I/P Engine, Inc. v. AOL, Inc. et al

Filing 974

Declaration re 973 Opposition, Declaration Of Keith R. Ugone, Ph.D. In Support Of Defendants' Response To Plaintiff I/P Engine, Inc.'s Notice Of Calculation Of Supplemental Damages, Prejudgment Interest, and Post-Judgment Interest by AOL Inc., Gannett Company, Inc., Google Inc., IAC Search & Media, Inc., Target Corporation. (Attachments: # 1 Exhibit 1 (Public Version), # 2 Exhibit 2, # 3 Exhibit 3)(Noona, Stephen)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF VIRGINIA
NORFOLK DIVISION
I/P ENGINE, INC.
Plaintiff,

Civil Action No. 2:11-cv-512

v.
AOL, INC., et al.,
Defendants.

DECLARATION OF KEITH R. UGONE, PH.D. IN SUPPORT OF DEFENDANTS'
RESPONSE TO PLAINTIFF I/P ENGINE, INC.'S NOTICE OF CALCULATION OF
SUPPLEMENTAL DAMAGES, PREJUDGMENT INTEREST,
AND POST-JUDGMENT INTEREST

I, Keith R. Ugone, Ph.D., declare as follows:
1.

I submitted an expert report and provided oral testimony at trial in this matter on

behalf of Defendants Google Inc., AOL, Inc., IAC Search & Media, Inc., Gannett Co., Inc., and
Target Corp. ("Defendants"). I described my qualifications in both my trial testimony and expert
report. I have personal knowledge of the facts set forth in this Declaration. If called upon to
testify, I could and would certify competently to these facts.
2.

I have been asked to provide certain calculations in support of Defendants'

Response to Plaintiff I/P Engine, Inc.'s Notice of Calculation of Supplemental Damages,
Prejudgment Interest, and Post-Judgment Interest.
Supplemental Damages
3.

I have been asked to calculate I/P Engine's supplemental damages for the time

period from October 1, 2012 to November 20, 2012 using the 3.5% royalty rate awarded by the
jury and the 2.8% apportionment factor I derived previously based upon the damages awarded by
the jury. My derivation of the 2.8% apportionment factor (based upon the jury's damages award)
is explained in the declaration I submitted on November 29, 2012 and is repeated below for
convenience.
4.

In response to an interrogatory, the jury found that the appropriate form of

damages was a running royalty and set the royalty rate at 3.5%. (D.N. 789, 11.) The jury
awarded total damages of $30,496,155, attributed as follows: Google - $15,800,000, AOL$7,943,000, IAC - $6,650,000, Target - $98,833, and Gannett - $4,322. (Id.) Plaintiff asserts
that 20.9% of the revenues for the accused products is the appropriate royalty base to which the

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3.5% royalty should be applied (D.N.793, 11), but the amounts the jury awarded do not equate to
a royalty base apportioned at 20.9% of revenue. I was informed that the only information
Plaintiff provided the jury for the relevant damages period was a demonstrative slide (i.e., a "bar
chart") that Dr. Becker discussed in relation to a damages period barred by laches (D.N. 807 ¶ 2
& Ex. B (PDX-441)), and that in closing argument, Plaintiff used the slide to display a royalty
amount in the recoverable period that was derived from its 20.9% apportionment of revenue
multiplied by its 3.5% royalty. I have reviewed PDX-441. Based upon the "bars" presented
from third quarter 2011 through third quarter 2012, the height of each bar appears to reach
between approximately $25 million and $29 million (as determined from a rough comparison to
the scale on the left hand side of the chart). The jury awarded total damages from Google of
$15,800,000. (D.N. 789, 11.) This award was based upon a 3.5% running royalty rate. (Id.)
Using the information from the slide covering the allowable damages period and accounting for
the 3.5% royalty rate yields an apparent apportionment value of approximately 2.8%.
Specifically, the 2.8% estimated apportionment percentage is derived as follows. (I previously
provided the details of my estimation at D.N. 806-2.)
(a) The demonstrative exhibit that Plaintiff displayed for the allowable damages
period (i.e., damages period beginning September 15, 2011) showed a claimed
damages amount of approximately $118 million. (Trial Tr. 2005:13-2008:24;
D.N. 807 at ¶ 2 & Ex. B (PDX-441).)
(b) The jury's award of $15,800,000 is approximately 13.4% of the total royalties
Plaintiff demanded against Google for the allowable damages period (i.e., $15.8
million divided by $118 million).

