Core Wireless Licensing S.a.r.l. v. LG Electronics, Inc. et al

Filing 415

ORDER denying motions to strike 269 , 283 , 348 , and 396 . Signed by Magistrate Judge Roy S. Payne on 03/19/2016. (rsp2, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION

CORE WIRELESS LICENSING
S.A.R.L.,
v.
LG ELECTRONICS, INC., AND LG
ELECTRONICS MOBILECOMM
U.S.A., INC.

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Case No. 2:14-cv-911-JRG-RSP
(lead)

MEMORANDUM ORDER
This Order pertains to Case No. 2:14-cv-0911 (the “-911 Case”). The following motions
are before the Court:
•

LG’s 1 Motion to Exclude Opinions and Testimony of Dr. Stephen Magee (Dkt. No. 269);

•

Core’s 2 Motion to Exclude Opinions and Testimony of Dr. Thomas Vander Veen (Dkt. No.
283);

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LG’s Motion to Strike the Supplemental Report of Dr. Magee (Dkt. No. 348); and

•

Core’s Motion to Strike the Supplemental Rebuttal Report of Dr. Vander Veen (Dkt. No.
396).

Each motion seeks to exclude the opinions of a damages expert either under Daubert or on
untimeliness grounds.
I. LAW
A. Rule 702
Rule 702 provides that an expert witness may offer opinion testimony if (a) the expert’s
scientific, technical, or other specialized knowledge will help the trier of fact to understand the
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“LG” is Defendants LG Electronics, Inc. and LG Electronics Mobilecomm U.S.A., Inc.
“Core” is Plaintiff Core Wireless Licensing S.a.r.l.

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 inquiry envisioned by Rule 702 is . . . a flexible one,” but, in Daubert, the Supreme
Court held that the Rules also “assign to the trial judge the task of ensuring that an expert’s
testimony both rests on a reliable foundation and is relevant to the task at hand.” Daubert v.
Merrell Dow Pharms. Inc., 509 U.S. 579, 594, 597 (1993); see also Apple Inc. v. Motorola, Inc.,
757 F.3d 1286, 1321 (Fed. Cir. 2014) (“Experts routinely rely upon other experts hired by the
party they represent for expertise outside of their field.”).
“The relevance prong [of Daubert] requires the proponent [of the expert testimony] to
demonstrate that the expert’s ‘reasoning or methodology can be properly applied to the facts in
issue.’” Johnson v. Arkema, Inc., 685 F.3d 452, 459 (5th Cir. 2012) (quoting Curtis v. M & S
Petroleum, Inc., 174 F.3d 661, 668 (5th Cir. 1999)). “The reliability prong [of Daubert] mandates
that expert opinion ‘be grounded in the methods and procedures of science and . . . be more than
unsupported speculation or subjective belief.’” Johnson, 685 F.3d at 459 (quoting Curtis, 174 F.3d
at 668).
In assessing the “reliability” of an expert’s opinion, the trial court may consider a list of
factors including: “whether a theory or technique . . . can be (and has been) tested,” “whether the
theory or technique has been subjected to peer review and publication,” “the known or potential
rate of error,” “the existence and maintenance of standards,” and “general acceptance” of a theory
in the “relevant scientific community.” Daubert, 509 U.S. at 593–94; see also Kumho Tire Co.,
Ltd. v. Carmichael, 526 U.S. 137, 150 (1999) (“Daubert makes clear that the factors it mentions do
not constitute a ‘definitive checklist or test.’”); U.S. v. Valencia, 600 F.3d 389, 424 (5th Cir. 2010).

