Motion 871
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF VIRGINIA
NORFOLK DIVISION
)
I/P ENGINE, INC., )
)
Plaintiff, )
v. ) Civ. Action No. 2:11-cv-512
)
AOL, INC. et al., )
)
Defendants. )
)
PLAINTIFF I/P ENGINE, INC.’S OPPOSITION TO DEFENDANTS’ RENEWED
MOTION FOR JUDGMENT AS A MATTER OF LAW ON DAMAGES OR A NEW
TRIAL
Jeffrey K. Sherwood
(Virginia Bar No. 19222)
Frank C. Cimino, Jr.
Kenneth W. Brothers
Charles J. Monterio, Jr.
DICKSTEIN SHAPIRO LLP
1825 Eye Street, NW
Washington, DC 20006
Telephone: (202) 420-2200
Facsimile: (202) 420-2201
Dawn Rudenko Albert
DICKSTEIN SHAPIRO LLP
1633 Broadway
New York, NY 10019
Telephone: (212) 277-6500
Facsimile: (212) 277-6501
Donald C. Schultz (Virginia Bar No. 30531)
W. Ryan Snow (Virginia Bar No. 47423)
CRENSHAW, WARE & MARTIN PLC
150 West Main Street
Norfolk, VA 23510
Telephone: (757) 623-3000
Facsimile: (757) 623-5735
Counsel for Plaintiff I/P Engine, Inc.
January 25, 2013
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TABLE OF CONTENTS
I. INTRODUCTION .............................................................................................................. 1
II. A NEW TRIAL ON THE DOLLAR AMOUNT OF DAMAGES ONLY, NOT
JMOL OR A COMPETE RETRIAL ON DAMAGES, IS THE PROPER
REMEDY............................................................................................................................ 2
A. Neither JMOL Nor A Complete Retrial On Damages Is Appropriate.................... 2
B. The New Trial Should Be Limited to the Dollar Amount of Past Damages .......... 4
III. I/P ENGINE SUBMITTED SUFFICIENT EVIDENCE OF THE ROYALTY
BASE .................................................................................................................................. 5
IV. DEFENDANTS’ DOUBLE COUNTING OF REVENUE ARGUMENT IS
MERITLESS..................................................................................................................... 11
A. Defendants Waived Any Double-Counting Objection ......................................... 11
B. There Is No Legal or Factual Basis For Defendants’ Double-Counting
Argument .............................................................................................................. 12
V. DR. BECKER’S DAMAGES THEORIES AND RELATED EVIDENCE ARE
PROPER, ADMISSIBLE AND CREDIBLE ................................................................... 14
A. There Is Substantial Evidence Regarding Infringement ....................................... 14
B. The Jury’s Findings Regarding Dr. Becker’s Credibility Should Remain
Undisturbed........................................................................................................... 16
1. There is Substantial Evidence of Record Supporting the Jury’s
Verdict of a Running Royalty................................................................... 17
2. There Is Sufficient Evidence for the Jury to Have Found that the
Overture Licenses Were Comparable ....................................................... 18
C. Defendants’ Thinly Disguised Entire Market Value Rule Argument Is A
Red Herring........................................................................................................... 22
VI. A NEW TRIAL IS WARRANTED ONLY ON THE DOLLAR AMOUNT OF
PAST DAMAGES............................................................................................................ 28
VII. CONCLUSION................................................................................................................. 30
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I. INTRODUCTION
Defendants’ motion amounts to this: a rehash of arguments repeatedly rejected by this
Court, coupled with an attack on the credibility of I/P Engine’s damages expert, Dr. Stephen
Becker. But Defendants’ 27-page effort to distort the record, misconstrue the law, and knock
down straw men, is hardly sufficient to withdraw this case from the province of the jury. The
evidence at trial amply supported the jury’s finding that I/P Engine should receive a 3.5%
running royalty on Defendants’ infringing revenues. Dr. Becker’s testimony was well-supported
by the evidence, and the jury had ample basis to ignore Defendants’ attack on his credibility.
Defendants’ arguments, including their assertions regarding apportionment and double dipping,
either have no basis in fact, or were met with contrary evidence, leaving the decision to the jury.
The appropriateness of the jury’s decision is magnified by Defendants’ decision to utterly
abandon at closing the testimony of their own damages expert. Defendants’ request for JMOL
on damages should be denied.
