Intelligent Verification Systems, LLC v. Microsoft Corporation et al
Filing
498
MEMORANDUM OPINION and Order (Redacted Version). Signed by Magistrate Judge Lawrence R. Leonard on 3/24/15. (afar)
UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Norfolk Division
INTELLIGENT VERIFICATION
SYSTEMS, LLC,
Plaintiff,
Case No. 2:12-cv-525
v.
REDACTED VERSION
MICROSOFT CORP., et ah,
Defendants.
MEMORANDUM OPINION AND ORDER
This matter is before the Court on Plaintiff Intelligent Verification Systems, LLC's
("IVS") Motion to Partially Exclude Opinions of Julie L. Davis, ECF No. 289, Motion in Limine
to Preclude Any Reliance by Defendants on Microsoft's "Telemetry Data" or Related Alleged
Summaries, ECF No. 397, Motion in Limine to Preclude Any Reliance by Defendants on Third
Party Settlement Agreements and Related Materials, ECF No. 402, Motion in Limine (Omnibus
Motion), ECF No. 404, Motion in Limine Regarding Prior Art, ECF No. 409, and Defendants
Microsoft Corporation and Majesco Entertainment Company's (collectively "Defendants") Joint
Motion to Exclude the Testimony of Walter Bratic, ECF No. 350, and Defendants' Joint Motions
in Limine Numbers One through Ten, ECF No. 388. On March 20, 2015, the Court conducted a
hearing on all seven of these motions. The Court will first consider the parties' Daubert motions
and then address each motion in limine in turn.
I. EXPERT OPINIONS
A. Legal Standard
Federal Rule of Evidence 702 permits admission of "scientific, technical or other
specialized knowledge" by a qualified expert if it will "help the trier of fact to understand the
evidence or to determine a fact in issue," "the testimony is based on sufficient facts or data," "is
the product of reliable principles and methods," and "the expert has reliably applied the
principles and methods to the facts of the case." Fed. R. Evid. 702 ("Rule 702"). The seminal
case of Daubert v. Merrell Dow Pharm., Inc. provides that expert testimony may be admitted
pursuant to Rule 702 if the testimony is both relevant and reliable, considering a number of
factors including whether the theory or technique "can be (and has been tested)," whether it "has
been subjected to peer review and publication," whether it has been "generally accept[ed]" in the
"relevant scientific community," and "the known or potential rate of error." 509 U.S. 579, 589,
593-94 (1993). Although the admissibility of expert opinion is "flexible," the district court must
function as a gatekeeper, permitting only expert testimony that comports with Rule 702's
guidelines as explained in Daubert.
509 U.S. at 594.
Moreover, the Court's gatekeeping
responsibility applies to all types of expert testimony. Kumho Tire Co. v. Carmichael, 526 U.S.
137,147(1999).
Here, both parties' damages experts utilized the Georgia-Pacific factors to opine as to a
reasonable damages calculation. Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp.
1116, 1120 (S.D.N.Y. 1970). The Georgia-Pacific factors consider a "hypothetical negotiation"
set at the time of the alleged first infringement "to ascertain the royalty upon which the parties
would have agreed had they successfully negotiated an agreement just before infringement
began." Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir. 2009). Examples
of the Georgia-Pacific factors include Factor No. Two, "[t]he rates paid by the licensee for the
use of other patents comparable to the patent in suit," Factor No. Eight, "[t]he established
profitability of the product made under the patent; its commercial success; and its current
popularity," and Factor No. Twelve, "[t]he portion of the profit or of the selling price that may be
customary in the particular business or in comparable businesses to allow for the use of the
invention or analogous inventions." Georgia-Pacific, 318 F. Supp. at 1120.
B. The Proposed Expert Opinions
Ms. Davis, IVS's damages expert, and Mr. Bratic, Defendants' damages expert, both
utilized the Georgia-Pacific factors, albeit their reports' structures differed.
Mr. Bratic
considered each Georgia-Pacific factor sequentially with the bulk of his analysis subsumed in
his consideration of each factor, while Ms. Davis outlined a number of considerations at the
beginning of her report and then addressed each Georgia-Pacific factor with references to
previous considerations.
For purposes of the parties' motions, Mr. Bratic and Ms. Davis's
opinions at Factor Numbers Two, Twelve, Thirteen, and Fourteen are most important.
For
Factor No. Two, "[t]he rates paid by the licensee for the use of other patents comparable to the
patent in suit," Mr. Bratic relied on thirteen Microsoft licenses to support his conclusion that the
form of the royalty should be a running royalty rate. Even though Mr. Bratic admitted that these
thirteen licenses did not involve technology comparable to the patent-in-suit, Mr. Bratic used
them to inform his opinion that Defendants would have negotiated a dollar amount per unit of
licensed product sold in the hypothetical negotiation. In contrast, Ms. Davis relied on four
settlement agreements, three of which also included a license agreement. Each involved Kinectrelated technology, including, for example, patents for skeletal tracking, facial recognition,
optical following of objects, and speech recognition as computer input. The agreements were all
reached in 2013 or 2014, and ranged from a settlement agreement in the amount of $70,000, to
three settlement agreement and license packages ranging from $141,000 to $500,000. Ms. Davis
cited the technological comparability between the patent-in-suit and these Kinect-related
settlement agreements as grounds for her reliance under Factor No. Two.
For Factor No. Twelve, "[t]he portion of the profit or of the selling price that may be
customary in the particular business or in comparable businesses to allow for the use of the
invention or analogous inventions," Mr. Bratic cited several Immersion/Logitech licenses from
the late 1990's, but ultimately relied on a 2005 verdict award and license rate in a case between
Immersion and Sony (the "Immersion patents-in-suit" or "Immersion/Sony verdict and license"),
wherein a jury awarded $82 million in past damages and $8.9 million in pre-judgment interest
against Sony. Thereafter, the district court stayed a permanent injunction against Sony pending
appeal, but ordered Sony to pay a compulsory license fee at the rate of 1.37% for the duration of
the permanent injunction. Mr. Bratic cited Dr. Rhyne's opinions1 for the proposition that:
[T]he Immersion patents-in-suit relate to haptic/force feedback technology used in
consoles, controllers, and games. Furthermore, Dr. Rhyne indicated that the technology
taught by the Immersion Patents-in-Suit allows for a more enjoyable gaming experience
by providing tactile feedback to the user. Therefore, it is Dr. Rhyne's opinion that the
Immersion Patents-in-Suit are technologically comparable to, but much less important
than the Patent-in-Suit. According to Dr. Rhyne, the patented technology taught by the
'073 Patent is substantially more valuable from a technological, feature, and functional
perspective to entertainment console manufacturers and game developers, as well as to
end-users, than the teachings of the Immersion Patents-in-Suit. Furthermore, according
to Dr. Rhyne, the technology taught by the '073 Patent is at least several times more
valuable than the technology taught by the Immersion Patents-in-Suit.
ECF No. 322, attach. 10 at 101-02. Accordingly, Mr. Bratic determined "that the 1.37% royalty
rate from the Immersion/Sony trial provides the most guidance as to the reasonable royalty." Id.
at 103. He opined that "because the Sony products found to infringe the Immersion Patents-in-
Suit (i.e., PlayStation consoles, Dual Shock controllers, and games) were similar to the Accused
Hardware Products (i.e., Microsoft Xbox 360 and Xbox One consoles and Kinect sensors) and
1Mr. Bratic cited his "Interview of Dr. Rhyne, IVS's technical expert," for the following opinions. See ECF No.
