, Pitt argues that Varian should be precluded from offering evidence and
argument that its alleged “foreign sales” should be excluded from the royalty base. Varian
sought summary judgment on this issue, and the Court, in the Memorandum Opinion on
Summary Judgment, already found that there is no legitimate dispute that the RPM System and
the accelerators are made and sold in the United States based upon the submissions of the parties
during the summary judgment proceedings. Univ. of Pittsburgh, 2011 U.S. Dist. LEXIS 149685
at *12. The accused products are “made” in the United States for purposes of direct patent
infringement when someone “without authority makes, uses, offers to sell, or sells any patented
invention, within the United States.” 35 U.S.C. § 271(a). Accordingly, the Court hereby
GRANTS Subpart III of Pitt’s Omnibus Motion in Limine (doc. no. 560).
(4) Fourth, Pitt contends that Varian should be precluded from offering evidence and
argument regarding its proposed re-design of the RPM System. Varian sought summary
judgment on this issue, and the Court, in its Memorandum Opinion on Summary Judgment,
previously held that Varian’s proposed modification infringes the ‘554 patent both literally and
under the Doctrine of Equivalents. Univ. of Pittsburgh, 2011 U.S. Dist. LEXIS 149685 at *5564. Therefore, all of Varian’s expert (Mr. McFarlane’s) opinions and any other related
evidence/testimony, which is reliant upon the availability of a non-infringing design change, will
be excluded as not relevant (under Fed. R. Evid. 402), and prejudicial (under Fed. R. Evid. 403).

12

Accordingly, the Court hereby GRANTS Subpart IV of Pitt’s Omnibus Motion in Limine (doc.
no. 560).
(5) Fifth, and finally, Pitt argues that Varian should be precluded from offering evidence
and argument concerning a royalty rate on linear accelerators sold in combination with the RPM
System. There are two ways that Varian could attempt to offer evidence and argument
concerning the royalty rate to be applied to the linear accelerators. First, Varian could argue that
the linear accelerators should not be included in the royalty base at all. However, the Court has
ruled herein that the linear accelerators can be included in the royalty base. See infra section
(IV)(D); Univ. of Pittsburgh, 2011 U.S. Dist. LEXIS 149685, at *45-47. Secondly, Varian could
attempt to present evidence/testimony by their expert, Mr. McFarlane, as to what the royalty rate
for the linear accelerators should be. However, Fed. R. Civ. P. 26(a)(2)(D) provides that such an
opinion would have to be disclosed in Mr. McFarlane’s report sufficiently in advance of trial.
Mr. McFarlane’s report does not include any calculation as to what a reasonable royalty for the
linear accelerators should be. Accordingly, the Court hereby GRANTS Subpart V of Pitt’s
Omnibus Motion in Limine (doc. no. 560).
(D) Defendant’s Motion In Limine to Exclude Sales of Clinac and Trilogy Linear
Accelerators From Royalty Base Under Entire Market Value Rule and to Exclude
Evidence Or Argument Concerning Linear Accelerator Sales (doc. no. 567)
Varian has filed a Motion In Limine to Exclude Sales of Clinac and Trilogy Linear
Accelerators From Royalty Base Under Entire Market Value Rule (“EMVR”) and to Exclude
Evidence or Argument Concerning Linear Accelerator Sales (doc. no. 567), and Pitt’s has filed
its response thereto (doc. no. 592).2
2

In the Memorandum Opinion on Summary Judgment, Univ. of Pittsburgh, 2011 U.S. Dist.
LEXIS 149685 at *5455, the Court stated as follows: “Varian argues that the revenues from the
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(1)

EMVR Standard

A patentee is entitled to damages that adequately compensate it for the infringement. 35
U.S.C. § 284. In determining the proper royalty base for a reasonable royalty calculation the
nature of the patented invention in relation to the accused product or products must be examined.
Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1336–37 (Fed. Cir. 2009). When a
reasonable royalty3 on the patented product does not adequately compensate the patentee for the
infringement then the royalty base can include unpatented products that are sold in combination
with the patented product. Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1318 (Fed. Cir.
2011). In order to include the unpatented product in the royalty base, the following three-part
test must be met:
(1) the allegedly infringing components must be the basis for customer demand for
the entire system, including the parts beyond the claimed invention;
(2) the infringing and non-infringing components must be sold together so that they
constitute a functional unit or are parts of a complete machine; and

