Eidos Display, LLC et al v. AU Optronics Corporation et al

Filing 703

MEMORANDUM OPINION AND ORDER. Defendants' Motion to Exclude the Opinions of Dr. Smith (Doc. No. 681) is DENIED. Signed by Magistrate Judge John D. Love on 3/22/2017. (rlf)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
TYLER DIVISION
EIDOS DISPLAY, LLC,
LLC,

EIDOS III,

Plaintiffs,
v.
CHI MEI INNOLUX CORPORATION,
CHI MEI OPTOELECTRONICS USA,
INC., CHUNGHWA PICTURE TUBES,
LTD.,
HANNSTAR
DISPLAY
CORPORATION,
HANNSPREE
NORTH AMERICA, INC.,

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CIVIL ACTION NO. 6:11-CV-00201-JRG

Defendants.
MEMORANDUM OPINION AND ORDER
Before the Court is Defendants’ Motion to Exclude Plaintiffs’ expert Bruce Smith’s
opinions relating to his “Benefits of the Claimed Five-Mask BCE Manufacturing Process”
Report. (Doc. No. 681.) Plaintiffs have filed a response. (Doc. No. 696.) For the reasons stated
herein, Defendants’ Motion (Doc. No. 681) is DENIED.
BACKGROUND
On April 25, 2011, Eidos filed suit against AU Optronics Corporation, AU Optronics
Corporation America, Chunghwa Picture Tubes, Ltd., HannStar Display Corporation, Hannspree
North America, Inc., Chi Mei Innolux Corporation, and Chi Mei Optoelectronics USA, Inc.,
alleging infringement of U.S. Patent No. 5,879,958 (“the ’958 Patent”). (Doc. No. 1.) The ’958
Patent is titled “Method of Producing an Electro-Optical Device” and relates to the process of
forming circuitry used in controlling liquid crystal displays (“LCD”). Specifically, the ’958

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Patent relates to the process for forming an array of thin film transistors (“TFT”) and pixel
electrodes that are used to control the light emission of an LCD. Notably, the ’958 Patent
contains 17 embodiments (identified as A-S) providing various manufacturing processes that
reduce the number of photolithographic steps. See ’958 Patent at 4:50–14:18 (describing
processes with four or five lithographic steps as opposed to seven).
Claim 1 is the only issued claim in the ’958 Patent. Claim 1 recites as follows:
1. A method for producing an electro-optical device
in which an electro-optical material is put between
a pair of substrates opposed to each other, at least
a portion of opposing surfaces of the substrates is
insulative, a plurality of source wirings and a
plurality of gate wirings are formed crossing each
other on the surface of one of said pair of
substrates and a transparent pixel electrode and a
thin film transistor are formed at each of the
crossing points between the source wirings and the
gate wirings, wherein the method comprises:
a step G1 of forming a first metal film on
the surface of said one substrate,
a first photolithographic step G2 of
patterning the first metal film to
form a gate electrode and a gate
wiring,
a step G3 of forming a first insulator film,
a semiconductor film and an ohmic
contact film on the surface of said
one substrate after the first
photolithographic step,
a second photolithographic step G4 of
patterning the semiconductor active
film and the ohmic contact film to
form a semiconductor portion
above the gate electrode in a state
isolated from other portions,
a step G5 of forming a second metal film
on the surface of said one substrate
after the second photolithographic
step,
a third photolithographic step G6 of
patterning the second metal film
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and the ohmic contact film to form
a source electrode, a drain electrode
and a channel portion,
a step G7 of forming a passivation film on
the surface of said one substrate
after the third photolithographic
step, and
a fourth photolithographic step G8 of
patterning the passivation film to
form a contact hole reaching the
gate wiring, a contact hole reaching
the drain electrode and a contact
hole for source wiring and gate
wiring connection terminals,
a step G9 of forming a transparent
conductive film on the surface of
said one substrate after the fourth
photolithographic step, and
a fifth photolithographic step G10 of
patterning the transparent
conductive film to form a
transparent pixel electrode.
’958 Patent at 58: 5–47.
On March 6, 2017, Defendants brought the instant Daubert Motion to Exclude certain of
Dr. Smith’s opinions related to apportionment. (Doc. No. 681.)
LEGAL STANDARD
Federal Rule of Evidence 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
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 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
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Pharms. Inc., 509 U.S. 579, 594, 597 (1993). “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). “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).
Apportionment
In a reasonable royalty analysis, damages must be tied “to the claimed invention’s
footprint in the marketplace.” ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 869 (Fed. Cir.

