CARNEGIE MELLON UNIVERSITY v. MARVELL TECHNOLOGY GROUP, LTD. et al

Filing 608

MEMORANDUM ORDER indicating that Marvell's "Motion in Limine No. D12 To Preclude CMU From Introducing Evidence and Argument Regarding Any Compensatory Damages Beyond a Reasonably Royalty" 523 is granted, in part and denied, in part; Marvell's Motion is granted to the extent that CMU is precluded from introducing evidence or argument at trial of the prospective harms to CMU (as set forth in pages 377-79 of Ms. Lawtons expert report) as a result of the alleged failure of Marv ell to enter into a license for the patents-in-suit; and,Marvell's Motion is denied to the extent that it seeks a pretrial order precluding all evidence of the economic circumstances of CMU and the DSSC at the time of the hypothetical negotiation. Signed by Judge Nora Barry Fischer on 11/6/2012. (bdk)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
CARNEGIE MELLON UNIVERSITY,

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Plaintiff,
vs.
MARVELL TECHNOLOGY GROUP, LTD.
et al.,
Defendants.

Civil Action No. 09-290
Judge Nora Barry Fischer

MEMORANDUM ORDER
This patent infringement action is set to commence jury selection and trial on November
26, 2012. The parties have filed a number of motions in limine seeking pretrial rulings on the
admissibility of certain evidence at trial. Presently pending before the Court is Defendant
Marvell’s “Motion in Limine No. D12 To Preclude CMU From Introducing Evidence and
Argument Regarding Any Compensatory Damages Beyond a Reasonably Royalty.” (Docket
No. 523). Through this motion, Marvell seeks an order excluding Plaintiff CMU from
presenting “evidence and argument regarding any purported ‘harms’ or ‘damages’ other than the
loss of the reasonable royalty that would have resulted from the hypothetical negotiation for a
license to the patents-in-suit.” (Docket No. 523-1). Marvell contends that the evidence of such
harms and consequential damages are not relevant to the calculation of the reasonable royalty in
this case and are otherwise not supported by evidence in the record. (Docket No. 524). CMU
opposes the motion, arguing that such evidence as to the harms suffered by CMU is relevant to
the calculation of the reasonable royalty as it would inform the hypothetical negotiation in this
case. (Docket No. 570). CMU further maintains that such evidence is necessary to rebut
Marvell’s claims that the damages sought by CMU are unreasonable. (Id.). The Court heard
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argument on the Motion during its hearing on October 17, 2012. (Docket Nos. 579, 590). Upon
consideration of the parties’ positions, Marvell’s motion [523] is granted, in part and denied, in
part.
In so holding, the Court notes the following. The instant motion surrounds the disputed
factual predicate concerning the calculation of the reasonable royalty1 in this case by CMU’s
expert, Catharine Lawton. Ms. Lawton has opined that a hypothetical negotiation involving
Marvell and CMU would have resulted in a reasonable royalty of $0.50 for each sale of the
Accused Chips by Marvell from the first date of infringement (March 6, 2003) to the present.
(Docket No. 461 at 10). In her expert report, Ms. Lawton suggests that Marvell’s infringement
(and failure to take a license and pay CMU said royalty) caused the following “harms” to CMU.
• “CMU has been deprived of a significant source of revenue that
would have provided it with the independence to continue to
pursue exploratory research projects”;
• “CMU’s achievements did not receive proper recognition,
CMU’s reputation and standing were diminished, and this has had
a direct impact on its access to money and resources”;
• “CMU has had less funding available to build and maintain stateof-the-art facilities”;
• “The value of CMU’s technology achievements has been
diminished and so has CMU’s reputation and standing in the
technical community, which adversely impacts CMU’s ability to
attract and retain top faculty scientists” and “the best and brightest
students”;
• “CMU has had less money, and as a result, CMU’s capacity to
fulfill its mission”—by “contribut[ing] to society and industry”—
“has been diminished”;
• CMU was harmed by “delayed and lost opportunities” that
cannot be “recaptured”; and
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As CMU does not manufacture any products, it is not seeking lost profits damages in this
case. (See Docket No. 570).
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• “CMU was forced to litigation to enforce its patents and, as a
result, administrative and faculty resources and millions of dollars
are diverted away from research and into litigation[…] costs, and
CMU’s reputation has been further impugned.”
(Def. Ex. A at 377-79). The parties agree that Ms. Lawton has not quantified any of these
alleged harms in her extensive expert report. (See Docket Nos. 524, 570). Marvell does not
challenge her calculation of the $0.50 royalty through this motion, but maintains that none of the
alleged “harms” listed above are relevant to the calculation of the reasonable royalty and, to the
extent that Ms. Lawton relies on them for same, that they lack a factual foundation. (Docket No.
524). CMU counters that these facts are relevant as they “inform the analysis” of the reasonable
royalty calculation and are otherwise admissible to counter the claims of Marvell’s expert,
Creighton Hoffman, that CMU’s damages are unreasonable because their claim would “double”
CMU’s endowment. (Docket No. 570). At the motion hearing, Marvell’s counsel suggested that
it would not use any opinion evidence regarding CMU’s endowment at trial, if the Court were to
conclude that the challenged evidence is admissible only as rebuttal to Hoffman’s opinions.
(Docket No. 590 at 119 (“we have no problem if the Court takes that out [the opinion evidence
concerning CMU’s endowment] in the context of excluding the information that we seek to have
excluded on this motion.”)).
“A reasonable royalty contemplates a hypothetical negotiation between the patentee and
the infringer at a time before the infringement began.” IP Innovation L.L.C. v. Red Hat, Inc., 705
F.Supp.2d 687, 689 (E.D. Tex. 2010) (Rader, J.) (citing Hanson v. Alpine Valley Ski Area, Inc.,
718 F.2d 1075, 1078 (Fed. Cir. 1983)). The hypothetical negotiation presumes that both the
patentee and the accused infringer are willing parties to the negotiation, and also assumes that the
patent was valid, enforceable, and infringed. Georgia-Pacific Corp. v. U.S. Plywood Corp., 318