linear accelerator must be excluded from the royalty base under the Entire Market Value Rule
and that the revenues from sales of the RPM designed for use with PET and CT scanners must be
excluded from the royalty base because that RPM device does not infringe any asserted claims of
the ‘554 Patent. The Court finds that the first point should be argued before a jury, and the
second point is really an attempt to re-argue liability (which liability rulings have already been
made against Varian). The Court will re-visit this issue at the trial on damages during the
motions in limine phase.” The Court finds that the applicability (or, more accurately,
inapplicability of the EMVR) is appropriate to be addressed and ruled upon during the instant
Motions in Limine process.
3
In this case, Pitt does not make any products that compete with the RPM System and/or the
accelerators at issue and is therefore not entitled to lost profits damages. Both expert reports
acknowledge this fact and, accordingly, attempt to calculate a reasonable royalty rate (albeit
Pitt’s expert report calculates based upon all three product lines, while Varian’s expert only uses
the RPM System in its calculations).
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(3) the infringing and non-infringing components must be analogous to a single
functioning unit.
Cornell Univ. v. Hewlett-Packard Co., 609 F.Supp.2d 279, 286-87 (N.D.N.Y. 2009) (Rader, J.
sitting by designation) (citing cases).
Varian argues that sales of its linear accelerators should be excluded from the royalty
base considered during the trial on damages because of the EMVR. Varian contends that the
EMVR applies in this case because, Varian claims that the linear accelerators are not a part of the
invention that is covered by the ‘554 patent. Varian argues that the linear accelerators are prior
art that are only mentioned in Claims 22 and 38 of the ‘554 patent and that this “artful drafting”
cannot serve as a basis to expand the royalty base. Varian further argues that Pitt cannot meet the
three-prong test under the EMVR to include the linear accelerators in the royalty base.
Pitt argues that the EMVR only applies to unpatented components of an apparatus. Pitt
argues that the EMVR does not apply in this case because the linear accelerators are part of the
apparatus that was found to infringe Claims 22 and 38 of the ‘554 patent. Pitt contends that the
royalty rate it is seeking properly accounts for the novel features of the claimed invention under
Georgia-Pacific. For the reasons, set forth immediately, hereinbelow, this Court agrees.
(2)

The EMVR Does Not Apply

The United States Court of Appeals for the Federal Circuit has repeatedly held, and
Varian acknowledges in its brief, that the EMVR only applies when unpatented products are
combined with patented products. Uniloc, 632 F.3d at 1318. Varian argues that the linear
accelerators are unpatented products and that the only patented part of the invention is the RPM
System itself. The Court disagrees and believes that the linear accelerators are part of the
patented product. In particular, the Court finds that Claims 22 and 38 of the ‘554 patent include
the linear accelerators as part of the patented product.
15

(a)

Claims 22 and 38 Require a Linear Accelerator

The parties do not dispute that Claim 38 of the ‘554 patent requires the use of a beam
generator;4 however, they do dispute whether Claim 22 of the ‘554 patent requires the use of a
beam generator. In the Memorandum Opinion on Summary Judgment, this Court has already
ruled that Claim 22 does in fact include a beam generator. Univ. of Pittsburgh, 2011 U.S. Dist.
LEXIS 149685 at *46-47. However, Varian has renewed its objection to that finding and the
Court will again address the issue (in greater detail). Claim 22 of the ‘554 patent states:
The apparatus of claim 20 adapted for use during treatment of said patient with a
radiation beam generated by a beam generator, wherein said gating means comprises
means generating gating signals synchronized to actuate said beam generator in
synchronism with patient breathing.
Varian argues that Claim 22 does not include a beam generator as a claim element.
Varian contends that the phrase “adapted for use” means that the beam generator need not be
present during treatment but only that the RPM System be so adapted as to be capable of
interacting with a beam generator. If Claim 22 only comprised the first two lines above, Varian
would be correct; however, the last two lines of Claim 22 make it clear that Claim 22 requires
that the beam generator be actuated by the RPM System. This cannot be accomplished if the
beam generator is not present during the treatment of the patient.
The case of 3M Co. v. Mohan, 2010 U.S. Dist. LEXIS 81094 (D. Minn. 2010), which is
the only case upon which Varian relies for its proposition that the beam generator is not a part of
the apparatus of Claim 22, is handily distinguishable from this case. In 3M, the claim at issue,
Claim 8, did not specify the use of the stethoscope anywhere in the claim except immediately