322, attach. 10, at 101 n.567.
2As explained by the parties in their briefing and confirmed at the hearing, haptic feedback is the technical term for
vibration in a hand-held controller. One such example of haptic feedback occurs in a driving game when the player
takes the vehicle "off-road." The hand-held controller will vibrate to signify departure from the paved road.
the Accused Games," the Immersion/Sony verdict and license was more relevant than the
Logitech agreements he discussed previously which "involved only gaming peripherals (i.e.
joysticks and mice)." Id.
Conversely, with respect to Factor No. Twelve, Ms. Davis cited the
language of the factor, opining, "I am not aware of any apportionment of profit or selling price
that may be customary in this business." ECF No. 316, attach. 1 at 44.
Turning then to Factor No. Thirteen, "[t]he portion of the realizable profit that should be
credited to the invention as distinguished from non-patented elements, the manufacturing
process, business risks, or significant features or improvements added by the infringer," Mr.
Bratic began his analysis by noting that the Entire Market Value Rule ("EMVR") did not apply,
as the patent-in-suit did not drive the demand for the accused hardware products. Therefore, Mr.
Bratic "relied upon the opinions of Dr. Rhyne to determine the value and/or benefit specifically
attributed to the technology taught by the Patent-in-Suit." ECF No. 322, attach. 10 at 103. To
do this, Mr. Bratic began by identifying the smallest salable patent-practicing unit ("SSPPU"),
which "includes those components in the Accused Hardware Products required to implement the
Patented Functionality in the Accused Hardware Products." Id. at 104. This SSPPU, Mr. Bratic
opined, "represents the value of the Patented Functionality as practiced by Defendants." Id. To
apportion the SSPPU from the accused product, Mr. Bratic used a bill of materials and Dr.
Rhyne's analysis of which hardware components were necessary to practice the patented
technology to determine what percentage of the accused hardware products was required to
actually practice the patent-in-suit. Although Mr. Bratic did not include this specific percentage
in his expert report, IVS's counsel, in explaining Mr. Bratic's apportionment, stated that for the
Xbox 360, 40% of the accused hardware was necessary to practice the patent-in-suit (the
"necessary hardware").
Mr. Bratic then identified the cost of the necessary hardware as
compared to the total cost of the accused product. For example, for the Xbox 360, the necessary
hardware cost $193.30 of the total cost of $236.44; accordingly, Mr. Bratic opined that 81.8% of
the total cost of the Xbox 360 is attributable to the cost of the necessary hardware components
needed to practice the patent-in-suit. Then, taking the average sales price of $237.79 for the
Xbox 360 and applying the 81.8% attributable to necessary hardware components, Mr. Bratic
derived an apportioned royalty base of $194.41 for the Xbox 360.
In comparison, when analyzing Factor No. Thirteen, Ms. Davis relied on Microsoft's data
which "indicate[d] that speech and voice commands are the most widely used feature of the
Kinect." ECF No. 316, attach. 1 at 45. She also cited data indicating "that the Kinect is used
with games only 4% of the time," and analyzed the top fifteen selling accused Xbox 360 games,
citing data that eleven did not use any biometric technology or enrollment, two utilized biometric
technology 5% of the time or less, and two utilized biometric enrollment technology .08% of the
time or less. Id.
Finally, in considering Factor No. Fifteen,3 which functions as a summary of all the
factors, Mr. Bratic relied on Dr. Rhyne's opinion that "the technology taught by the '073 Patent
is at least several times more valuable than the technology taught by the Immersion Patents-in-
Suit," to determine that the parties would have agreed upon a royalty rate of "4.11% (i.e., 1.37%
x 3)." ECF No. 322, attach. 10 at 112. Simply put, Mr. Bratic multiplied the Immersion/Sony
license rate by three to account for the difference between the technologies. On the other hand,
Ms. Davis reiterated her considerations including: "lack of importance of the accused
3"The amount that a licensor (such as the patentee) and a licensee (such as the infringer) would have agreed upon
(at the time the infringement began) if both had been reasonably and voluntarily trying to reach an agreement; that
is, the amount which a prudent licensee - who desired, as a business proposition, to obtain a license to manufacture
and sell a particular article embodying the patented invention - would have been willing to pay as a royalty and yet
be able to make a reasonable profit and which amount would have been acceptable by a prudent patentee who was
willing to grant a license." Georgia-Pacific Corp., 318 F. Supp. at 1120.
functionalities in driving sales of the accused product;" "limited extent of use of the accused
features;" "non-infringing alternatives available to the Defendants;" "agreements related to
Kinect-enabled features;" "commercial relationship between IVS and the Defendants;" and
"advantages of structuring the royalty as a one-time, upfront, lump sum payment." ECF No.
316, attach. 1 at 46.
She then discussed in detail each of the four Kinect-related settlement
agreements before ultimately opining that a $500,000 lump sum payment would be appropriate.
After her discussion of Factor No. Fifteen, Ms. Davis included an evaluation of Mr. Bratic's
report, wherein she criticized Mr. Bratic's opinion on a number of grounds. Id. at 48-57.
C. Discussion
The parties' Daubert motions can be condensed to three categories: first, whether the
Immersion/Sony verdict and license is more comparable than the Kinect-related settlement
agreements; second, whether Mr. Bratic properly apportioned the royalty base; and third,
whether Ms. Davis properly relied on telemetry data supplied by Defendants.
I. Comparability ofthe Licenses
The Court considers together IVS's claim that Ms. Davis's reliance on the settlement
agreements is improper and Defendants' argument that Mr. Bratic relied on non-comparable
licenses including the Immersion/Sony verdict and thirteen Microsoft licenses.
In establishing a reasonably royalty, the "licenses relied on by the patentee in proving
damages [must be] sufficiently comparable to the hypothetical license at issue in suit," Lucent
Techns., Inc., 580 F.3d at 1325, because "alleging a 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). Although "the fact that a license is not perfectly
analogous generally goes to the weight of the evidence, not its admissibility," Ericsson, Inc. v.
D-Link Sys., 773 F.3d 1201, 1227 (Fed. Cir. 2014), the Federal Circuit "ha[s] cautioned that
district courts performing reasonable royalty calculations must exercise vigilance when
considering past licenses to technologies other than the patent in suit and must account for
differences in the technologies and economic circumstances of the contracting parties," Virnetx,
Inc. v. Cisco Sys., 161 F.3d 1308, 1330 (Fed. Cir. 2014) (citations omitted). Indeed, the district
court must exercise its gatekeeping function to bar non-comparable licenses when the license
does not meet the baseline of comparability test, which considers whether "the methodology is
sound" and whether "the evidence relied upon [is] sufficiently related to the case at hand."
ActiveVideo Networks, Inc. v. Verizon Commc'ns, Inc., 694 F.3d 1312, 1333 (Fed. Cir. 2012)
(quoting i4i Ltd. P'ship v. Microsoft Corp., 598 F.3d 831, 852 (Fed. Cir. 2010) (discussing the
"minimum threshold" for expert testimony)). If a license meets this baseline of comparability,
the degree of comparability between licenses including "the degree of relevance or
accuracy... may go to the testimony's weight."
Id. ("The degree of comparability of
the ... license agreements as well as any failure on the part of ActiveVideo's expert to control
for certain variables are factual issues best addressed by cross examination and not by
exclusion.").