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It is not proper to use Rule 702 as a vehicle to usurp the fact-finding role of the jury, nor is
exclusion under Rule 702 an appropriate substitute for the Court’s power to grant summary
judgement or judgement as a matter of law when such relief is warranted:
[R]espondent seems to us to be overly pessimistic about the capabilities of the jury
and of the adversary system generally. 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. Additionally, in
the event the trial court concludes that the scintilla of evidence presented supporting
a position is insufficient to allow a reasonable juror to conclude that the position
more likely than not is true, the court remains free to direct a judgment, Fed. Rule
Civ. Proc. 50(a), and likewise to grant summary judgment, Fed. Rule Civ. Proc. 56.
Daubert, 509 U.S. at 596. “The proponent need not prove to the judge that the expert’s testimony
is correct, but she must prove by a preponderance of the evidence that the testimony is reliable.”
Johnson, 685 F.3d at 459 (quoting Moore v. Ashland Chem., Inc., 151 F.3d 269, 276 (5th Cir.
1998) (en banc)). At base, “the question of whether the expert is credible or the opinion is correct
is generally a question for the fact finder, not the court.” Summit 6, LLC v. Samsung Elecs. Co.,
Ltd., 802 F.3d 1283, 1296 (Fed. Cir. 2015).
B. Damages
Upon a finding of infringement, a patent holder is entitled to “damages adequate to compensate
for the infringement, but in no event less than a reasonable royalty for the use made of the
invention by the infringer.” 35 U.S.C. § 284. “The patentee . . . must in every case give evidence
tending to separate or apportion the defendant’s profits and the patentee’s damages between the
patented feature and the unpatented features . . . [unless] the entire value of the whole machine, as
a marketable article, is properly and legally attributable to the patented feature.” Garretson v.
Clark, 111 U.S. 120, 121 (1884). Accordingly, proof of damages must be carefully tied to “the
claimed invention’s footprint in the market place.” VirnetX, Inc. v. Cisco Sys., 767 F.3d 1308, 1327
(Fed. Cir. 2014); CSIRO v. Cisco Sys., 809 F.3d 1295 (Fed. Cir. 2015) (“damages awarded for

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patent infringement must reflect the value attributable to the infringing features of the product, and
no more”).
“[E]stimating a ‘reasonable royalty’ is not an exact science. As such, the record may
support a range of ‘reasonable’ royalties, rather than a single value. Likewise, there may be more
than one reliable method for estimating a reasonable royalty.” Apple Inc. v. Motorola, Inc., 757
F.3d 1286, 1315 (Fed. Cir. 2014). In determining whether to admit or exclude a damages opinion
under Rule 702, “[t]he essential requirement is that the ultimate reasonable royalty award must be
based on the incremental value that the patented invention adds to the end product.” Ericsson, Inc.
v. D-Link Sys., 773 F.3d 1201, 1226 (Fed. Cir. 2014).
C. Timeliness
A party must disclose the opinions of its experts “at the times and in the sequence that the
court orders.” Fed. R. Civ. P. 26(a)(2)(D). A party who fails to timely disclose bears the burden of
proving that such failure is harmless. See Heidtman v. County of El Paso, 171 F.3d 1038, 1040 (5th
Cir. Tex. 1999). The Court considers four factors to determine whether a Rule 26 violation is
harmless: “(1) [the party’s] explanation for its failure to disclose the evidence, (2) the importance
of the evidence, (3) the potential prejudice to [the opposing party] in allowing the evidence, and
(4) the availability of a continuance.” CQ, Inc. v. TXU Min. Co., L.P., 565 F.3d 268, 280 (5th Cir.
2009).
II. ANALYSIS
A. Timeliness
LG and Core have each moved to strike the late-served supplemental damages reports of
the adverse party’s damages expert. (Dkt. Nos. 348, 396). Both supplemental reports were
purportedly served in response to Core’s withdrawal of certain patents in the -911 Case. See (Dkt.

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No. 360 at 4; 399 at 2). Core’s Supplemental Report of Dr. Magee was served December 11, 2015.
(Dkt. No. 348-2 at 2). 3 LG’s Supplemental Report of Dr. Vander Veen was served February 22,
2016. (Dkt. No. 396 at 4). Because these reports were served after the November 12, 2015 expert
disclosure deadline, they are untimely under Fed. R. Civ. P. 26(a)(2)(D). See (Dkt. No. 126 at 2).
To determine whether a violation of Rule 26 was harmless, the Court considers the four CQ
factors. CQ, 565 F.3d at 280. First, each party offers essentially the same “explanation for its
failure to disclose the evidence,” namely, that its expert served the supplemental report in response
to Core’s significant narrowing of the scope of the -911 Case. 4 Because each party’s explanation
for its late disclosure is substantially the same, neither party can credibly argue that the other’s
explanation is insufficient. The first factor, therefore, weighs in favor of supplementation.
Second, each party offers similar justifications for the “importance of the evidence.” Core
argues that without the supplemental report, “Dr. Magee’s ultimate royalty rates would pertain to
groups of patents that are no longer at issue.” (Dkt. No. 360 at 18). Likewise, LG argues that the
“jury will be best served by the presentation of damages numbers calculated from the actual
number of patents at issue in this case, rather than a number of patents previously at issue.” (Dkt.
No. 399 at 8). Again, neither party can reasonably argue that the evidence is not important, since
both offer largely the same argument for why it is important. This factor weights in favor of
supplementation.
Third, the Court must consider the potential prejudice in allowing the evidence. Each party
originally argued it had been prejudiced by the other’s late supplemental report. LG later withdrew