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F.Supp. 1116, 1120 (S.D.N.Y. 1970). The Georgia-Pacific case sets out a series of factors that
may be relevant to the analysis of a reasonable royalty.2 Id. “The Federal Circuit ‘requires sound
economic proof of the nature of the market and likely outcomes with infringement factored out
of the economic picture’ in all damages calculations.” Red Hat, Inc., 705 F. Supp. 2d at 689
(quoting Grain Processing Corp. v. Am. Maize-Prods. Co., 185 F.3d 1341, 1350 (Fed.Cir.
1999)). “Although some approximation is permitted in calculating the reasonable royalty, the
Federal Circuit requires ‘sound economic and factual predicates’ for that analysis.” Id. (quoting
Riles v. Shell Exploration & Production Co., 298 F.3d 1302, 1311 (Fed.Cir. 2002) (citation
omitted)).
At the outset, the Court notes that CMU has not specifically addressed each of the
challenged “harms” listed above in its response or at the motion hearing. (See Docket Nos. 570,
590). CMU has focused its efforts on establishing that information pertaining to the state of
economic affairs at the University and the DSSC at the time of the hypothetical negotiation,
including that the National Science Foundation grant was expiring, are facts which would bear
on the hypothetical negotiation. (Docket No. 570 at 4 (citing Rodime PLC v. Seagate
Technology, Inc., 174 F.3d 1294, 1307 (Fed. Cir. 1999)). CMU also believes that “reputational
harm” is an appropriate consideration for the jury in the context of the hypothetical negotiation.
(Id. at 5 (citing Monsanto Co. v. McFarling, 488 F.3d 973, 980 (Fed. Cir. 2007)).
Given these arguments, the Court agrees with Marvell that CMU has not established any
factual predicate to support Ms. Lawton’s conclusions that Marvell’s infringement: adversely
affects its ability to attract top faculty or students; delayed and caused certain unspecified “lost
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CMU does not argue that the challenged evidence is used by Lawton in her analysis of
any of the 15 Georgia-Pacific factors. (See Docket Nos. 570, 590). Accordingly, the Court will
not restate them here.
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opportunities” which CMU was unable to pursue; or diminished CMU’s capacity to fulfill its
mission by contributing to society and industry. (Docket No. 524). In addition, CMU has failed
to convince the Court that the administrative burdens of litigation have caused any harm or
damages which should be considered in the context of the hypothetical negotiation (or how these
post-infringement costs could have possibly been considered by CMU at the time of the
hypothetical negotiation). Without any factual support, these supposed “harms” are speculative,
not relevant, see FED. R. EVID. 401,3 and, if presented at trial, would complicate the issues and
confuse the jury, see FED. R. EVID. 403.4
Regarding the evidence concerning the lack of funding from NSF, the Court finds that the
state of economic affairs at CMU and the DSSC at the time of the negotiation may be relevant to
CMU’s position during the hypothetical negotiation. Indeed, the Federal Circuit has recognized
that such evidence may be relevant to the price of the reasonable royalty. See Rodime, 174 F.3d
at 1308 (“The condition of Rodime’s business at the time of such a hypothetical negotiation with
Seagate may have affected the outcome of those negotiations. If, for example, Rodime faced
imminent bankruptcy (as borne out by later events), Rodime may have factored that
consideration into the royalty it sought.”). However, the Court agrees with Marvell that how
CMU would have spent potential funds from a hypothetical license to Marvell, i.e., by
reinvesting in human capital, real estate projects, or marketing directed toward prospective
faculty, staff, or additional members of the DSSC, is not relevant to the hypothetical negotiation.
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Rule 401 provides that “relevant evidence” means “evidence having any tendency to
make the existence of any fact that is of consequence to the determination of the action more
probable or less probable than it would be without the evidence.” FED. R. EVID. 401
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Rule 403 provides that “the court may exclude relevant evidence if its probative value is
substantially outweighed by a danger of one or more of the following: unfair prejudice,
confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting
cumulative evidence.” FED. R. EVID. 403
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Such facts would not bear on damages available under a reasonable royalty analysis but, rather,
would potentially support a claim for lost profits.5 Id. Therefore, Marvell’s motion will be
denied to the extent that it seeks to exclude evidence surrounding the economic circumstances of
CMU and the DSSC at the time of the hypothetical negotiation; but, it will be granted to the
extent that it seeks to exclude the prospective investment opportunities or potential opportunity
costs as a result of Marvell’s alleged infringement.
The Court will likewise grant Marvell’s motion to exclude CMU’s references to the