Generally, settlement agreements proffered as comparable licenses are disfavored;
however, in "limited circumstances" the Federal Circuit has sanctioned the use of a settlement
agreement as a comparable license. In ResQNet, the Federal Circuit determined that a settlement
agreement to the patents-in-suit was "the most reliable license in [the] record" when compared to
other licenses which did not "even mention[] the patents in suit or show[] any other discernable
link to the claimed technology." ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 870-72 (Fed.
Cir. 2010). In ResQNet, the expert relied on seven licenses, "five of which had no relation to the
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claimed invention." Id. at 870. The remaining licenses both arose from litigation relating to the
patents-in-suit. Id. The Federal Circuit cited the expert and trial court's failure to explain the
link between the unrelated licenses and ultimately compared the licenses itself, finding that "[i]n
simple terms, the '075 patent deals with a method of communicating between host computers
and remote terminals-not training, marketing and customer support services. The re-bundling
licenses simply have no place in this case." Id. at 871. Thereafter, the Federal Circuit cited the
"limited scope of circumstances" outlined in ResQNet as occurring "where a lone settlement
agreement stood apart from all other licenses in the record as being uniquely relevant and
reliable." LaserDynamics, 694 F.3d at 77-78.
Here, IVS's attack on Ms. Davis's reliance on the settlement agreements, although
cloaked in other arguments including, inter alia, her alleged admission that the settlement
agreements were not relevant,4 failure to investigate the agreements, and the potential prejudicial
effect of the settlement agreements, boils down to a claim that the license on which IVS relies —
the Immersion/Sony verdict and license—is more reliable than the settlement agreements. As
such, IVS claims that Defendants' settlement agreements do not fit within ResQNet's limited
circumstance of permitting settlement agreements only if they are the most reliable licenses on
the record. Applying ResQNet in its most narrow interpretation ultimately yields this conclusion:
settlement agreements are permissible as comparable licenses if they are the most reliable
licenses on the record.
Indeed, both IVS and Defendants apparently agree with this
4 As the undersigned noted at the hearing, IVS's interpretation of Ms. Davis's deposition regarding this point is
stretched, at best, and misleading, at worst. In response to the question, "What if you didn't have any settlement
agreements in this case? How would your opinion change?" Davis responded, "Then I would probably have to rely
almost exclusively for a quantification of damages on the design-around value." ECF No. 316 at 9. IVS interpreted
this statement as Ms. Davis "admit[ting] [the settlement agreements] have no effect on her ultimate number; thus
they are not relevant." Id. Such a characterization of this section of the deposition is inaccurate as Ms. Davis was
posited with a hypothetical in which she could not rely on the settlement agreements. In response, she stated that
she would then need to rely on the design-around. An interpretation that she was admitting that the settlement
agreements were irrelevant misconstrues Ms. Davis's statements.
characterization of ResQNet's holding.
See ECF No. 354 at 10 ("The Federal Circuit has
permitted consideration of settlement agreements when they are the best available evidence, that
is, the agreements most comparable to the case at hand."); ECF No. 370 at 115 ("Defendants fail
to prove the four settlement agreements are more reliable than the licenses presented by IVS.").6
Thus, whether Defendants' proposed Kinect-related settlement agreements may be relied upon as
comparable licenses is based on a comparison to IVS's Immersion/Sony verdict. Only if the
Kinect-related settlement agreements are more reliable licenses on the record can they be relied
upon by Ms. Davis. Subsumed in that consideration, then, is an analysis of the comparability of
the Immersion/Sony Verdict and whether it, or the settlement agreements, meet the baseline of
comparability test.
To reiterate the baseline of comparability test, the Federal Circuit has held that the
"degree of comparability" including its relevance and accuracy are factual questions for the jury,
but the baseline of comparability, or the "minimum threshold," requires that "the evidence relied
upon [be] sufficiently related to the case at hand." ActiveVideo, 694 F.3d at 1333 (quoting i4i,
598 F.3d at 852). For the following reasons, the Court finds that the Immersion/Sony verdict and
license does not qualify as "sufficiently related" evidence, and the Kinect-related settlement
agreements constitute the most reliable licenses on the record.
Preliminarily, at the hearing, the undersigned questioned both parties as to what evidence
could meet the baseline of comparability test to permit an expert to opine about a comparable
5 IVS also argued that the settlement agreement in ResQNet "was a license by the plaintiff in the case for the
plaintiffs patent in suit," and "Defendants do not cite a single case that even considered the admissibility of a
settlement agreement that did not involve the plaintiff in the case settling a case and licensing the patent in suit." Id.
at 10-11. These claims, however, are all sub-arguments for the ultimate consideration of whether the agreements are
the most reliable licenses.
6 At the hearing, IVS relied extensively on Apple, Inc. v. Samsung Elecs. Co., ll-cv-01846, 2013 WL 5958176
(N.D. Cal. Nov. 7, 2013). However, IVS relied on the holding of Apple without explaining how the nuances of that
holding translateto this case. For example, "all experts in the Apple case determined that the litigation settlement in
question was "not probative to their primary opinions." See GPNE Corp. v. Apple, Inc., 12-cv-02885, 2014 WL
1494247,at *9 (N.D. Cal. Apr. 16, 2014) (citations omitted) (distinguishingApplebased on its facts).
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license.
IVS answered that once a technical expert opined as to the comparability of the
technology, then the baseline test has been met; defendants argued that the technology must be
related to the actual claimed invention.
The undersigned finds IVS's test—that a technical
expert's opinion on comparability is sufficient to establish a baseline of comparability—to be
logically inconsistent with the Court's role of acting as a gatekeeper to bar non-comparable
licenses. If a baseline of comparability could be established simply through a technical expert's
opinion, then the Court's role in determining whether the "minimum threshold" had been met
would be largely irrelevant, and would directly contravene the Federal Circuit's direction that
"[w]hen relying on licenses to prove a reasonable royalty, alleging a loose or vague
comparability between different technologies or licenses does not suffice." LaserDynamics, 694
F.3d at 79. Under IVS's baseline rule, a "loose or vague comparability" would be sufficient, if
indeed that comparison was spoken from the mouth of a technical expert. Defendants' baseline
of comparability answer more closely mirrors the language of Active Video and i4i's "minimum
threshold" test that "the evidence relied upon [be] sufficiently related to the case at hand."
ActiveVideo, 694 F.3d at 1333 (quoting i4i, 598 F.3d at 852).
IVS argued that the technology in the Immersion/Sony verdict and license is comparable
to the patented technology because both enhance game play and relate to user interaction.
However, Mr. Bratic's citation to Dr. Rhyne's technical comparison of the technology was much
more cursory: "[I]t is Dr. Rhyne's opinion that the Immersion Patents-in-Suit are technologically
comparable to, but much less important than the Patent-in-Suit." ECF No. 322, attach. 10 at 101.
Moreover, Dr. Rhyne's opinions cited in the pleadings were not more explanatory. IVS quoted
Dr. Rhyne's "classification] of the Immersion patents as covering 'an input and output device;'"
which according to IVS, rendered the '073 patents and the Immersion patents technically
11
comparable. ECF No. 371 at 4. IVS also argued that the proper focus for comparability should
be on the patent disclosures themselves, as opposed to how the technology is practiced in the
accused device. IVS argued, citing Dr. Rhyne, that because "the Immersion patents disclosed a
man-machine
interface
which
provides
tactile
feedback
also
known
as
haptic
feedback[,]... [t]here was no requirement that the technology of the Immersion patents must be
implemented in a traditional video game controller." Id. Thus, the patents were comparable
because "[t]he '073 patent is not required to be implemented in a traditional video game
controller and there is also no limitation that the '073 patent could not cover a video game
controller as part of an interactive apparatus." Id. at 5.
