THE VALSPAR CORPORATION et al v. PPG INDUSTRIES, INC.

Filing 1021

MEMORANDUM OPINION re 1020 Order on Motion for Clarification. Signed by Judge Joy Flowers Conti on 12/1/21. (mh)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
THE SHERWIN-WILLIAMS COMPANY, ) CIVIL ACTION NO. 17-1023
)
Plaintiff/Counterclaim-defendant,
) JUDGE JOY FLOWERS CONTI
)
)
)
v.
)
)
PPG INDUSTRIES, INC.,
)
)
Defendant/Counterclaimant.
)

OPINION
Pending before the court is a motion for clarification (ECF No. 1007) filed by The
Sherwin-Williams Co. (“Sherwin” or “SW”). PPG filed a response in opposition (ECF No.
1015) and the motion is ripe for disposition.
Sherwin seeks clarification about a statement made by the court in its October 27, 2021
opinion (ECF No. 996), in connection with the court’s denial of SW MIL #15. In SW MIL #15,
Sherwin sought to preclude PPG’s damages expert, Michael Milani (“Milani”), from referencing
the “Exemplary Perez Coating” in his damages opinions. PPG responded that it will not
reference the “Exemplary Perez Coating,” but Milani will opine about the existence of the Perez
Patent and Prop 65 as factors in the hypothetical negotiation of a reasonable royalty.
The court denied SW MIL #15, characterized it as a semantic dispute, and observed that
both parties cited to the court’s prior rulings. (Compare ECF No. 530 at 17 with ECF No. 636 at
11-12). The court reasoned as followed:
As the special master correctly explained, the court has made a distinction
between the “Exemplary Perez Coating” and the teachings of the Perez Patent. The

“Exemplary Perez Coating” was a specific coating created by PPG’s technical
expert, Dr. Robson Storey, “for the specific purpose of demonstrating his opinion
that a coating based on the Perez patent would inherently meet the testing
limitations.” (ECF No. 530 at 11). The parties agreed that the Exemplary Perez
Coating did not exist in the market during the original damages period and the court
in granting Sherwin’s summary judgment motion held that the Exemplary Perez
Coating was not a non-infringing alternative product (ECF Nos. 530, 864).
The court’s ruling about that specific product – which was created during
the litigation for technical purposes -- does not preclude PPG from relying on the
existence of the underlying Perez Patent itself in its damages analysis. To the
contrary, the court specifically explained that Milani’s reasonable royalty opinions
“that Sherwin’s patent did not provide any economic benefit over the disclosures
of the Perez Patent, and that the value of both PPG’s and Sherwin’s products was
driven by the Prop 65 regulation” had not been challenged by Sherwin, were
supported by the record, and would be admissible. (ECF No. 636 at 11-12).
Sherwin did not provide a persuasive reason for the court to reconsider that
decision.
Milani will be permitted to opine, in essence, that rather than paying
Sherwin a royalty, PPG could have chosen to develop a non-infringing product
based on the Perez Patent. Sherwin will have an opportunity to subject that
opinion to vigorous cross-examination. In sum, SW MIL #15 will be denied.
(ECF No. 996 at 6) (emphasis added). The court also held that Sherwin’s challenges to the
references in Milani’s supplemental report to the Perez Patent as a basis for his reasonable
royalty opinions would be denied for the same reasons. (ECF No. 996 at 7).
Sherwin seeks clarification and confirmation that the court’s ruling does not alter its
summary judgment ruling, which stated, in pertinent part (with appropriate context):
Sherwin Williams sufficiently showed “the negative,” i.e., no other products
existed in the market, through its interrogatory to PPG and deposition questions to
PPG’s corporate designee. Vague references by PPG that an Akzo product might
exist will not suffice. ECF No. 398 ¶¶ 24-44. Speculation that PPG might have
been able to design a non-infringing alternative based on the Perez patent will
also not suffice. ECF No. 398 ¶¶ 46-47. It is undisputed that the Exemplary Perez
Coating was never commercialized.
(ECF No. 530 at 16). Sherwin agrees that Milani can opine about the limited differences
between the four corners of the Perez patent and the Asserted Patents. (ECF No. 1008 at 1, 6).

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The court adheres to its summary judgment decision. The issue at summary judgment
was whether a non-infringing alternative product existed in the market. (See ECF No. 371). The
court concluded that there was no evidence of such a product and reasoned as follows:
Because there is insufficient evidence for a reasonable jury to find that the Akzo
product or Exemplary Perez Coating were in the market during the damages period,
it would be improper to refer to either product as a basis to calculate lost profits or
a reasonable royalty.
(ECF No. 530 at 17). The court noted that its summary judgment ruling with respect to no noninfringing alternative products was not intended to resolve the Daubert challenges that both sides
filed against the opposing damages experts. Id.
To the extent that Sherwin seeks to extrapolate that holding to preclude PPG from relying
on any hypothetical coating based on the Perez patent in the damages phase of trial (ECF No.
1008 at 1) (emphasis in original), the court is not persuaded. The court’s summary judgment
ruling was not intended, and cannot be reasonably interpreted, to preclude the entirety of
Milani’s opinions about the Perez patent as it relates to the Georgia-Pacific factors. It simply
prevented PPG from inviting the jury to speculate that a non-infringing alternative product
existed in the market (during the initial damages period) when determining lost profits or a
reasonable royalty.
In its summary judgment decision, the court recognized that the “reasonable royalty”
calculation necessarily involves some imprecision because it is determined by constructing a