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2010). Thus, “where multi-component products are involved, the governing rule is that the
ultimate combination of royalty base and royalty rate must reflect the value attributable to the
infringing features of the product, and no more.” Ericsson, Inc. v. D-Link Sys., Inc., 773 F.3d
1201, 1226 (Fed. Cir. 2014) (citing VirnetX, Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1326 (Fed.
Cir. 2014)). When the accused products have both patented and non-patented features, the
damages analysis requires an apportionment analysis in order to determine the value added by
such features. Id.
DISCUSSION
Defendants argue that Dr. Smith’s opinions are unreliable and should be excluded
because Dr. Smith describes the benefits of moving from a seven-mask process to a five-mask
process, but does not tie the invention to its footprint in the marketplace because it is undisputed
that prior art five-mask processes were available before the ’958 Patent. (Doc. No. 681, at 11.)
Defendants also argue that Dr. Smith’s opinions should be excluded because he describes the
benefits of four structures—ESD structures, parallel wiring on the first and second metal layers,
and two types of test structures—that are not disclosed in the ’958 Patent, and because his
opinions do not contain any economic analytical data and are therefore purely subjective and
unreliable. Id. at 13–14.
As to apportionment, Defendants specifically contend that Dr. Smith did not compare any
of the prior art five-mask processes to the claimed processes or to any non-infringing
alternatives. Id. at 11. Therefore, Defendants argue that Dr. Smith “does not attempt to separate
the benefits attributable to Claim 1 (e.g., the improvement in the G8 step) from the unpatented
features that were known in the prior art…” Id. at 12. Defendants contend his opinions are
rendered inadmissible on this basis. Eidos argues that this assertion is incorrect and based on the

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untenable position that all five-mask processes are interchangeable. (Doc. No. 696, at 10.) Eidos
further cites to Dr. Smith’s deposition testimony where he explained the benefits are not simply
reducing the number of steps, but carrying out the right steps in the right way so that the benefits
can be realized. (Doc. No. 696, at 10, citing Doc. No. 696-2, at 116:18–118:21, 128:4–130:9,
218:21–219:8.) Eidos then further points to the specific advantages of claim 1, including the use
of back channel etch instead of an etch stop and the creation of four separate contact holes in one
photolithographic step, and argues that these advantages would not be realized by just any fivemask process. Id. at 11. Eidos argues that these are the benefits that Dr. Smith describes. Id.
citing Doc. No. 696-1, at ¶¶ 18, 66, 69, 17, 50–61.
The Court disagrees with Defendants. Dr. Smith may provide opinions based on his
technical knowledge and expertise as to the technical advantages of the claimed process. The fact
that five-mask processes were known in the prior art does not render these opinions unreliable.
As Eidos has points out, there are specific advantages to these claimed steps that Dr. Smith has
opined on, including the order of the claimed steps, the back channel etch (as opposed to etch
stop), and the creation of multiple contact holes in the fourth lithographic step. Doc. No. 696-2,
at 116:18–118:21, 128:4–130:9, 218:21–219:8; Doc. No. 696-1, at ¶¶ 17, 18, 50–69. Thus, Dr.
Smith considered claim 1 of the ’958 Patent and the facts of this case in asserting his opinions on
the alleged benefits of the invention. Whether Dr. Smith considered alternatives or compared
other five-mask processes is simply a matter for cross-examination as it goes to the correctness
of his methodology, not the reliability. See Summit 6, LLC v. Samsung Elecs. Co., 802 F.3d
1283, 1296 (Fed. Cir. 2015) (“where the methodology is reasonable and its data or evidence are
sufficiently tied to the facts of the case, the gatekeeping role of the court is satisfied, and the
inquiry on the correctness of the methodology…belongs to the factfinder.”)

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Dr. Smith’s discussion of structures allegedly not disclosed in the ’958 Patent similarly
does not provide a basis to exclude his opinions. In paragraph 70 of Dr. Smith’s report cited by
Defendants, he is describing the advantages to the designer of a TFT substrate using the claimed
method. (Doc. No. 696-1, at ¶ 70.) This discussion is not improper for apportionment purposes
as it discusses the claimed method and the real world benefits tied to that method. Id. Whether
Dr. Smith’s opinions explore unintended advantages of the claimed subject matter, or advantages
not sufficiently tied to the claimed method, is a question for the factfinder. See Summit 6, 802
F.3d at 1296 (“[T]he question of whether the expert is credible or the opinion is correct is
generally a question for the fact finder, not the court.”).
Finally, the contention that Dr. Smith’s opinions are purely subjective because he did not
conduct an analytical economic analysis also does not provide a basis to exclude his opinions. As
discussed above, Dr. Smith is Eidos’s technical expert and has provided opinions regarding the
technical advantages and benefits of the claimed technology. The ultimate apportionment value
for the accused products, including the economic analysis, must rest with Eidos’s damages
expert Mr. Cobb, not Dr. Smith.
CONCLUSION
Accordingly, for the reasons stated herein, Defendants’ Motion to Exclude the Opinions
of Dr. Smith (Doc. No. 681) is DENIED.

So ORDERED and SIGNED this 22nd day of March, 2017.

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