alleged “reputation harm” caused by Marvell’s infringement. CMU relies on the decision in
Monsanto Co. v. McFarling, 488 F.3d 973 (Fed. Cir. 2007) for the proposition that “consequent
reputation harm” is a qualitative factor relevant to the hypothetical negotiation. The Court
disagrees with CMU’s reading of Monsato. In that case, the Federal Circuit did not set forth a
bright line rule that “reputation harm” is always relevant to the hypothetical negotiation but
merely commented that the harm to Monsato’s reputation was relevant based on the facts and
circumstances of that case. Id. at 979. This Court finds that the facts of Monsanto are
distinguishable from this case because Monsanto was a manufacturer of patented seeds and
relied on established licenses with farmers in its case against McFarling, a farmer who allegedly
used the patented seeds in violation of a license agreement which required him to destroy the
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The Court further notes that Ms. Lawton also opines that it is “highly probable that
CMU itself, including the DSSC, would be different had Marvell taken a license in March 2001
to the Patents-in-Suit and had CMU been able to achieve the value of its licensing program and
had the benefit of this direct financial support over the past decade, and CMU would have
factored that consideration into the royalty it sought.” (Def. Ex. A at 380 of 541 (emphasis
added)). In this Court’s estimation, even if the prospective harm evidence was relevant and
admissible, it would be excluded because this opinion is speculative and an opinion that certain
facts are “highly probable” is not reliable because it is not made with a reasonable degree of
accounting certainty sufficient to present it to a jury. See FED. R. EVID. 702; see also Red Hat,
Inc., 705 F. Supp. 2d at 689 (expert testimony must be relevant and reliable; otherwise, it must
be excluded).
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seeds at the conclusion of a harvest. Id. at 976. The Federal Circuit commented that the
consequent reputational harm to Monsanto caused by McFarling’s infringement derived from
McFarling’s planting of the patented seeds in subsequent years without first renewing his license
to use them. Id. at 979. The Court noted that Monsanto’s experts believed that this action by
McFarling damaged Monstanto’s reputation among its other farmer-licensees which dutifully
followed the license and destroyed the seeds at the conclusion of each year’s harvest. Id. This
holding has no application to this case as CMU does not manufacture the Accused Chips and is
not relying on its licenses to establish the reasonable royalty.
In addition, even if CMU had properly construed the decision in Monsanto, there is no
evidence in the record supporting the contention that CMU’s reputation has been diminished in
any way. In its amended pretrial statement, CMU states that it is “one of the preeminent
universities in the world” (Docket No. 461 at 3); as such, CMU must present actual evidence
before claiming that its reputation has been damaged, through its expert or otherwise. For these
reasons, the Court will grant Marvell’s motion to exclude the evidence of alleged damage to
CMU’s reputation and standing in the university community as such evidence is not relevant to
the hypothetical negotiation, see FED. R. EVID. 401 and, if presented at trial, will only tend to
confuse the issues and mislead the jury, see FED. R. EVID. 403.
The final point of contention between the parties concerns the potential use of the “harm”
evidence to counter Marvell’s position that CMU’s damages are unreasonable by pointing out
that its damages case is twice the size of its endowment. (Docket Nos. 524, 570). CMU has not
filed a corresponding motion in limine to exclude Marvell from presenting this evidence at trial
(see Civ. A. No. 09-290, Docket Report), and Marvell’s counsel has proffered that it will not
introduce such evidence as trial in order to prevent CMU from possibly putting forth the “harm”

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evidence. (Docket No. 590 at 119). It is thus clear to the Court that any ruling on these issues
must be deferred until trial as the parties’ arguments are contingent on the evidence to be
presented by Marvell in defense of this case.
For these reasons,
IT IS HEREBY ORDERED that Marvell’s Motion [523] is granted, in part, and denied in
part.
IT IS FURTHER ORDERED that Marvell’s Motion is granted to the extent that CMU is
precluded from introducing evidence or argument at trial of the prospective harms to CMU (as
set forth in pages 377-79 of Ms. Lawton’s expert report) as a result of the alleged failure of
Marvell to enter into a license for the patents-in-suit; and,
IT IS FURTHER ORDERED that Marvell’s Motion is denied to the extent that it seeks a
pretrial order precluding all evidence of the economic circumstances of CMU and the DSSC at
the time of the hypothetical negotiation.

s/ Nora Barry Fischer
Nora Barry Fischer
U.S. District Judge
Date: November 6, 2012
cc/ecf: All counsel of record.

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