The parties do agree, however, that a new trial is necessary based on the Court’s midsummation
ruling that changed the basis of I/P Engine’s damage claim. This new trial should be
limited to the amount of past damages. Defendants’ proposal to retry the entire damages case is
nonsensical. The jury’s decision to credit the testimony of Dr. Becker and award a 3.5% running
royalty is supported by substantial evidence. Only I/P Engine’s proposal for the scope of a new
trial comports with the twin aims of preserving judicial economy while respecting as much of the
jury’s verdict as is possible. This narrow retrial is made possible by the Court’s use of a special
verdict form, which “enables errors to be localized so that the sound portions of the verdict may
be saved and only the unsound portions be subject to redeterminations through a new trial.”
Richardson-Vicks Inc. v. Upjohn Co., 122 F.3d 1476, 1484-85 (Fed. Cir. 1997) (quoting
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Sunderland, Verdicts, General and Special, 29 Yale L.J. 253, 259 (1920)). The only “unsound
portio[n]” of the verdict was the jury’s decision concerning past damages, and should be the
singular focus of the new trial.
II. A NEW TRIAL ON THE DOLLAR AMOUNT OF DAMAGES ONLY, NOT
JMOL OR A COMPETE RETRIAL ON DAMAGES, IS THE PROPER REMEDY
The primary thrust of Defendants’ motion is that JMOL is required because no portion of
the jury’s damages findings was based on substantial evidence, and the award was tainted by
unreliable and inadmissible expert testimony. Defendants alternatively argue (at 3, 29-30) that,
if the Court denies their JMOL motion, then a new trial on “all” damages issues is necessary.
The case law and evidence of record do not support either of Defendants’ demands.
A. Neither JMOL Nor A Complete Retrial On Damages Is Appropriate
The jury found that all Defendants infringed I/P Engine’s valid asserted patents. (D.I.
789 (verdict) at 2-6). The jury also found that I/P Engine was entitled to a running royalty of
3.5%, and awarded money damages for Defendants’ past infringement. (Id. at 11). The parties
agree that the jury’s specific dollar award of past damages was based upon error. (See D.I. 826
(Seeking New Trial on Dollar Amount of Past Damages)). Defendants cite to no authority
whatsoever that requires granting a JMOL of no damages under such circumstances.
Numerous Federal Circuit decisions dictate that, if there was an error in conjunction with
the presentation of a patent holder’s damages case at trial, the appropriate remedy is a new trial
limited to the damages issues tainted by the error. In the present case, there was error associated
with the dollar amount of past damages awarded.1 The jury’s special-interrogatory findings
enables this Court to preserve all other aspects of the verdict, and narrowly defines the scope of
1 I/P Engine has separately argued that the Court’s substantive laches decision was improper, and
that damages should be awarded from September 15, 2005. (D.I. 837). That motion also relates
solely to the amount of past damages.
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the new trial. See, e.g., LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 69, 81 (Fed.
Cir. 2012) (remanded for new damages determination limited to the appropriate royalty rate, as
expert’s royalty rate was “untethered from the patented technology at issue and the many
licenses thereto” and the expert’s royalty base violated the entire market value rule);
ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 870-72 (Fed. Cir. 2010) (remanded for
recalculation of reasonable royalty, as expert relied on incomparable licenses and misrepresented
those licenses); Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d. 1301, 1338-39 (Fed. Cir. 2009)
(remanded for new trial on the amount of damages where expert provided no analysis of certain
license agreements and increased royalty rate to a rate that lacked any evidentiary support); Riles
v. Shell Exploration & Prod. Co., 298 F.3d 1302, 1312-14 (Fed. Cir. 2002) (remanded for
redetermination of past damages because the three damages models employed by plaintiff’s
expert lacked in “any reasonable economic or factual basis”).2
Defendants assert (at 3) that the Supreme Court decision in Weisgram v. Marley Co., 528
U.S. 440 (2000), supports their argument. But Weisgram does not apply to the facts of this case.
In Weisgram, the Supreme Court upheld the Court of Appeals’ decision to enter a JMOL rather
than remand for retrial because there was no evidence (expert or otherwise) sufficient to support
the verdict, and the plaintiff did not present any grounds for a new trial to the Court. Id. at 456.