4

The beam generator is one of the components of the linear accelerators at issue in this case.
16

following the “adapted for use” clause and in describing how difficult the tip should be to
remove from the stethoscope. Id.
In this case, in sharp contrast to the claim at issue in 3M, Claim 22 specifically mentions
that the apparatus comprises the gating system actuating the beam generator. This is not merely
a phrase describing how the RPM System is to be manufactured in case it is connected to the
beam generator. Rather, it is a phrase that is critical to describing the apparatus that is being
patented.
Furthermore, the line of cases upon which 3M relies points towards a finding that the
beam generator should be considered as part of the patented apparatus. For example, in Catalina
Mktg. Int’l, Inc. v. Coolsavings.com, Inc., 289 F.3d 801, 808 (Fed. Cir. 2002), the United States
Court of Appeals for the Federal Circuit held that a perambulatory clause can be used in some
instances to “define, in part, the claimed invention.” Id. After reviewing the entire patent, the
Court finds this case to be one of those instances. The preamble of Claim 22 is “necessary to
give life, meaning, and vitality” to the claim. Pitney Bowes, Inc. v. Hewlett-Packard Co., 182
F.3d 1298, 1305 (Fed. Cir. 1999). Claim 22 deals specifically with the treatment of patients and
not their “theoretical” treatment like other claims of the ‘554 patent. Thus, in order for the
patients to undergo treatment by the RPM System, a beam generator must be present in the room.
(b)

The Linear Accelerators are Part of the Patented Apparatus

Varian argues that the effect of not applying the EMVR in this case is that the patent for
respiratory gating is turned into a patent for linear accelerators. That is simply not the case. If
Varian were to stop selling the RPM System and were to only sell the linear accelerators, it
would not be infringing the ‘554 patent. However, the reality is, Varian is selling the RPM
System and the linear accelerators, which the Court has previously found infringes claims 22 and
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38 of the ‘554 patent. Univ. of Pittsburgh v. Varian Med. Sys. Inc., 2011 U.S. Dist. LEXIS
149685, at *45-47 (W.D. Pa. Dec. 30, 2011).
The Court held that the linear accelerators were a critical component of the infringing
apparatus for Claims 22 and 38 and not just an accessory that is used in conjunction with the
RPM System. Id. It is important to note that many components of the RPM System are not
patented by Pitt but Varian does not argue that those components should be excluded from the
royalty base. For example, the processor that is being used to process the signals coming from
the camera has not been patented by Pitt. Thus, the Court surmises that the primary reason that
Varian is arguing that the linear accelerators are not a part of the patented apparatus is because of
the impact that including the linear accelerators will have on damages. However, because the
Court has concluded the linear accelerators are a part of the patented apparatus and not just a
mere accessory, the added value of the linear accelerators may be used in determining the royalty
base.
Varian argues that this result would be akin to including the price of a TV in the royalty
base for a patented DVR that mentions the TV in one of the patent claims. However, this
analogy is inopposite. The current case is more akin to a TV that has a built in DVR. In that
case, the TV is a critical component of the whole patented apparatus and the TV may be included
in the royalty base.
(3)

Defendant’s Other Arguments for Excluding Linear Accelerators
(a) Expanding the Royalty Base Does Not Lead to an Unreasonable
Royalty