Mr. Bratic's reliance on the Immersion/Sony verdict and license as a comparable license
and IVS's arguments in support of comparability are flawed for at least three reasons.7 First,
IVS's attempt to shift focus away from how the Immersion patent was practiced as haptic
feedback in the accused Sony game controllers, to simply the Immersion patent disclosure, is
misplaced. Although the patent disclosure does have some role to play in the comparability
analysis, it is not a role that can swallow the license agreement entirely. IVS's attempt to dodge
flaws in how the Immersion technology was implemented as haptic feedback by focusing on the
patent disclosures is not sufficient to establish comparability.
IVS's consideration of the
Immersion patent disclosures are theoretical in nature; arguably, the Immersion patents, and even
the '073 patent, need not be practiced entirely in the way they are in the accused products. But
ignoring the patent's practice in the accused product, by hiding behind the language of the patent
disclosures, ignores the role that the technological comparison plays within the license
comparability analysis. The technological considerations are subsumed with in the ultimate
7 The Court also notes that the Immersion/Sony verdict and royalty rate was set years before the Federal Circuit
beganrequiring apportionment of damages, a fact which Mr. Bratic readily admitted. ECF No. 355, attach. 2 at 17.
12
consideration of the license comparability; so, the correct focus is on how the patented
technology is practiced within the license. Moreover, IVS cited no case law supporting the
proposition that a patent's disclosures could override the comparison between how the
technology is practiced in considering license comparability.
Second, the Immersion/Sony technology is far from comparable to the patented
technology.
IVS's patented technology primarily functions as an input device, using facial
recognition technology
to acquire information about the player.
Conversely, the
Immersion/Sony technology primarily functioned as an output device, using haptic feedback to
signal the player as to game play changes. Even more importantly, the Immersion/Sony
technology was simply a modification of a handheld game controller, whereas the IVS's patented
technology of facial recognition displaces the need for handheld game controllers, resulting in a
fundamental change in game play. IVS's argument that both technologies relate generally to an
"interface" is reminiscent of the Federal Circuit's rejection of a license simply because it was
"PC-related." Lucent, 580 F.3d at 1328. Finally, regardless the technologies' comparison, Mr.
Bratic's use of the Immersion/Sony verdict and license as a comparable license belies his
proposition that the two are comparable.
After opining as to the comparability of the
technologies, Mr. Bratic, in reliance on Dr. Rhyne's opinion that "the technology taught by the
'073 Patent is at least several times more valuable than the technology taught by the Immersion
Patents-in-Suit," multiples the Immersion/Sony license rate by three. ECF No. 322, attach. 10 at
112. The fact that Mr. Bratic had to modify the royalty rate, based on the consideration that the
Immersion/Sony technology was less valuable than the patented technology, is considerable
Q
evidence of the non-comparability of the Immersion/Sony technology.
8IVS argued that Defendants' failure to move to exclude Dr. Rhyne's opinion as to thecomparability of the licenses
is fatal to their attack on Mr. Bratic. The Court finds this argument unpersuasive. In considering the comparability
13
Not only was Mr. Bratic's reliance on the Immersion/Sony verdict and license as a
comparable license improper, Mr. Bratic also incorrectly relied on thirteen Microsoft licenses to
support the form of his royalty under Georgia-Pacific Factor No. Two. ECF No. 322, attach. 10
at 36. Mr. Bratic admitted that none of these agreements involved comparable technology, but
proffered them simply to support his finding that the hypothetical negotiation would produce a
running royalty, as opposed to a lump sum payment. Id. The Northern District of California
recently rejected a similar opinion in TV Interactive Data Corp. v. Sony Corp., 929 F. Supp. 2d
1006 (N.D. Cal. Mar. 11, 2013). There, the expert cited agreements that were "not for
technologies directly comparable" to prove that "Sony has agreed to pay running royalties
ranging from $0.01 to $0.25 per unit." Id. at 1015. Because the expert admitted that the
technologies were not comparable, the court excluded him from referencing them, even though
he proposed to only use them to note that they supported his royalty rate. Id. Mr. Bratic
attempts to do the same thing as the expert in TV Interactive Data Corp. He admits the
technologies are not comparable, even though Factor No. Two is addressed to "[t]he rates paid
by the licensee for the use of other patents comparable to the patent-in-suit." ECF No. 322,
attach. 10 at 36. Though Mr. Bratic proposes to use the licenses simply to support the form of
the royalty, the Federal Circuit has specifically rejected reliance on technologically noncomparable licenses under Georgia-Pacific Factor. No. Two. See, e.g., Lucent, 580 F.3d at
1326-28.
Notably, IVS never argued on brief or at the hearing that the Kinect-related settlement
agreements were not technologically comparable. IVS's remaining disputes with the Kinectrelated settlement agreements about the inclusion litigation avoidance costs in the agreements
of the licenses, the Court has addressed Mr. Bratic's analysis and his reliance on Dr. Rhyne. Excluding any
reference to the Immersion/Sony verdict and license will bar both experts from discussing it.
14
and Ms. Davis's alleged failure to investigate the agreements will be subjects for cross-
examination.9 Accordingly, the Kinect-related settlement agreements are the most reliable
licenses on the record.
In addition, the Court's rejection of Mr. Bratic's reliance on the
Immersion/Sony verdict and license renders Defendants' remaining challenge pertaining to Mr.
Bratic's multiplication of the Immersion/Sony license rate by three moot.
2. Mr. Bratic's Apportionment Analysis
Besides Mr. Bratic's reliance on the Immersion/Sony verdict and license as a comparable
license, the parties also dispute Mr. Bratic's apportionment.10 As discussed above, Mr. Bratic
determined what hardware components of the accused products were necessary to practice the
patent, identifying this as the SSPPU.
Then, he determined the cost of those necessary
components as compared to the total cost of the accused product to determine what percentage of
the total cost of the accused product was attributable to the SSPPU. Mr. Bratic applied that
percentage to the average sales price of the accused product to create an apportioned royalty
base. Mr. Bratic opined that "[t]he 'smallest salable patent-practicing unit' represents the value
of the Patented Functionality as practiced by Defendants." ECF No. 322, attach. 10 at 106.
"By statute, reasonable royalty damages are deemed the minimum amount of
infringement damages 'adequate to compensate for the infringement.'" LaserDynamics, 694
F.3d at 66 (citing 35 U.S.C. § 284). To properly calculate this compensation, "it is generally
required that royalties be based not on the entire product, but instead on the smallest salable
patent-practicing unit." Id. at 67 (citations omitted). This is because "[w]here small elements of
multi-component products are accused of infringement, calculating a royalty on the entire
9 In its Daubert motion, IVS also moved to exclude the settlement agreements "as unduly prejudicial under Federal
Rule of Evidence 403 and subject to exclusion under Federal Rule of Evidence 408." ECF No. 316 at 9. Such
arguments are properly reserved for a motion in limine, and will be addressed accordingly.
10 Because Ms. Davis determined that a lump sum payment was a reasonable royalty, she had no need to apportion.
15
product carries a considerable risk that the patentee will be improperly compensated for non
infringing components of that product." Id. The "Entire Market Value Rule" or "EMVR" is a
"narrow exception" to the general rule requiring royalties be derived from the SSPPU. Id. The
EMVR provides that "a patentee may be awarded damages as a percentage of revenues or profits
attributable to the entire product," only "[i]f it can be shown that the patented feature drives the
demand for an entire multi-component product." Id.