The Eighth Circuit found that the plaintiffs’ expert evidence was entirely speculative,
inconsistent with Daubert, and that the case was not close. Id. Here, by contrast, Dr. Becker’s
testimony was fully consistent with Daubert, strongly supported by considerable evidence, and
there was also substantial other evidence in the record sufficient to support I/P Engine’s damages
2 In Cornell Univ. v. Hewlett-Packard Co., 609 F. Supp. 2d 279, 292 (N.D.N.Y. 2009), the
district granted JMOL after it determined that the royalty base used by the jury was too large, but
even then, it recalculated the appropriate amount of damages, and did not grant a judgment of
zero damages, as Defendants seek in their present motion.
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case. See infra § III, § V. This Court previously rejected Defendants’ Daubert and in limine
arguments seeking exclusion of Dr. Becker’s opinions and supporting evidence. Unlike
Weisgram, this Court admitted into evidence numerous documents from I/P Engine and
Defendants supporting I/P Engine’s damages theory, and found that Dr. Becker’s opinions were
consistent with Daubert. See infra § V. And unlike Weisgram, I/P Engine has presented
detailed grounds for a new trial on the dollar amount of past damages. (D.I. 826, 837).
B. The New Trial Should Be Limited to the Dollar Amount of Past Damages
Aside from the dollar amount of past damages, there were no defects in any other aspect
of the trial or verdict. The jury found that a running royalty, not a lump sum, was appropriate,
and found that the appropriate royalty rate was 3.5%. (D.I. 789 at 11). These findings were
based on the substantial evidence of record (e.g. Trial Tr. at 772:11-21; 792:17-799:1; 834:1-
846:11; 1683:14-19), and were expressly set forth in the special interrogatory verdict form. (D.I.
789 at 11).
The Federal Circuit has endorsed the type of special verdicts used by this Court in this
case. Richardson-Vicks, 122 F.3d at 1484-85. Because the Court used a special verdict form
that separately asked about a running royalty or lump sum, the royalty rate, and the dollar
amount of past damages, “the sound portions of the verdict may be saved and only the unsound
portions [need] be subject to redeterminations through a new trial.” Id. The new trial should be
limited to the sole issue of the dollar amount of past damages, as stated by question III.C of the
verdict form:
If you have found any claim of the ‘420 or the ‘664 patent to be both valid and
infringed by Defendants, what sum of money, if any, if paid now in cash, would
reasonably compensate I/P Engine for any of defendants past infringement?
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A new trial on the dollar amount of past damages could be accomplished in a single day, with
brief openings and summations, stipulated facts, and expert testimony (consistent with their
reports) from Dr. Becker and Dr. Ugone.
In their brief, Defendants ignore the Federal Circuit jurisprudence holding that special
verdicts should be preserved as much as possible. Defendants instead rely (at 3) on three nonbinding
and irrelevant decisions relating to the admissibility of a defendant’s wealth or net
worth.3 I/P Engine did not introduce any evidence of Defendants’ wealth or net worth, however.
Indeed, the Court precluded I/P Engine from even referencing Defendants’ total revenues
relating to the accused systems. (Trial Tr. at 746:2-19). Defendants’ attempt (at 3) to transform
I/P Engine’s introduction of an apportioned royalty base into evidence of admission of wealth is
absurd. Evidence of apportioned revenues from Defendants’ infringing activities has nothing to
do with Defendants’ wealth and cannot support JMOL. See, e.g., Carnegie Mellon Univ. v.
Marvell Tech. Group, LTD., No. 09 cv 290, 2012 U.S. Dist. LEXIS 120558, *13 (W.D. Pa. Aug.
24, 2012) (“reference to average operating profits for the purpose of showing a starting point [of
an apportionment analysis] is justified”).
III. I/P ENGINE SUBMITTED SUFFICIENT EVIDENCE OF THE ROYALTY BASE
Defendants claim (at 11-12) that the “only evidence that I/P Engine attempted to rely on
to establish damages or a royalty base” after the Court issued its sua sponte laches decision4
3 U.S. ex rel. Miller v. Bill Harbert Int’l Constr., Inc., 608 F.3d 871, 897-98 (D.C. Cir. 2010);
Koufakis v. Carvel, 425 F.2d 892, 902 (2d Cir. 1970); and Reilly v. NatWest Mkts. Group Inc.,
181 F.3d 253, 266 (2d Cir. 1999). Notably, the Reilly court held that although evidence of
wealth is generally inadmissible there was no error in admitting the evidence because it was
relevant to the witness’s credibility. 181 F.3d at 266-67.