Varian’s contention that an inclusion of the linear accelerators as part of the royalty base
would lead to an effective royalty of over 50% for the RPM System is simply not true. Pitt’s
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expert is only proposing a royalty of 12% on the RPM Systems that Varian has sold, and
continues to sell. Although this percentage is significantly higher than the 2% that Varian’s
expert proposes, it is not over 50% royalty. The additional royalties that Varian would be forced
to pay if the jury were to adopt Pitt’s expert’s recommendation accounts for the value added to
the invention by the linear accelerator as part of Claims 22 and 38.
(b) The Linear Accelerators “Other Features” Do Not Exclude Them
From the Royalty Base
Next, Varian argues that, because the linear accelerators at issue in this case perform
more tasks than simply generating a beam for use with the RPM System, they must be excluded
from the royalty base. If taken literally, Varian’s argument would prohibit a patentee from
receiving royalties from almost any invention. The only thing that royalties could be collected
on would be new elements. For example, in the present case, the RPM System has a camera that
could be used for other purposes. This does not mean that the cost of the camera should be
excluded from the royalty base.
(c) Damages From a Dependent Claim Can Exceed Those of an
Independent Claim
Finally, Varian argues that the damages that are awarded from infringement of a
dependent claim cannot exceed those that are awarded from infringement of the independent
claim from which it is derived. In support of its proposition, Varian cites only a footnote from
Wahpeton Canvas Co. v. Frontier, Inc., 870 F.2d 1546, 1553 n.10 (Fed. Cir. 1989). This Court
will decline Varian’s invitation to extend the dicta in Wahpeton into the promulgation of a rule
of law by the Court of Appeals for the Federal Circuit.

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(4)

Conclusion

In sum, this Court finds that the Entire Market Value Rule (EMVR) does not apply in the
present case. Accordingly, Varian’s Motion In Limine to Exclude Sales of Clinac and Trilogy
Linear Accelerators From Royalty Base Under Entire Market Value Rule and to Exclude
Evidence Or Argument Concerning Linear Accelerator Sales (doc. no. 567) is DENIED.
(E)

Defendant’s Motion in Limine to Bar the Testimony of John Hansen (doc.
no. 554)

Varian has filed Motion In Limine to Bar the Testimony of John Hansen (doc. no. 554)
and Pitt has responded thereto (doc. no. 589). Varian raises two main objections to the
qualification of Mr. Hansen under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579
(1993) and Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999). Varian argues that Mr. Hansen
is not qualified and thus should be barred from testifying under Daubert and Kumho, on the basis
that: 1) he improperly employed the 25% rule; 2) he improperly considered the license between
Texas and Nomos; and, 3) he improperly failed to consider the parties prior license negotiations.
(1)

Mr. Hansen Did Not Use the 25% Rule

The 25% rule of thumb means that the “licensee pay a royalty rate equivalent to 25
percent of its expected profits for the product that incorporates the IP at issue.” Uniloc, 632 F.3d
at 1313 (citation omitted). In Uniloc, the Court of Appeals for the Federal Circuit rejected the
use of the 25% rule of thumb and held that it may not be used by experts to determine what a
reasonable royalty would be under Georgia-Pacific. Id. at 1315.
Contrary to the assertions of Varian, the Court finds that Mr. Hansen did not use the 25%
rule. As Varian emphasizes, its own damages expert challenged Mr. Hansen’s calculation of the
appropriate royalty rate. Mr. Hansen replied, in his rebuttal report, that he did not use the 25%
rule of thumb to calculate the appropriate royalty rate to be used in this case. Doc. No. 335, ¶¶
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26-29. There is no evidence in the record to support Varian’s allegation that he did in fact use the
25% rule of thumb. The Court finds there is no reason to disbelief Mr. Hansen when he states
that he did not use the 25% rule of thumb. However, Varian is free to cross-examine Mr. Hansen
on this subject during the damages phase of the trial.
(2)

The Texas/Nomos License Relied Upon by Mr. Hansen is Relevant

The Court finds that Mr. Hansen’s limited use of the Texas/Nomos licensing agreement
was relevant and appropriate in calculating a reasonable royalty rate in this case. There is no
reason to exclude this evidence based upon Varian’s assertion that the only reason this license
was included was because of the high royalty rate. Although the license was exclusive, which
points to the royalty rate being higher than in this case, there are several factors that point to the
royalty rate in this case being higher. For example, the license between Texas and Nomos was
for a pending patent. The patent had not yet been issued, much less had an ex parte
reexamination occurred. Additionally, there was no certainty that the patent was valid and being
infringed – which is the assumption during a damages trial. Although not a respiratory gating
patent, the patent application at issue in the Texas/Nomos license did deal with radiation therapy
by one of Varian’s major rivals. The patent application was not “radically different” than the
patent-in-suit. Again, Varian is free to cross-examine Mr. Hansen on this subject during the
damages phase of the trial.
(3)