Both parties agree that this case does not qualify for the EMVR exception;11 indeed, IVS
has not asserted that its facial recognition technology drives demand for the Xbox 360 or the
Xbox One. The parties' dispute hinges on whether Mr. Bratic properly apportioned the royalty
base, specifically, whether he was required to apportion beyond identifying the SSPPU.
Defendants argued that Mr. Bratic was required to apportion out the value attributable to the
patented features, beyond just his identification of the SSPPU. IVS's response is four-fold: first,
IVS argued that because the patent-in-suit is an apparatus claim, the entirety of the accused
products are necessary to infringe and constitute the SSPPU, see ECF No. 371 at 17 ("The Xbox
console, the Kinect, and the games are not broken down into smaller component parts that in turn
are sold on the market. Thus, the accused products, taken together, form the 'smallest saleable
unit' and 'smallest saleable patent practicing unit);'" second, that further apportionment for the
value of the patented feature, beyond removing the non-infringing hardware components, was
not required, id. at 20-21; third, at the hearing, IVS argued that once apportioned, the royalty rate
11 Defendants also argued that Mr. Bratic improperly relied on the entire sales of the accused product. Because IVS
has admitted that it does not qualify for the EMVR exception, the Court finds no reason to permit Mr. Bratic to
testify to the entire sales of the accused product. Indeed, to opine as to the entire sales under the guise of
apportioning circumvents the EMVR entirely. The Federal Circuit has strongly cautioned against disclosure of an
alleged infringer's total sales or revenue because of the potential to skew the jury's damages calculation. See, e.g.,
Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1320 (Fed. Cir. 2011) ("The $19 billioncat was never put back
into the bag even by Microsoft's cross-examination of Mr. Gemini and re-direct of Mr. Napper, and in spite of a
final instruction that the jury may not award damages based on Microsoft's entire revenue from all the accused
products in the case.") (citations omitted).
16
itself accounts for the value of the patented features; and finally, that Mr. Bratic was prevented
from apportioning the value of the patented feature because Defendants failed to provide
adequate usage data.
Notably, IVS's argument on brief that the SSPPU is the entire accused product, id. at 17,
is directly contrary to Mr. Bratic's opinion. Mr. Bratic opined:
I have not considered the entire product as the appropriate base, but instead considered
only those components that implement the technology taught by the Patent-in-Suit,
which represents the "smallest salable patent-practicing unit,''' to be included as the
appropriate royalty base. It is my understanding that the "smallest salable patentpracticing unit" includes those components in the Accused Hardware Products required
to implement the Patented Functionality in the Accused Hardware Products.
ECF No. 322, attach. 10 at 105-106 (emphasis added).
Mr. Bratic went on to identify the
necessary hardware components needed to practice the patented feature and identified those
necessary components as the SSPPU. Id. Moreover, at the hearing, IVS stated that of the
eighteen components listed in the bill of materials for the accused products, only eight were
identified by as being necessary to practice the patented feature. Accordingly, the undersigned
disregards IVS's argument that the SSPPU is the entirety of the accused product as Mr. Bratic
did not opine in that regard; rather, the SSPPU identified by Mr. Bratic was only those hardware
components necessary to practice the patented feature.
Second, IVS argued that further apportionment for the value of the patented feature, beyond
identification of the necessary hardware components, was not required. Although IVS cited
large portions of the Federal Circuit's holding in Virnetx, Inc. v. Cisco Systems, Inc., 161 F.3d
1308 (Fed. Cir. 2014) in its brief, IVS's attempt to distinguish Virnetx is not readily apparent.
IVS seems to distinguish Virnetx on its facts, arguing that "[i]n Virnetx, the patents in suit had
system and method claims that did not recite component hardware parts like the entertainment
device, acquisition device, and processor." ECF No. 371 at 19. IVS also argued that "further
17
apportionment beyond removal of the 'non-infringing components' from the accused products is
not a requirement imposed by Virnetx or any other legal authority cited by Defendants." Id. at
21. However, these arguments fail to rebut the plain language of Virnetx:
Where the smallest salable unit is, in fact, a multi-component product containing several
non-infringing features with no relation to the patented feature ... the patentee must do
more to estimate what portion of the value of that product is attributable to the patented
technology. To hold otherwise would permit the entire market value exception to
swallow the rule of apportionment.
767 F.3d at 1327-28. Although Mr. Bratic did apportion out those hardware components not
required to practice the patented feature, he did not properly apportion any value to the necessary
hardware components. Indeed, a processor has "several non-infringing features with no relation
to the patented feature," id. at 1327, yet Mr. Bratic attributed 100% of the processor to the
10
apportioned royalty base. IVS could not plausibly argue that the processor does not have any
other function besides practicing the patented feature, but that is exactly what Mr. Bratic's
apportionment signifies.
His failure to identify the value of those necessary hardware
components renders his opinion flawed and directly contrary to the Federal Circuit's provision in
Virnetx.
Moreover, Mr. Bratic's value determination based on comparing the costs of the
necessary hardware components to practice the patented technology and the total cost of the
accused product also fails to properly consider the value of the patented feature. This calculation
still ties the alleged "value" to the necessary hardware components, not the value of the patented
feature. Under Virnetx, Mr. Bratic was barred from ascribing all of the value of the patented
feature to a multi-component product like a processor.
Further, IVS argued at the hearing that, once apportioned, the royalty rate itself accounts
12 A processor, also called a "CPU" or Central Processing Unit "is the brains of the computer where most
calculations take place. In terms of computing power, the CPU is the most important element of a computer
system." Vangie Beal, CPU-Central Processing Unit, www.webopedia.com/TERM/C/CPU.html (last visited Mar.
24,2015).
18
for the value of the patented feature. Although IVS cited Virnetx for this proposition, Virnetx's
consideration of an expert's royalty rate was in the context of whether his reliance on
comparable licenses was proper. Id. at 1330-1331. Indeed, the opposite conclusion appears to
be correct. Id. at 1333 ("[A] patentee may not balance out an unreasonably high royalty base
simply by asserting a low enough royalty rate.") (citing Uniloc, 632 F.3d at 1320). Moreover,
Mr. Bratic did not use the royalty rate to account for the value of the patented feature within the
accused product. Mr. Bratic increased his royalty rate based on an assumption that the patented
technology was more valuable than the Immersion patents. Thus, any consideration of the value
of the patented technology in the royalty rate was a comparison between the Immersion
technology and IVS's '073 patent, not the value of the patented feature, facial recognition, to the
accused product, Kinect and Xbox 360 or Xbox One.
Finally, IVS's argument that Mr. Bratic failed to apportion the value of the patented
feature because Defendants did not provide adequate usage data is meritless. Regardless of
whether Defendants provided usage data, it was IVS's burden to apportion the value of the
patented feature to substantiate its damages claim. See e.g., VirnetX, 161 F.3d at 1329 ("VirnetX
cannot simply hide behind Apple's sales model to avoid the task of apportionment.");
LaserDynamics, 694 F.3d at 70 (holding that there is no "necessity-based exception to the entire
market value rule"). Moreover, Mr. Bratic did not cite any lack of usage data in his analysis;
rather, his "value" apportionment was based on the cost of the necessary hardware components
as compared to the total cost of the accused product. Accordingly, the undersigned finds that
Mr. Bratic improperly apportioned the royalty base by failing to apportion the value of the
patented feature beyond his identification of the SSPPU.