4 Defendants falsely state (at 6) that the Court granted Defendants’ laches motion. As the Court
acknowledged in its written decision (D.I. 800, at 1), Defendants had not moved for JMOL on
laches in response to I/P Engine’s JMOL at the close of Defendants’ case. The Court ruled sua
sponte on laches.
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“was a demonstrative bar chart.” That bar chart (Ex. 2, PDX-441) has nothing to do with a
royalty base, however. It was essentially the same demonstrative (Ex. 1, PDX-83) that Dr.
Becker referenced during his testimony. Dr. Becker explained that he prepared PDX-83 to
“show[] the amounts by quarter that you would have under a running royalty structure.” (Trial
Tr. at 848:11-21). I/P Engine used the demonstrative PDX-441 during summation as an
illustration and reminder of the amount of royalties it was seeking post-filing of the complaint.
Inspection of the four relevant quarters after the complaint was filed shows that between $25
million and $30 million would be due in each of these quarters. (Ex. 2, PDX-441).5 Showing a
demonstrative during summation that was previously referenced by an expert and shown to a
jury is a perfectly appropriate aid to argument. See United States v. Soulard, 730 F.2d 1292,
1300 (9th Cir. 1984) (approving use of demonstrative charts during expert testimony and closing
arguments); U.S. v. Waddell, 62 Fed. Appx. 491, 495 (4th Cir. 2003) (“the display of the chart
did not constitute plain error, if error at all”).
Defendants disregard that any alleged shortcoming in I/P Engine’s admitted evidence of
damages is of their own making. Indeed, Defendants objected to the introduction of the evidence
that they now assert was required. For example, I/P Engine attempted to submit quarterly
revenues for the accused systems for each of the Defendants. These revenues could have been
used to calculate a precise royalty base for the post-laches damages period by multiplying each
Defendant’s quarterly revenue by the corresponding apportionment factor. (See Trial Tr. at
826:11-827:2; Ex. 3 (PDX-076, listing the apportionment factors Dr. Becker used)). Defendants
5 Although I/P Engine agrees that the timing of the Court’s laches rulings caused jury confusion
warranting a new trial as to the dollar amount of damages (see, e.g., D.I. 826 and 837), the record
contains ample evidence supporting I/P Engine’s damages claim, including specific numbers of
the royalty base and specific damage numbers for each defendant. (e.g. Trial Tr. at 833:3-
846:17; 1028:20-21 (denying Defendants’ Rule 50(a) motion on damages); 2135:8-2136:25
(same)).
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objected to the introduction of this evidence as violating the “entire market value rule;” and, the
Court excluded the total accused revenues from evidence. (Trial Tr. at 746:2-19 (general ruling);
828:2-22 (specifically precluding PX-280)). As explained in more detail in I/P Engine’s Motion
for a New Trial (D.I. 826 at 7-13), the Court’s exclusion of that evidence was improper because
the entire market value rule was not in play, and the proffered information was not entire market
value evidence. Numerous courts have held that the revenues attributable to the smallest salable
patent-practicing unit are admissible, and that introduction of these revenues does not implicate
the entire market value rule. See, e.g., LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d
51, 67 (Fed. Cir. 2012); Carnegie Mellon Univ. v. Marvell Tech. Group, LTD., No. 09 cv 290,
2012 U.S. Dist. LEXIS 120558, *12 (W.D. Pa. Aug. 24, 2012); PACT XPP Techs., AG v. Xilinx,
Inc., No. 2:07 cv 563, 2012 U.S. Dist. LEXIS 66436, *8-9 (E.D. Tex. May 10, 2012).
Defendants are trying to have it both ways, arguing at trial that financial evidence should be
excluded for one reason, then arguing in post-trial motions that the same evidence should have
been introduced for another reason and that the exclusion sought and obtained by the Defendants
taints the verdict.