Mr. Hansen Was Not Required to Consider the Pre-Suit Negotiations

Although this Court has ruled that the pre-lawsuit negotiations may be considered by the
jury (supra part (IV)(C)(2)), Mr. Hansen’s decision not to consider the pre-lawsuit negotiations
does not bar his testimony. In this case, there were hundreds, if not thousands, of possible
licenses that could have been considered by the experts in their reports. Each expert made
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decisions on which licenses to consider in their report and which ones not to consider. This case
is easily distinguished from ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860 (Fed. Cir. 2010), in
which the Federal Circuit discussed the consideration of actual licenses for the patent-in-suit.
The current suit deals with license negotiations for the patent-in-suit. The license negotiations
between Pitt and Varian differed in important ways from the hypothetical negotiation that is at
issue during the damages trial. Therefore, the failure to consider the pre-lawsuit negotiations
between Pitt and Varian would not justify taking the action of barring Mr. Hansen from
testifying.
(4)

Conclusion

In sum, the Court finds that Mr. Hansen’s testimony handily meets the Daubert standard.
Accordingly, Varian’s Motion In Limine to Bar the Testimony of John Hansen (doc. no. 554) is
DENIED.
V.

Defendant’s Motion In Limine to Include the Issue of Laches as Part of the
Damages Trial (doc. no. 557)

Varian’s seeks to include the Issue of Laches as Part of the Damages phase of the trial,
and files a Motion In Limine in support thereof. Doc. No. 557. Pitt has objected to the issue
being put before the jury, either for final deposition or in an advisory role. Doc. No. 587. The
defense of laches is an equitable one, and thus is to be ruled upon by the Court. A.C. Auckerman
Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1028 (Fed. Cir. 1992) (en banc) (citing cases).
Varian has cited no case law to support its proposition that laches is an issue that is properly
before the jury, and the Court’s research has revealed none. Therefore, the Court will order the
parties to file Cross-Motions for Summary Judgment on the issue of Varian’s laches defense (by

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separate order of Court). Accordingly, Varian’s Motion In Limine to Include the Issue of Laches
as Part of the Damages Trial (doc. no. 557) is DENIED.
VI.

Defendant’s Motion in Limine to Exclude any Content or References
Relating to the Finding of Willfulness (doc. no. 559)

The final issue before the Court is Varian’s Motion In Limine to Exclude any Content or
References Relating to the Finding of Willfulness (doc. no. 559) and Pitt’s response thereto (doc.
no. 591). As discussed in Part III of this Opinion, the Court possesses the inherent authority and
discretion to have conducted a trial (without subparts or breaks) at which evidence relating to
invalidity, willfulness, and damages would have been simultaneous presented to one jury.
However, as discussed in Part II of this Opinion, this Court has decided that conducting three
subsections of one trial on three issues was the most fair and advantageous use of the time and
resources of the Court, the jury, and the attorneys. The Court has repeatedly stated that it will
not permit parties to “backdoor” other issues into the various subparts of the trial. Doc. Nos.
426, 452 and 543.
That said, there is no reason for either party to revisit the jury’s finding of willfulness at
the trial on damages. And, at the conclusion of the damages subsection of the trial, there will be
no reason for the parties to refer again to the damages and willfulness determinations in the trial
subsection on invalidity. The jury’s prior finding on willfulness in no way impacts the jury’s
determination of what the proper compensatory damages should be in this case. Obviously, the
jury is aware of the decision that they made at the willfulness trial, and the evidence put forth
during the willfulness trial has been incorporated into the trial as a whole. By limiting ground
that has already been covered, the Court is well within its discretionary power.

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Although the Court is GRANTING Varian’s Motion In Limine on this point (doc. no.
559), in light of the use of the same jury (and denial of Varian’s Motion in Limine to Seat New
Jury for Damages Trial), the Motion is technically MOOT.
VII.

Conclusion

The trial of this matter shall proceed in accordance with these pretrial rulings. An
appropriate Order (doc. no. 594) incorporating these rulings has been previously filed. A
separate scheduling Order will be filed on cross-motions for summary judgment on the issue of
laches.

s/ Arthur J. Schwab
Arthur J. Schwab
United States District Judge
cc:

All Registered ECF Counsel and Parties

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