19
3. Ms. Davis's Reliance on Telemetry Data & Other Methodological Attacks
IVS claimed that Ms. Davis's reliance on telemetry data provided by Defendants was
improper because "she never looked at the actual underlying data upon which these litigationinspired spreadsheets are allegedly based and never asked to see that data." ECF No. 315 at 17.
Defendants' explanation of the telemetry data renders IVS's argument on this point moot. At the
hearing, Defendants explained that the telemetry data, or usage data, is collected from all Xbox
360s and Xbox Ones and tracks anonymously the user's implementation of certain features,
which games are played, and other data. This data is stored in rough form on Microsoft's
servers. To extract any data, an individual must input a specific query, in response to which, the
server generates the corresponding data. Accordingly, the server houses a mass of data, and to
the untrained eye, this data would be incomprehensible without specific extraction for the portion
of the data desired. To review the "actual underlying data," as IVS asserted, Ms. Davis would
have needed specialized training to sift through the vast amount of data collected by Microsoft.
Such a duty need not be imposed on a damages expert. Ms. Davis properly relied on the
spreadsheets, which according to Microsoft, were generated directly from the underlying data.
Any fault with Ms. Davis's calculation regarding the telemetry data and inclusion of games that
were not accused are properly the subject for cross-examination as those issues go to the weight
of Ms. Davis's testimony, not the admissibility.
IVS also argued that Ms. Davis did not quantify how she arrived at her lump sum
payment of $500,000, arguing that "she has not provided any mathematical basis for her
conclusion, did not perform any mathematical calculations to arrive at it, and she had no starting
point." ECF No. 316 at 19. "[A]ny reasonable royalty analysis necessarily involves an element
of approximation and uncertainty," Lucent, 580 F.3d at 1325 (citations omitted), and IVS's
20
reliance on Whitserve, LLC v. Computer Packages, Inc. does not require otherwise.
In
Whitserve, the Federal Circuit stated that "while mathematical precision is not required, some
explanation of both why and generally to what extent the particular factor impacts the royalty
calculation is needed." 694 F.3d 10, 31 (Fed. Cir. 2012). Ms. Davis's opinion was well within
the "explanation" contemplated by Whitserve; for example, in considering Factor No. Fifteen,
Ms. Davis cited eight different considerations ultimately necessary to forming her opinion.
Moreover, Ms. Davis's lump sum amount was well within the range of comparable licenses
provided to her and the cost of the design-around. IVS's other arguments that Ms. Davis ignored
evidence about deficiencies with the design-around again can be discussed on cross-examination
as this addresses the weight of her opinion, not its admissibility.
IVS's final complaint with Ms. Davis is her failure to consider "hold-up value." Hold-up
value "deals[s] with the special situation in which a technical standard is set for an industry that
puts one patent holder 'in a position to "hold up" the industry participants from implementing the
standard.'" Astrazeneca AB v. Apotex Corp., 985 F. Supp. 2d 452, 500-501 (S.D.N.Y. 2013)
(citations omitted). IVS's argument as to this point appears contradictory. On brief, IVS argued
that "hold up value is not relevant to this case . . . [and] Ms. Davis must be precluded from
offering her opinions regarding hold up value." ECF No. 316 at 23. IVS further noted that Ms.
Davis had testified that she "would disregard" any "negotiating advantage that would tend to
increase the royalty because it constitutes hold up value, which Ms. Davis contended was an
inappropriate consideration." Id. At the hearing, moreover, IVS argued that Ms. Davis should
have considered "hold up value" and claimed that Ms. Davis should be barred from testifying
that it is irrelevant. As IVS has admitted that its patented technology is not a technical standard,
ECF NO. 316 at 23, the Court sees no flaw in Ms. Davis's opinion that hold-up value is
21
irrelevant. Moreover, any question as to a general negotiating advantage IVS would have had
over Defendants due to the timing of the hypothetical negotiation centers on whether the
negotiation would have been set in November or June 2010. Although Mr. Bratic opined that the
hypothetical negotiation would have occurred in November 2010, the date of the first sale of the
accused product, Ms. Davis opined that the negotiation would have occurred in June 2010, the
date of first infringement when the Kinect was demonstrated for the public. IVS did not provide
any evidence as to why the June 2010 date was incorrect. Accordingly, any argument that IVS
had a negotiating advantage over Defendants due to the upcoming holiday season necessarily
requires that the date of first infringement be set in November. As IVS has provided no evidence
to contradict Ms. Davis's June 2010 date, IVS's argument as to its alleged negotiating advantage
appears largely irrelevant.
In conclusion, for the reasons stated herein, Defendants' Motion to Exclude the
Testimony of Walter Bratic, ECF No. 350, is GRANTED and IVS's Motion to Partially Exclude
the Opinions of Julie L. Davis, ECF No. 289, is DENIED. The Court turns next to the parties'
Motions in Limine.
II. MOTIONS IN LIMINE
The Motions in Limine include: IVS's Motion in Limine to Preclude Any Reliance by
Defendants on Microsoft's "Telemetry Data" or Related Alleged Summaries, ECF No. 397,
IVS's Motion in Limine to Preclude Any Reliance by Defendants on Third Party Settlement
Agreements and Related Materials, ECF No. 402, IVS's Motion in Limine (Omnibus Motion),
ECF No. 404, IVS's Motion in Limine Regarding Prior Art, ECF No. 409, and Defendants' Joint
Motions in Limine Numbers 1 through 10, ECF No. 388.
22
A. Legal Standard
Although not specifically provided for in the Federal Rules of Evidence, motions in limine
"ha[ve] evolved under the federal courts' inherent authority to manage trials." United States v.
Verges, No. I:13cr222, 2014 WL 559573, at *2 (E.D. Va. Feb. 12, 2014) "The purpose of a
motion in limine is to allow a court to rule on evidentiary issues in advance of trial in order to
avoid delay, ensure an even-handed and expeditious trial, and focus the issues the jury will
consider." Id.
However, a motion in limine "should be granted only when the evidence is
clearly inadmissible on all potential grounds." Id. at *3. For the following motions in limine
that are denied as premature, including challenges to relevance or authentication, they may be
raised again through objections at trial. See, e.g., Columbia Gas Transmission, LLC v. Martin,
No. 3:1 l-cv-060,2011 WL 9974802, at *1 (E.D. Va. Dec. 19, 2011).
B. Discussion
I. IVS's Motion in Limine to Preclude AnyReliance by Defendants on Microsoft's "Telemetry
Data " or Related Summaries
IVS moved to exclude the telemetry data and other summaries on two grounds: first, as a
sanction under Federal Rule of Civil Procedure 37(c) for Defendants' failure to timely disclose
them in discovery; and second, because the spreadsheets are allegedly unauthenticated,
inadmissible hearsay. IVS argued that, on four separate occasions, IVS requested the telemetry
data either in a Request for Document Production ("RFP") or correspondence. However, it was
not until IVS's Fifth RFP that IVS specifically referenced the request as "telemetry data." At the
hearing, IVS represented to the Court that telemetry data would have been responsive to the
Second RFP, September 2013 letter, and Fifth RFP.13 Based on this case's lengthy factual
history replete with motions to compel, the Court finds it perplexing indeed that if those three
13 Counsel concededthat the First RFP cited in IVS's brief was not targetingtelemetrydata.
23
requests were directed at telemetry data, IVS would have declined to file a motion to compel on
such arguably relevant evidence.
Regardless of this consideration, however, Microsoft did
timely produce spreadsheets of the telemetry data on September 18, 2014, one month after the
Fifth RFP's specific request.