Defendants insinuate (at 11) that JMOL is warranted because I/P Engine, aware that
Defendants may press their affirmative defense of laches, should have introduced damages
claims under both a non-laches and laches environment. This argument is illogical and
unsupported by the case law. Laches is an affirmative defense, where Defendants at all times
bore the burden of proof. A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1038-
1039 (Fed. Cir. 1992). There was no obligation for I/P Engine to introduce alternative damages
theories and amounts during its case in chief. Doing so would have caused needless jury
confusion. This is particularly true because laches was and is an equitable defense, and the Court
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already ruled at the final pretrial conference that the issue would not be submitted to the jury.
(D.I. 839 ¶ 2 (Rudenko Dec.); D.I. 840 ¶ 2 (Sherwood Dec.); D.I. 841 ¶ 2 (Brothers Dec.), D.I.
842 ¶ 2 (Snow Dec.)).
Defendants fail to cite (and I/P Engine did not find) a single case suggesting that a
patentee (or any other plaintiff) is obligated to present alternative non-laches and laches damage
claims at trial to the jury, and that the failure to do so is grounds for JMOL. To the contrary,
where laches is at issue during a trial, the common practice is for the jury to decide the damages
due for the full damages period. If the court then finds that laches applies, it reduces the jury’s
damage award to reflect only the post-suit damages. See, e.g., Humanscale Corp. v. CompX
Intern. Inc., No. 09-86, 2010 WL 3222411 (E.D. Va. Aug. 16, 2010) (jury verdict covered
damages period beginning six years prior to filing; court then denied laches); Amado v. Microsoft
Corporation, No. 03-242, 2008 WL 8641264, *1 (C.D. Cal Dec. 4, 2008) (jury verdict covered
damages period beginning six years prior to filing; court found laches and altered jury award to
reflect laches ruling); Engineered Products Co. v. Donaldson Co., 330 F. Supp. 2d 1013,1017-
18 (N.D. Iowa 2004) (“Still unresolved after the jury’s verdict [is] the defendant’s equitable
defenses of…laches…, which [was] tried to the court….”), rev’d on other grounds, 147 Fed.
Appx. 979 (Fed. Cir. 2005); Imonex Services, Inc. v. W.H. Munzprufer Deitmar, Trenner
G.m.b.H., No. 01-174, 2003 WL 26095807, *1 (E.D. Tex. Sept. 25, 2003) (“defendants have
failed to meet their burden to demonstrate that laches bars the recovery of any damages in this
case. Therefore, the court declines to reduce the amount of damages awarded by the jury….”).6
6 Defendants cite no cases that support the argument that they used to convince the Court to
change the damages period near the end of trial. (Trial Tr. at 1813:2-8 (arguing that submitting
full damages period to the jury would be improper)). Indeed, the case law contradicts
Defendants’ argument. See, e.g., Amado v. Microsoft Corporation, No. 03-242, 2008 WL
8641264, *1 (C.D. Cal Dec. 4, 2008) (jury verdict covered damages period beginning six years
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Consistent with the common practice of the courts, I/P Engine understood that this Court would
not rule on laches prior to the jury’s verdict of the entire damages period. (D.I. 837 at 3; D.I. 839
¶ 2 (Rudenko Dec.); D.I. 840 ¶ 2 (Sherwood Dec.); D.I. 841 ¶ 2 (Brothers Dec.), D.I. 842 ¶ 2
(Snow Dec.)).7
Nor do Defendants explain how Dr. Becker would have been able to provide such
“alternative” theories. The Court ruled that the experts were limited to the opinions expressly set
out in their reports. (Trial Tr. at 433:13-14). Defendants frequently objected at trial when they
believed I/P Engine was not complying with this ruling. (e.g. Trial Tr. at 812:17-20; 840:16-19;
846:21-22). I/P Engine did not bear the burden of proving laches, and Defendants’ damages
expert failed to proffer any evidence of alternative damages theory or amount based upon an
application of laches, so there was nothing relating to laches for Dr. Becker to rebut.
Defendants’ argument that I/P Engine should have sought to reopen the record after the
Court’s laches ruling is no basis to grant Defendants’ JMOL. Defendants ignore that the Court
made clear that it was not accepting additional testimony (Trial Tr. at 1868:17-22, 1963:20-22),
prior to filing; court found laches and altered jury award to reflect laches ruling); Humanscale
Corp. v. CompX Intern. Inc., No. 09-86, 2010 WL 3222411 (E.D. Va. Aug. 16, 2010) (jury
verdict covered damages period beginning six years prior to filing; court considered laches after
the jury verdict).