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Citations to the docket use CM/ECF page numbers.
Core raises the additional explanation that it was served in response to LG’s
supplemental interrogatory responses concerning LG’s licensing practices. (Dkt. No. 360 at 4).
LG raises the additional explanation that it was awaiting guidance from the Court as to the
effect of Core’s Notice of Withdrawal (Dkt. No. 266). (Dkt. No. 399 at 3).

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its objections to Dr. Magee’s Supplemental Report with respect to the -911 Case at the February 5,
2016 pretrial conference. See (Dkt. No. 396 at 4). Accordingly, there is no basis to conclude that
LG would be prejudiced by Dr. Magee’s Supplemental Report. Core raises a number of specific
reasons why it is prejudiced by the Supplemental Report of Dr. Vander Veen. Some of these
reasons are trivially meritless, such as Core’s insistence that it cannot understand the meaning of
the term “paid-up” royalty in Dr. Vander Veen’s Supplement. (Dkt. No. 396 at 10). LG points out
that this term was used repeatedly in both Dr. Vander Veen’s Original Report and in Dr. Magee’s
Report. (Dkt. No. 399 at 7). Likewise, Core’s complaint about a missing exhibit appears to have
been promptly rectified by LG. (Id. at 6). However, Core raises a valid concern—Dr. Vander
Veen’s Supplemental Report was served on February 11, 2016, shortly before trial. LG responds
that Dr. Vander Veen’s opinions are based on the same methodologies and mathematical formulae
disclosed in his original report; his opinions have simply been adjusted to take into account the
reduced number of asserted patents and are “fully supported by and derivable from his Original
Report.” (Id. at 6). While the late date of Dr. Vander Veen’s supplement might implicate prejudice
concerns if he were expressing new opinions, it appears here that he has adjusted his prior opinions
without changing them. Core has not identified any specific prejudice it would suffer from these
supplemental opinions.
Fourth, a continuance is not reasonably available due to the proximity of trial. However, it
is not clear that a continuance would be helpful in the absence of any identifiable prejudice. This
factor is neutral.
In light of the foregoing, the Court finds that the parties’ late disclosures were harmless and
declines to strike the supplemental expert reports of Dr. Magee and Dr. Vander Veen.

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B. Motion to Strike Dr. Magee
LG moves to strike Dr. Magee’s damages opinions under Rule 702. (Dkt. No. 269).
Because the Court has declined to strike Dr. Magee’s Supplemental Report as untimely, the Court
will consider both Dr. Magee’s Original and Supplemental Reports together in determining
whether his opinions are admissible. LG raises three categories of challenges under Rule 702: (1)
that Dr. Magee has selected the wrong hypothetical negotiation date (id. at 8–9), (2) that Dr.
Magee’s analysis of the Georgia-Pacific factors is “conclusory,” (id. at 4–7), and (3) that Dr.
Magee’s opinions run afoul of Federal Circuit jurisprudence regarding apportionment and the
entire market value rule (“EMVR”) (id. at 7–8, 9–15).
LG’s challenge to Dr. Magee’s hypothetical negotiation date is moot in light of his
supplemental report, which addresses LG’s concerns by identifying a later hypothetical negotiation
date occasioned by Core’s withdrawal of the ’667 Patent. (Dkt. No. 348-2 at 13–14). LG has not
challenged this new date under Rule 702.
LG’s second argument—that Dr. Magee’s analysis of the Georgia-Pacific factors is
“conclusory”—is not well-founded. LG contends “Dr. Magee does not state that any value is used
as a starting point in the analysis, whether any particular factor moved the rates up or down, or
whether any particular factor was ultimately weighed more heavily than others.” (Dkt. No. 269 at
6). This characterization of Dr. Magee’s opinions, while literally true, belies the fact that he
performs a detailed economic analysis under each Georgia-Pacific factor, describing the evidence
he considered (or elected not to consider) and his reasons for doing so. See (Dkt. No. 269-1 at 117–
133). The Federal Circuit has “never described the Georgia-Pacific factors as a talisman for
royalty rate calculations” and has stated it is not necessarily correct to “resort to the factors to
justify urging an increase or a decrease in a royalty calculation.” See Ericsson, 773 F.3d at 1230. In