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(c) Given the relative magnitude of the jury damages award and Plaintiff's claimed
damages, the royalty base apportionment percentage based upon the jury verdict
is 2.8% (i.e., 13.4% multiplied by the 20.9% apportionment percentage demanded
by Plaintiff).
5.

Revenue information for the time period from October 1, 2012 to November 20,

2012 has been provided for AdWords, AdSense for Search, AdSense for Mobile Search, and
AOL Search Marketplace. It is my understanding that the total revenues provided for AdSense
for Search include revenues associated with Google's AdSense for Search partners and codefendants AOL, Gannett / USA Today, IAC, and Target.

However, revenue information

specific to each co-defendant also was provided for the time period from October 1, 2012 to
November 30, 2012. In order to calculate I/P Engine's supplemental damages specific to each
co-defendant, it was necessary to prorate the revenue amounts provided for the co-defendants to
reflect the appropriate supplemental damages period (i.e., October 1, 2012 to November 20,
2012). Further, in both my calculation and I/P Engine’s calculation, to avoid double counting
(because Google’s AdSense for Search revenues include revenues associated with the codefendants), co-defendants’ damages are subtracted from Google’s damages to yield the
damages specific to Google, net of the co-defendants.
6.

Apportioning the total revenues for the October 1, 2012 to November 20, 2012

using the 2.8% apportionment factor and applying the 3.5% royalty rate yields total supplemental
damages of $2,249,777. Supplemental damages associated with each Defendant are shown in
the table below; the details of my calculations are provided in Exhibit 1.

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I/P Engine's Supplemental Damages
October 1, 2012 – November 20, 2012
Google
$2,120,939
AOL
$42,390
Gannett (USA Today)
$18
IAC
$84,387
Target
$906
AOL Search Marketplace
$1,138
Total
$2,249,777

Prejudgment Interest
7.

I have been asked to calculate prejudgment interest in this matter using both the

prime rate and U.S. Treasury rate and compounding quarterly. Throughout the time period from
September 15, 2011 to November 20, 2012, the prime rate was 3.25%.
8.

The methodology that I employed in deriving my prejudgment interest calculation

is as follows.
(a) I allocated the jury's royalty damages award to the quarters between September
15, 2011 and September 30, 2012 using the number of days in each quarter
relative to the number of days in the entire time period.
(b) I assumed that these quarterly royalty amounts would have been paid at the end of
each quarter, which would be in line with the likely arrangement of royalty
reporting and payment in a real-world business situation.

9.

Using this methodology, I calculated the prejudgment interest that would be due

on the damages awarded by the jury from September 15, 2011 to November 20, 2012 to be
$537,616 using the prime rate compounded quarterly pursuant to the Court's instruction. Using
the U.S. Treasury Rate, the corresponding amount would be $29,296.
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The results of my

calculations are presented in the tables below; the details of my calculation are provided in
Exhibit 2.
Prime Rate
Prejudgment Interest Calculation
September 15, 2011 – November 20, 2012
Google
$278,538
AOL
$140,027
Gannett
$76
IAC
$117,233
Target
$1,742
Total
$537,616

U.S. Treasury Rate
Prejudgment Interest Calculation
September 15, 2011 – November 20, 2012
Google
$15,178
AOL
$7,630
Gannett
$4
IAC
$6,388
Target
$95
Total
$29,296

Post-Judgment Interest
10.

I have been asked to calculate post-judgment interest in the manner set forth in 28

U.S.C. § 1961(a) ("from the date of the entry of the judgment, at a rate equal to the weekly
average 1-year constant maturity Treasury yield, as published by the Board of Governors of the
Federal Reserve System, for the calendar week preceding the date of the judgment") on the sum
of (a) the damages awarded by the jury, (b) I/P Engine's supplemental damages, and (c) the
prejudgment interest amounts shown above.