7 After the Court initially stated its laches ruling, I/P Engine requested that the Court defer
application until after the jury verdict. (Trial Tr. at 1812:3-18). The Court indicated it was
willing to do so, but after Defendants objected, the Court changed its mind. (Trial Tr. at 1815:1-
11). Defendants asserted that allowing I/P Engine to argue for damages that cover the full
damages period would be improper because I/P Engine could “try to prejudice the verdict and to
achieve some kind of compromise” by the jury that I/P Engine should “get something out of it.”
(Trial Tr. at 1813:2-8). This position is meritless. Both damages experts had already testified
regarding damages that covered the full damages period (Trial Tr. at 845:18-846:17; 1599:5-10),
and Defendants never alleged that allowing this testimony was error. Defendants cannot have it
both ways, by arguing in its post-trial brief that I/P Engine should have proceeded with laches in
the alternative, but objecting at trial to permitting the Court to adjust the verdict post-trial by an
application of the laches equitable defense.
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and that the Court believed that the record was sufficient for the jury to arrive at a damages
verdict (Trial Tr. at 1964:5-13, 1968:10-25). Defendants also ignore that I/P Engine made
repeated attempts to address the laches issue as it related to past damages. For example, I/P
Engine repeatedly urged the Court to follow the routine practice of allowing the jury to consider
the full damages period, and making any laches-related adjustments post-verdict. (Trial Tr. at
1811:19-1812:2 (suggesting leaving the damages period unchanged); 1815:12-1816:15
(suggesting allowing the jury to evaluate both damages periods); 1976:9-19, 2022:13-18
(objecting to jury instructions regarding the damages period)).
The only case on which Defendants rely for this argument, Davis v. Rodriguez, 364 F. 3d
424 (2d Cir. 2004), does not stand for the premise that a failure to seek to reopen a case is
grounds for JMOL. That issue was not even addressed on appeal in Davis. Commenting on Rule
50(a)(1), the Second Circuit stated that the plaintiff should have been given an opportunity to
reopen his case based on the comments to the rule that say “in no event ... should the court enter
judgment against a party who has not been apprised of the materiality of the dispositive fact and
been afforded an opportunity to present any available evidence bearing on that fact.” Id. at 432.
Davis suggests that depriving I/P Engine of the ability to present its laches evidence once the
presumption of laches was found by the Court was error. It does not suggest that I/P Engine was
required to attempt to re-open the record.
I/P Engine explicitly sought the Court’s guidance regarding how to proceed in view of
the Court’s laches ruling regarding the damages period. After specifically discussing PDX-83 in
view of the shortened damages period with the Court, I/P Engine’s counsel acknowledged that a
specific damages number for the shortened period was not in evidence and asked the Court for
guidance on how to address the situation. (Trial Tr. at 1962:9-1963:19.) The Court’s response
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was to prohibit the parties from mentioning the damages numbers that apply to the shortened
damages period. (Trial Tr. at 1963:20-22; D.I. 827 (Sherwood Dec) ¶ 2). The parties agree that
the Court’s implementation of its laches ruling was error. The appropriate remedy is a new trial
solely on the dollar amount of past damages. As explained in I/P Engine’s motion for a new trial
on past damages (D.I. 826), a new trial on past damages is appropriate whether or not the Court
reverses its laches ruling.
IV. DEFENDANTS’ DOUBLE COUNTING OF REVENUE ARGUMENT IS
MERITLESS
The Court has twice previously ruled that all defendants can be jointly and severally
liable (D.I. 682 at 5 (“AOL, Gannett, IAC…, and Target… may be jointly and severally liable
for any alleged infringement with their co-defendant, Google, Inc.”; D.I. 705 at 9 (same)). In its
Order, the Court reiterated the well-established law that “the parties that make and sell an
infringing device are joint tort-feasors with parties that purchase an infringing device for use or
resale....” (D.I. 682 at 5 (citing Shockley v. Arcan Inc., 248 F.3d 1349,1364 (Fed. Cir. 2001)).
The third time is not the charm; Defendants’ “double counting” argument must be rejected for
three independent reasons. First, Defendants failed to timely object, and thus waived this
argument. Second, as explained above, there is no legal basis for the argument (even if it were
factually correct). Third, the argument is factually incorrect. I/P Engine fully disaggregated the
damages numbers that it presented to the jury.