IVS also attacks the admissibility of the spreadsheets arguing that they were not produced
in the ordinary course of business and are unauthenticated.
As previously described by
Microsoft's counsel at the hearing, this data was kept in the regular course of business, but the
unwieldy nature of the data requires specific extraction. In their briefing and at the hearing,
Microsoft extended IVS the opportunity to inspect the data in its raw form. Moreover, IVS's
attack on the authentication of the data is ill-suited to a motion in limine. Defendants will proffer
a foundation at trial, then if that is inadequate, IVS may object. Moving to exclude without any
knowledge of the proffered foundation, however, is premature. Accordingly, IVS's Motion in
Limine, ECF No. 397, is DENIED.
2. IVS's Motion in Limine to Preclude Any Reliance by Defendants on Third Party Settlement
Agreements and Related Materials
IVS argued that the settlement agreements and related materials should be excluded
pursuant to Federal Rule of Evidence 403 and 408, as inadmissible hearsay, and based on
Defendants' inability to authenticate the agreements. As this Court already concluded that the
settlement agreements constitute the most reliable, and therefore probative, evidence on the
record, any prejudicial effect of the settlement agreements is greatly outweighed by their
probative value. Moreover, Defendants' ability to lay a proper foundation is a question to be
addressed after Defendants attempt to authenticate the agreements.
Any question as to
authentication is purely speculative at this stage in the litigation. Finally, to the extent that IVS
contends the settlement agreements themselves are hearsay evidence, IVS does not contend that
24
Ms. Davis's reliance on the settlement agreements is improper as experts routinely on
inadmissible evidence. Rather, IVS attempts to block the settlement agreements admission as
evidence. However, whether the settlement agreements constitute hearsay will depend on their
proffered purpose and factual context. Indeed, it is for this reason that "[o]rders in limine which
exclude broad categories of evidence should rarely be employed. A better practice is to deal
with questions of admissibility of evidence as they arise." Sperberg v. Goodyear Tire & Rubber
Co., 519 F.2d 708, 712 (6th Cir. 1975). Accordingly, IVS's Motion in Limine, ECF No. 402, is
DENIED.
3. IVS's Omnibus Motion in Limine
The parties represented that IVS's Motion in Limine Nos. One through Six, and Thirteen
have been resolved by the parties; accordingly, with respect to these claims, the Court finds that
they are MOOT.14 Thus, the Court will only address the remaining disputed claims. For the
following reasons, IVS's Omnibus Motion in Limine, ECF No. 404, is DENIED.
A. IVS's Motion in Limine No. Seven
IVS seeks to exclude any argument or evidence regarding an opinion of counsel. In
response, Defendants proposed that they would consent to this request if IVS agreed not to argue
that Defendants should have sought an opinion of counsel. IVS declined to stipulate to this
agreement. At the hearing, Defendants represented that they do not intend to offer any evidence
or argument regarding an opinion of counsel; thus, it is unclear as to what evidence IVS is
attempting to exclude in this motion in limine. Accordingly, IVS's Motion in Limine No. Seven
is DENIED.
B. IVS's Motions in Limine No. Eight
IVS's Motion in Limine No. Eight seeks to exclude the defenses of unpatentability and
14 Additionally, Nos. Onethrough Six, andThirteen are included in theparties' stipulation. ECF No. 474.
25
prosecution history estoppel because Defendants did not provide any facts in discovery that
would support these defenses. This motion "attackfs] the propriety of allowing Defendants] to
proceed with several affirmative defenses, based upon the evidence produced - or not produce during discovery." Telewizja Polska USA, Inc. v. Echostar Satellite Corp., No. 02 C 3293, 2004
WL 2367740, at *1 (N.D. 111. Oct. 15, 2004). Accordingly, "[b]ecause a motion in limine is not
the appropriate vehicle for addressing the strength of the evidence or the substance of a
complaint," id., IVS's Motion in Limine No. Eight is DENIED.
C. IVS's Motions in Limine Nos. Nine and Eleven
IVS's Motion in Limine No. Nine seeks to exclude any argument, evidence or reference
to Defendants' corporate citizenship, charitable acts, and similar matters. IVS's Motion in
Limine No. Eleven seeks to exclude all evidence relating to Kinect for Windows or any other
non-accused products. A motion in limine should only be granted when the evidence is
undoubtedly inadmissible on all potential grounds. Verges, 2014 WL 559573, at * (citing United
States v. Brawner, 173 F.3d 966, 970 (6th Cir. 1999)). At this stage, not having been presented
with the factual context for which these arguments and evidence may be proffered, the Court
cannot sanction such a broad exclusion. Accordingly, IVS's Motions in Limine No. Nine and
Eleven are DENIED.
D. IVS's Motion in Limine No. Ten
IVS seeks to preclude the Defendants from using the existence of their own patents as
any form of non-infringement defense. Defendants argue that to the extent their patents are
permitted by law, such as evidence relating to willful infringement, the patents should be
admitted. Moreover, Defendants argue that the patents are relevant to the development process
of the accused products and relevant to their damages defense.
26
A defendant's patents are
relevant to rebut a claim of willful infringement, see King Instrument Corp. v. Otari Corp., 767
F.2d 853, 867 (Fed. Cir. 1985), and any relevance to the development process and damages
defense will be determined based on the Defendants' factual context and proffered purpose of the
evidence at trial. Accordingly, IVS's Motion in Limine No. Ten is DENIED.
E. IVS's Motion in Limine No. Twelve
IVS seeks to preclude testimony about the functioning of the accused source code by
witnesses on Microsoft's witness list and preclude expert testimony by Defendants' lay
witnesses. Any scope of witness testimony is necessarily governed by the foundation laid by the
party proffering the testimony. Accordingly, this motion is premature because it necessarily
depends on whether Defendants lay an appropriate foundation and demonstrate relevance.
Accordingly, IVS's Motion in Limine No. Twelve is DENIED.
F. IVS's Motion in Limine No. Fourteen
IVS seeks to exclude mischaracterizations of IVS's infringement theories. The Court
will define IVS's claims for trial and what arguments are appropriate and relevant to proving or
disproving those claims. Accordingly, IVS's Motion in Limine No. Fourteen is DENIED as
unnecessary.
G. IVS's Motion in Limine No. Fifteen
IVS seeks to exclude improper non-infringement theories and arguments based on facial
recognition not being required or necessary and based on limited time periods of non
infringement.
At the hearing, Defendants represented that this motion essentially seeks to
exclude Defendants' theory of their defense.
Indeed, whether or not facial recognition is
required or necessary for skeletal tracking may, at least, be a relevant consideration depending on
the factual context in which the argument is proffered. At this juncture, the Court cannot say that
27
this argument is completely irrelevant not yet having considered IVS's arguments for
infringement. Accordingly, IVS's Motion in Limine No. Fifteen is DENIED.
4. Defendants' Motions in Limine Nos. One through Ten
At the hearing, the parties represented that Defendants' Motions in Limine Nos. Six
through Seven have been resolved. Moreover, per the filing of the Stipulation, ECF No. 474 at
2, the Court considers Defendants' Motion in Limine No. Eight and Nine resolved. Accordingly,
the Court considers Nos. Six, Seven, Eight and Nine to be MOOT. Thus, the Court will only
address the remaining disputed motions.
For the following reasons, Defendants' Motion in
Limine, ECF No. 388, is GRANTED IN PART and DENIED IN PART.