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other words, the Georgia-Pacific analysis is a flexible one. There is no legal requirement that an
expert begin with a particular “starting point” and then use the fifteen factors to nudge the royalty
up or down. Here, Dr. Magee frames his economic analysis around the Georgia-Pacific factors and
offers his royalty rate opinions as a conclusion, having considered the applicability (or
inapplicability) of each factor. In doing so, he spells out the economic principles and methods on
which he relies. The Court cannot conclude that this analysis is unreliable under Rule 702.
Finally, LG argues that Dr. Magee’s opinions run afoul of the EMVR, which requires that
the “ultimate reasonable royalty award must be based on the incremental value that the patented
invention adds to the end product.” Ericsson, 773 F.3d at 1226. Dr. Magee’s report identifies the
smallest salable patent practicing unit, attempts to estimate the value of that unit using economic
principles, then attempts to isolate the fraction of that value the parties would attribute to the
patented features at the hypothetical negotiation. See (Dkt. No. 269-1 at 131–134). Accordingly,
Dr. Magee’s opinions espouse compliance with the legal framework of the EMVR and he applies
reliable economic reasoning in doing so. It may be that, after presenting all its evidence, Core will
have failed to meet its burden to prove the “incremental value that the patented invention adds to
the end product.” But determining the weight of the evidence is not appropriate under Rule 702;
this is a task for the jury, or for the Court pursuant to an appropriate motion under Rule 50. See
Daubert, 509 U.S. at 596.
Accordingly, the Court will not strike Dr. Magee’s opinions.
C. Motion to Strike Dr. Vander Veen
Core moves to strike Dr. Vander Veen’s damages opinions under Rule 702. (Dkt. No. 283).
Core argues that the comparable license agreements and patent valuations Dr. Vander Veen relies
on in forming some of his opinons are not sufficiently comparable to the patents-in-suit.

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The Federal Circuit has held that “alleging loose or vague comparability between different
technologies or licenses does not suffice.” LaserDynamics, Inc. v. Quanta Computer, Inc., 694
F.3d 51, 79 (Fed. Cir. 2012). However, an expert may rely on comparable licenses that differ in
some respects from the hypothetical agreement where he “account[s] for the technological and
economic differences between them.” See Wordtech Sys. v. Integrated Networks Solutions, Inc.,
609 F.3d 1308, 1320 (Fed. Cir. 2010). Here, Dr. Vander Veen does not rely on allegations of
“loose” or “vague” comparability. He offers opinions for each license or valuation that explain his
economic comparability analysis in detail. See, e.g. (Dkt. No. 300-1 at 57–60, 64–65, 71–75, 80).
Like LG, Core fundamentally attacks the weight of the evidence rather than the sufficiency of Dr.
Vander Veen’s analysis under Rule 702. “Vigorous cross-examination, presentation of contrary
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evidence, and careful instruction on the burden of proof are the traditional and appropriate means
of attacking shaky but admissible evidence.” Daubert, 509 U.S. at 596. Dr. Vander Veen identifies
and applies reliable economic principles to opine that the transactions and valuations he relies
upon are comparable and to account for any relevant differences.
The Court declines to strike Dr. Vander Veen’s opinions.
III. CONCLUSION
For the foregoing reasons, LG’s Motions to Strike Dr. Magee (Dkt. Nos. 269, 348) are
DENIED. Core’s Motions to Strike Dr. Vander Veen (Dkt. Nos. 283, 396) are DENIED.
SIGNED this 3rd day of January, 2012.
SIGNED this 19th day of March, 2016.

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ROY S. PAYNE
UNITED STATES MAGISTRATE JUDGE

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