A. Defendants Waived Any Double-Counting Objection
At no time during Dr. Becker’s trial testimony did Defendants object that he was not
appropriately disaggregating the total damages-related revenues. (Trial Tr. at 754:12-849:9;
924:18-935:20). Nor did Defendants cross-examine Dr. Becker or move for JMOL at the end of
I/P Engine’s case-in-chief regarding any alleged failure to disaggregate the numbers. (Trial Tr.
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at 849:10-924:17). As Dr. Becker testified at trial, and the demonstratives and evidence that he
relied on show, he disaggregated the damages numbers for each defendant. (Trial Tr. at 767:20-
769:2; 848:16-849:6; Ex. 1 (PDX-83); Ex. 4 (PDX-77); Ex. 5 (PDX-82)). I/P Engine never has
attempted to seek double recovery from any defendant in this case.
Defendants allege (at 13) that I/P Engine “urged the jury” during summation to interpret
PDX-441 as the royalties due from Google alone, instead of the royalties due from Defendants
collectively. Defendants’ argument is based solely upon I/P Engine’s closing arguments. (D.I.
844 at 13). But counsel’s statements during opening and closing arguments are not evidence.
See Kelly v. Smith, No. 7 cv 536, 2008 WL 345838, *9 (W.D.Va. Feb. 6, 2008). This Court
instructed the jury on just this stating that “[s]tatements and argument of counsel are not
evidence in the case unless made as an admission or stipulation of fact.” (Trial Tr. at 2076:1-3).
Further, Defendants could have objected to I/P Engine’s closing if they found it
improper. They did not and have therefore waived any right to argue putative error stemming
from I/P Engine’s closing. Dennis v. General Elec. Corp., 762 F.2d 365, 366–67 (4th Cir.1985)
(counsel “cannot as a rule remain silent, interpose no objections, and after a verdict has been
returned seize for the first time on the point that the comments to the jury were improper and
prejudicial”).
B. There Is No Legal or Factual Basis For Defendants’ Double-Counting
Argument
Defendants are attempting to capitalize on the confusion created by the Court’s laches
rulings by isolating from its context a portion of the transcript that relates to this ruling. The
damages period was shortened only after all of the damages evidence was submitted, and the jury
had not heard anything about a shortened damages period prior to closing. The damages period
for the non-Google defendants had not been shortened at the time of I/P Engine’s initial closing
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argument. On summation, I/P Engine therefore explained to the jury that the damages period for
Google had been shortened:
And remember, for Google recovery is only limited to the last four
quarters, so go back to the fourth quarter of last year. So those are
the only rates from here that are relevant to your determinations
when you retire to deliberate.
(Trial Tr. at 2007:25-2008:4). Consistent with what it had already discussed with the Court, I/P
Engine’s counsel reminded the jury of the evidence relevant to Google’s damages stating:
Well, as a result of the ruling, the only royalties that are at issue
here are the ones that are represented by the four bars on the far
right. And you will need to rely on your memory and judgment
to determine based upon that what's a reasonable royalty for
Google to pay after September 15, 2011.”
(Trial Tr. at 2008:19-24) (emphasis added). Contrary to Defendants’ characterization, I/P
Engine’s counsel did not tell the jury that the bar chart represented a royalty for Google alone.
I/P Engine’s counsel instead referenced a demonstrative exhibit that was virtually identical to the
demonstrative shown during Dr. Becker’s testimony, then asked the jury to rely on their
collective recollection of the evidence. (Id.) In his next breath, I/P Engine’s counsel asked the
jury to recall the damages due from the other defendants. (Trial Tr. at 2008:25-2009:2).
After the Court changed its laches ruling relating to the non-Google defendants (after I/P
Engine’s initial summation), I/P Engine attempted to explain that ruling and its impact on
damages to the jury. Again, referring the jury to PDX-441, I/P Engine’s counsel explained:
So when it comes to determining a royalty, as you have heard the Court has made a
ruling, an additional ruling since I was up here before, with respect to what the scope of
recovery is. And the scope of recovery is going to be limited for all defendants to the
period September 15 forward to the present day. September 15, 2011, excuse me. So this
is what you have to look at with respect to how to calculate the damages in this case,
which is the last four quarters, and these amounts are cumulative. In other words, each
bar on here reflects a different amount of money, a per quarter accumulation of revenue
as a result of using the infringing system.