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11.

The average 1-year constant maturity Treasury yield for the week ending

November 16, 2012 was 0.17%. The results of my calculation of post-judgment interest are
presented in the table below; the details of my calculation are provided in Exhibit 3.
Using Prime Rate for
Prejudgment Interest
Post-Judgment
Post-Judgment
Interest Accrued
Interest Per Day
as of 8/21/2013
$84.76
$23,225.52

Google
AOL

Using Treasury Rate for
Prejudgment Interest
Post-Judgment
Post-Judgment
Interest Accrued
Interest Per Day
as of 8/21/2013
$83.54
$22,889.43

$37.84

$10,369.37

$37.23

$10,200.41

$0.02

$5.64

$0.02

$5.54

$31.91

$8,743.79

$31.40

$8,602.34

Target

$0.47

$129.51

$0.46

$127.40

AOL Search
Marketplace
Total

$0.01

$1.45

$0.01

$1.45

$155.02

$42,475.28

$152.65

$41,826.58

Gannett
IAC

12.

I declare under penalty of perjury that the foregoing is true and correct.

____________________
Keith R. Ugone, Ph.D.
August 26, 2013

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DATED: August 26, 2013

/s/ Stephen E. Noona
Stephen E. Noona
Virginia State Bar No. 25367
KAUFMAN & CANOLES, P.C.
150 West Main Street, Suite 2100
Norfolk, VA 23510
Telephone: [phone]
Facsimile: [phone]
[e-mail]
David Bilsker
David A. Perlson
QUINN EMANUEL URQUHART &
SULLIVAN, LLP
50 California Street, 22nd Floor
San Francisco, California 94111
Telephone: [phone]
Facsimile: [phone]
[e-mail]
[e-mail]
Counsel for Google Inc., Target Corporation,
IAC Search & Media, Inc., and Gannett Co., Inc.
/s/ Stephen E. Noona
Stephen E. Noona
Virginia State Bar No. 25367
KAUFMAN & CANOLES, P.C.
150 W. Main Street, Suite 2100
Norfolk, VA 23510
Telephone: [phone]
Facsimile: [phone]
[e-mail]
Robert L. Burns
FINNEGAN, HENDERSON, FARABOW, GARRETT &
DUNNER, LLP
Two Freedom Square
11955 Freedom Drive
Reston, VA 20190
Telephone: [phone]
Facsimile: [phone]
Cortney S. Alexander
FINNEGAN, HENDERSON, FARABOW, GARRETT &
DUNNER, LLP

3500 SunTrust Plaza
303 Peachtree Street, NE
Atlanta, GA 94111
Telephone: [phone]
Facsimile: [phone]
Counsel for Defendant AOL Inc.

CERTIFICATE OF SERVICE
I hereby certify that, on August 26, 2013, I will electronically file the foregoing with the
Clerk of Court using the CM/ECF system, which will send a notification of such filing (NEF) to
the following:
Jeffrey K. Sherwood
Kenneth W. Brothers
DICKSTEIN SHAPIRO LLP
1825 Eye Street NW
Washington, DC 20006
Telephone: [phone]
Facsimile: [phone]
[e-mail]
[e-mail]
Donald C. Schultz
W. Ryan Snow
Steven Stancliff
CRENSHAW, WARE & MARTIN, P.L.C.
150 West Main Street, Suite 1500
Norfolk, VA 23510
Telephone: [phone]
Facsimile: [phone]
[e-mail]
[e-mail]
[e-mail]
Counsel for Plaintiff, I/P Engine, Inc.

/s/ Stephen E. Noona
Stephen E. Noona
Virginia State Bar No. 25367
KAUFMAN & CANOLES, P.C.
150 West Main Street, Suite 2100
Norfolk, VA 23510
Telephone: [phone]
Facsimile: [phone]
[e-mail]