Tinnus Enterprises, LLC et al v. Telebrands Corporation
MEMORANDUM OPINION AND ORDER GRANTING-IN-PART AND DENYING-IN PART 335 Defendants' Motion to Exclude Alan Ratliff's Opinion on Lost Profits, Including Price Erosion. The Court GRANTS-IN-PART Defendants' Motion, however, Mr. Ratliff will be permitted an opportunity to file an amended expert report to address the ZURU Ltd. sales associated with the generation of lost profits. Defendants' Motion is DENIED-IN-PART as to Mr. Ratliff's price erosion opinions. Signed by Magistrate Judge John D. Love on 9/11/2017. (rlf)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
TINNUS ENTERPRISES, LLC,
CIVIL ACTION NO. 6:16-CV-00033-RWS
MEMORANDUM OPINION AND ORDER
Before the Court is Defendants’ Telebrands Corporation and Bulbhead.com LLC
(collectively “Defendants”) Motion to Exclude Plaintiffs’ expert Alan Ratliff’s Opinion on Lost
Profits, including price erosion. (Doc. No. 335.) Plaintiffs Tinnus Enterprises, LLC and ZURU
Ltd. (collectively “Plaintiffs”) filed a response (Doc. No. 366), to which Defendants filed a reply
(Doc. No. 379), and Plaintiffs filed a sur-reply (Doc. No. 388). On September 7, 2017, the Court
held a hearing. For the reasons stated herein, Defendants’ Motion (Doc. No. 335) is GRANTEDIN-PART and DENIED-IN-PART.
On January 26, 2016, Plaintiffs filed the instant action against Telebrands, alleging
infringement of U.S. Patent No. 9,242,749 (“the ’749 Patent”). (Doc. No. 1.) On April 19, 2016,
Plaintiffs amended their complaint to add allegations of infringement of U.S. Patent No.
9,315,282 (“the ’282 Patent”). (Doc. No. 3.) This case proceeded on a trial schedule through the
completion of discovery and expert discovery and through the filing of dispositive motions. On
July 7, 2017, Defendants filed a for partial summary judgment, alleging for the first time that
Defendants were entitled to summary judgment on Plaintiffs’ claim for lost profits because
ZURU Ltd. had not made the sales of the Bunch O Balloons products in the United States, but
rather ZURU Inc. had made those sales and was not a named party to this action. (Doc. No. 334.)
On that same day, Defendants filed the instant motion seeking to strike portions of Mr. Ratliff’s
report regarding lost profits.
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
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).
Defendants move to exclude Plaintiffs’ damages expert, Alan Ratliff’s, opinions on lost
profits, including price erosion, on three bases: (1) Mr. Ratliff failed to consider whether either
of the Plaintiffs actually sell or profit from the sale of Bunch O Balloons; (2) Mr. Ratliff
erroneously attributes price erosion damages to Battle Balloons’ alleged infringement of the ’749
and ’282 Patents; and (3) Mr. Ratliff’s price erosion analysis is inconsistent with economic
reality. (Doc. No. 335, at 4.)
Plaintiffs argue that Defendants’ motion is improperly focuses on the weight of Mr.
Ratliff’s opinion, rather than reliability. (Doc. No. 366, at 6.) Plaintiffs argue that Mr. Ratliff’s
opinions are reliable and grounded in the facts because numerous purchase orders show that
Walmart, ZURU’s largest customer, was at least placing orders with ZURU Ltd. for Bunch O
Balloons. (Doc. No. 336, at 7, citing Ex. 4, Sample ZURU Ltd. Purchase Orders.) Plaintiffs
argue that whether ZURU Ltd. can claim lost profits for the activities of other ZURU entities is
not a subject for a damages expert opinion. Id. at 8.
As to the issue of sales resulting in lost profits, the Court has concurrently issued an order
regarding the sales for which ZURU Ltd. may seek lost profits in ruling on Defendants’ motion
for summary judgment. Consistent with the Court’s rulings, the Court GRANTS-IN-PART
Defendants’ Motion (Doc. No. 335); however, Mr. Ratliff will be permitted an opportunity to file
an amended expert report to address the ZURU Ltd. sales associated with the generation of lost
profits. It is therefore ORDERED that within 7 days of the issuance of this Order, the parties
shall complete any additional fact discovery. Within 14 days of the issuance of this Order, Mr.
Ratliff shall serve an amended expert report. Defendants’ expert may file a rebuttal report within
7 days of being served with Mr. Ratliff’s supplemental report. The parties are permitted one
supplemental deposition of each damages expert not to exceed 4 hours. Further expert
depositions shall be completed prior to the pretrial conference in this matter.
As to Defendants’ objections to Mr. Ratliff’s opinions on price erosion, Defendants argue
that Mr. Ratliff’s opinions cannot be squared with the evidence in this case because: (1) Mr.
Ratliff acknowledges that ZURU priced Bunch O Balloons prior to competitors entering the
market; (2) he already opined that Balloon Bonanza drove Bunch O Balloons prices down; and
(3) he admits that Battle Balloons debuted after the alleged price erosion occurred. (Doc. No.
335, at 9.) These criticisms of Mr. Ratliff’s opinions go to the weight of his opinions not the
admissibility. Therefore, on these bases, the Court finds no reason to strike Mr. Ratliff’s price
erosion opinions. Matters of credibility may be taken up during cross-examination. Accordingly,
Defendants’ Motion (Doc. No. 335) is DENIED-IN-PART as to Mr. Ratliff’s price erosion
For the reasons stated herein, Defendants’ Motion (Doc. No. 335) is GRANTED-INPART and DENIED-IN-PART. Within 7 days of the issuance of this Order, the parties shall
complete any additional fact discovery related to lost profits. Within 14 days of the issuance of
this Order, Mr. Ratliff shall serve an amended expert report. Defendants’ expert may file a
rebuttal report within 7 days of being served with Mr. Ratliff’s supplemental report. The parties
are permitted one supplemental deposition of each damages expert not to exceed 4 hours. Any
additional expert depositions shall be completed prior to the pretrial conference in this matter.
So ORDERED and SIGNED this 11th day of September, 2017.
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