hypothetical negotiation. (ECF No. 530 at 17) (citing Lucent Tech., Inc. v. Gateway, Inc., 580
F.3d 1301, 1324–25 (Fed. Cir. 2009)). The court also recognized: “There may be multiple
acceptable methodologies. Id. As the special master explained, both experts purported to apply
the Georgia Pacific factors and the jury should determine which expert’s application of those
factors is more persuasive.” (ECF No. 636 at 10).
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In his initial expert report’s reasonable royalty opinion, Milani stated:
A licensing negotiation is often the process of two parties determining the best way
to share any gains from the utilization of a particular technology. The licensor is
entitled to compensation for the benefits afforded by the intellectual property, while
the licensee must be compensated for the business risks of providing the product.
Once the value of the asset is estimated, then that value can be shared via a royalty.
In all cases it is necessary to apportion the value of the patented feature from the
non-patented features, or any other contributions which are unrelated to the
Asserted Patents. As discussed previously, I understand that, at the time of the
issuance of the Asserted Patents, BPA-NI coatings were known. More specifically,
I understand the Perez Patent discloses BPA-NI sprays and, assuming it does not
represent prior art which invalidates the Asserted Patents, any differences between
the Perez Patent and the Asserted Patents would be limited and immaterial to the
overall performance of the Innovel Product. Therefore, I consider the Asserted
Patents to provide a limited contribution over the prior art.
(ECF No. 428-1 at 80).1
In its earlier Daubert opinion, the court concluded that Milani would not be permitted to
testify that profits should be apportioned 50% to reflect the value of nonpatented features of
Innovel, such as a high glass transition temperature, because he provided no quantification for
that apportionment. (ECF No. 636 at 10-11). The court explained that Milani would be
permitted to offer his other opinions about the impact of the Perez patent on a reasonable royalty,
to which Sherwin did not object:
To be clear, the exclusion of the “apportionment of benefits” testimony does
not apply to the alternative bases for Milani’s reasonable royalty opinion – namely,
that Sherwin’s patent did not provide any economic benefit over the disclosures of
the Perez Patent, and that the value of both PPG’s and Sherwin’s products was
driven by the Prop 65 regulation. Milani Report at 79-80. These opinions are not
directly challenged by Sherwin (ECF No. 604 at 3-8) and are supported by the
Milani opined in the lost profits section of his initial report: “it is reasonable to consider
that PPG could have developed a commercially successful inside spray based on the Perez
Patent, like Innovel, but with a different formulation as compared to Innovel. That said, because
I do not have adequate information to directly account for the nature and timing of this
alternative, it is not explicitly factored into my lost profit analysis.” (ECF No. 428-1 at 51).
Milani will not be permitted to offer an opinion quantifying that rationale. The court’s statement
in ECF No. 996 was not intended to alter that decision or permit Milani to offer an opinion he
had disavowed.
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record. If the court reaches the damages phase, the jury will have necessarily
rejected PPG’s position that the Perez Patent renders the Asserted Patents invalid.
The jury can nevertheless consider Milani’s opinions about the existence of the
Perez Patent and Prop 65 as factors in the hypothetical negotiation of a reasonable
royalty.
(ECF No. 636 at 11-12). The fact that PPG did not develop a commercial product based on the
Perez patent, therefore, does not preclude the existence of the Perez patent as a factor in the
hypothetical negotiation. In the October 27, 2021 opinion, the court specifically held that Milani

could offer the apportionment opinion that the Asserted Patents provide a de minimis
contribution to the profits generated by Innovel (provided PPG establishes a proper foundation
for that opinion). (ECF No. 996 at 8). As noted, Sherwin recognizes that Milani can offer that
opinion (ECF No. 1008 at 6).

Conclusion
Sherwin’s request for clarification will be granted in part, as explained above. There is a
tension between (1) preventing the jury from speculating about products that did not exist in the
market; and (2) allowing the damages experts some latitude to opine about the factors that might
influence a hypothetical royalty negotiation. The court adheres to its prior decisions, which tried
to address these competing concerns. Milani will be permitted to opine about the existence of
the Perez patent as it impacts his Georgia-Pacific analysis about the economic value of the
Asserted Patents over the prior art. Milani will not be permitted to opine that a product based on
the Perez patent ever existed.
An appropriate order will be entered.
Dated: December 1, 2021
/s/ Joy Flowers Conti
Joy Flowers Conti
Senior United States District Judge
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