A. Defendants' Motion in Limine No. One
By this motion, Defendants seek to preclude IVS from making any reference and offering
at trial evidence stemming from Immersion/Sony litigation. As outlined above, this Court has
ruled that Mr. Bratic's reliance on this litigation was flawed under Daubert; accordingly,
Defendants' Motion No. One is GRANTED.
B. Defendants' Motion in Limine No. Two
Here, Defendants seek to preclude IVS from referencing other non-comparable licenses,
specifically in the context of opining as to the propriety of utilizing a running royalty as an
appropriate damages benchmark. Mr. Bratic relied on thirteen Microsoft licenses involving noncomparable technology to support his opinion that the form of a running royalty was appropriate
here. Again, the Court previously determined that Mr. Bratic's reliance on these non-comparable
licenses was flawed; thus, for the reasons stated herein, Defendants' Motion No. Two is
GRANTED.
28
C. Defendants' Motions in Limine Nos. Three and Four,
Defendants Motion in Limine No. Three seeks to preclude IVS from referencing the sales
volume of Defendants' accused products. Defendants' Motion in Limine No. Four seeks to
preclude any reference to Microsoft's valuation, revenues, profitability, and cash reserves. As
this Court previously determined above, IVS does not qualify for the EMVR exception, and thus
is barred from relying on the total revenue or sales of Defendants' accused products.
Accordingly, Defendants' Motions in Limine Nos. Three and Four are GRANTED.
D. Defendants' Motions in Limine Nos. Five and Ten
Motion in Limine No. Five seeks to preclude any reference to unrelated legal proceedings
involving the Defendants. Defendants' Motion in Limine No. Ten seeks to preclude any mention
of expert's prior retention by counsel in this case. "The purpose of a motion in limine is to allow
a court to rule on evidentiary issues in advance of trial in order to avoid delay, ensure an even-
handed and expeditious trial, and focus the issues the jury will consider." Verges, No. 2014 WL
559573, at *2. Such motions are disfavored, and should only be granted when the evidence is
clearly inadmissible on all potential grounds. Id.; Hawthorne Partners v. AT&TTechs., Inc., 831
F.Supp. 1398 (N.D. 111. 1993). Often, whether evidence should be admissible will depend upon
the factual context in which it is placed. Accordingly, "[ojrders in limine which exclude broad
categories of evidence should rarely be employed. A better practice is to deal with questions of
admissibility of evidence as they arise." Sperberg, 519 F.2d at 712.
At this juncture, the Court cannot say that all evidence regarding the Defendants' other
legal proceedings is irrelevant and therefore should not be admitted. Moreover, neither can any
evidence relating to an expert's prior retention by counsel be definitely excluded as irrelevant.
Certainly, such information cannot be admitted without the appropriate foundation and
29
demonstration of relevance. However, absent the factual context in which such evidence might
be proffered, an order excluding all such evidence before trial is premature. Consequently,
Defendants' Motion in Limine Nos. Five and Ten are DENIED, and the Court will rule on these
issues as they arise at trial.
5. IVS's Motion in Limine Regarding Prior Art
IVS seeks to preclude any evidence relating to Nitta 1997 because it is allegedly not prior
art under 35 U.S.C. §§ 102 or 103; preclude any evidence or testimony regarding work in Japan
because any relevance is outweighed by a high likelihood of confusion and possible prejudice;
preclude any prior art references that were not part of an expert report and require expert
testimony; and preclude any prior art not timely disclosed in discovery.
For the following
reasons, IVS's Motion in Limine, ECF No. 409, is DENIED.
IVS argues that Nitta 1997, a prior art publication relied upon by Defendants, is not prior
art under 35 U.S.C. §§ 102(a), (b), and 103 because only patents and printed publications from
foreign countries may qualify as prior art. "Because there are many ways in which a reference
may be disseminated to the interested public, 'public accessibility' has been called the
touchstone in determining whether a reference constitutes a 'printed publication' bar under 35
U.S.C. § 102(b)." SRIInt'l, Inc. v. Internet Sec. Sys., Inc., 511 F.3d 1186, 1194 (Fed. Cir. 2008)
(quoting In re Hall, 781 F.2d 897, 898-99 (Fed. Cir. 1986)). "A given reference is 'publicly
accessible' upon a satisfactory showing that such document has been disseminated or otherwise
made available to the extent that persons interested and ordinarily skilled in the subject matter or
art exercising reasonable diligence, can locate it." Id. (quoting Bruckelmyer v. Ground Heaters,
Inc., 445 F.3d 1374, 1378 (Fed. Cir. 2006)). According to IVS, Dr. Nitta, one of the authors of
Nitta 1997, did not provide adequate evidence that Nitta 1997 had been publicly accessible such
30
that it could qualify as prior art. However, Dr. Nitta testified that he presented Nitta 1997 at a
workshop in Nagoya, Japan in 1997. ECF No. 413 at 6. He testified that based on his
understanding, he believed that everyone registered for his workshop, about fifty participants,
received a copy of his paper. Id. He based this conclusion on the fact that he received a paper as
a printed copy of the paper was distributed to all participants at the workshop. Id. at 7. Based on
Dr. Nitta's testimony, Defendants have established enough evidence to prove that Nitta 1997 was
publicly accessible such that it qualifies as prior art.15 Moreover, any evidence ortestimony by
Drs. Nitta and Hasegawa regarding Nitta 1997 and other prior art references will most likely be
relevant to providing context for the prior art. Accordingly, with regard to Nitta 1997 and Drs.
Hasegawa and Nitta's testimony and evidence, the motion is DENIED.
IVS also seeks to exclude prior art references which were not part of an expert report and
require expert testimony. IVS does not rely on any specific law for the proposition that prior art
requires expert testimony, but generally relies on the principle that certain prior art references are
highly technical and scientific in nature and may require expert testimony. Without presentation
of those prior art references and the proffered testimony to explain them, the Court cannot
implement such a broad exclusion as requested by IVS. Accordingly, with respect to prior art
references not included in the expert reports and allegedly requiring expert testimony, this
motion is premature, and the Court DENIES it.
Finally, IVS seeks to exclude prior art references not disclosed in discovery. At the
hearing, Defendants represented that all the prior art references cited in their 35 U.S.C. § 282
Notice were disclosed in discovery, specifically in response to IVS Interrogatory No. 6.
Accordingly, this motion is DENIED with respect to prior art references allegedly not disclosed
15 It is curious that, although Nitta 1997 was repeatedly cited and relied upon by Microsoft in its summary judgment
motion, only now does IVS raise the claim that Nitta 1997 is not prior art. See ECF No. 257.
31
in discovery.
III. CONCLUSION
In summary, for the reasons stated herein, Defendants' Motion to Exclude the Testimony
of Walter Bratic, ECF No. 350, is GRANTED, and IVS's Motion to Partially Exclude the
Opinions of Julie L. Davis, ECF No. 289, is DENIED. IVS's Motion in Limine, ECF No. 397,
is DENIED. IVS's Motion in Limine, ECF No. 402, is DENIED. IVS's Omnibus Motion in
Limine, ECF No. 404, is DENIED.
Defendants' Motion in Limine, ECF No. 388, is
GRANTED IN PART and DENIED IN PART. IVS's Motion in Limine, ECF No. 409, is
DENIED.
The Clerk is DIRECTED to forward a copy of this Memorandum Opinion and Order to
all counsel of record.
It is so ORDERED.
Lawrence R. Lee
United States Magistrate Judge
Norfolk, Virginia
March 24, 2015
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