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(Trial Tr. 2069-70). I/P Engine thus made clear that PDX-441 represented the damages sought
for all defendants for the reduced damages period. At no time did I/P Engine “encourage” a socalled
“double counting of revenue and damages” as Defendants allege.
V. DR. BECKER’S DAMAGES THEORIES AND RELATED EVIDENCE ARE
PROPER, ADMISSIBLE AND CREDIBLE
The remainder of Defendants’ arguments fall into three general buckets: (1)
infringement; (2) credibility and issues of fact for the Jury; and (3) entire market value rule.
None of these are proper grounds for JMOL.
A. There Is Substantial Evidence Regarding Infringement
Defendants spend eight pages in their brief arguing that Dr. Becker’s damages opinion
and testimony are improper because I/P Engine allegedly failed to prove several different aspects
of its infringement case. (D.I. 844 at 2, 4, 15-16, 19-22). The Court already has considered and
rejected Defendants’ arguments.8 Specifically, Defendants argue that I/P Engine did not prove
infringement before 2010, so Dr. Becker’s reliance on a 2004 hypothetical negotiation date and
events occurring before 2010 to determine a reasonable royalty’s form, rate and base are
unreliable and inadmissible. (D.I. 844 at 19-22). Defendants also argue that Dr. Becker
improperly included the incremental impact of the disabling and promotion features in the
royalty base without any evidence that these features related to SmartAds or the accused
functionality. (D.I. 844 at 2, 15-16).
These arguments are improper damages-related arguments because a damages expert
must presume infringement. “Patents are presumed valid, enforceable, and infringed in the
context of an expert's formulation of an opinion on damages in a patent trial.” St. Clair
8 The Court denied Defendants’ Daubert motion finding that the Defendants’ objections to Dr.
Becker’s testimony “are best resolved at trial during the course of examination as they generally
go to the weight of the evidence and should be resolved by the jury.” (D.I. 705 at 9-10).
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Intellectual Property Consultants, Inc. v. Canon, Inc., No. 03 cv 241, 2004 WL 2213562, *3 (D.
Del. Sept. 28, 2004). Thus, the hypothetical negotiation for calculating a reasonable royalty is
based on the assumption that the patents are valid, enforceable and infringed. Id. (citing Chisum,
Patents § 20.03[3][a], p. 20-181; TP Orthodontics, Inc. v. Professional Positioners, Inc., 20
U.S.P.Q.2d 1017, 1025 (E.D. Wis. 1991), aff’d, 980 F.2d 743 (Fed. Cir. 1992)). This legal
premise is undisputed and was acknowledged by Defendants’ own damages expert. (Trial Tr. at
1570:24-1571:5). Defendants filed a separate infringement JMOL (D.I. 831), and I/P Engine
respectfully directs the Court to I/P Engine’s Opposition thereto, which is filed
contemporaneously with this brief.
Dr. Becker properly presumed infringement and properly relied on I/P Engine’s
infringement allegations, including the expert opinion and trial testimony of Dr. Frieder. In its
infringement case, I/P Engine submitted ample evidence that disabling and promotion
functionalities are part of the accused functionality. (Trial Tr. at 461:15-18; 494:1-10; 495:8-11;
496:13-15). Dr. Becker, as a damages expert, properly relied on Dr. Frieder’s testimony.
DataQuill Ltd. v. High Tech Computer Corp., No. 08 cv 543, 2011 WL 6013022, *23 (S.D. Cal.
Dec. 1, 2011) (“It is routine and proper for a damages expert in a technical patent case to rely on
a technical expert for background.”).
Likewise, Dr. Frieder testified that Google’s infringement began in 2004 (Trial Tr. at
592:14-600:17). As a matter of law, the hypothetical negotiation date is based on the date of first
infringement. LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 75 (Fed. Cir. 2012).
Dr. Becker appropriately may rely upon Dr. Frieder’s testimony on this issue. DataQuill Ltd.,
2011 WL 6013022, *23; Oracle America, Inc. v. Google Inc., No. 10 cv 3561, 2011 WL
5914033, *2 (N.D. Cal. Nov. 28, 2011) (rejecting argument that damages expert’s opinion is
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improper where the damages expert relied on technical experts). Significantly, Defendants’
damages expert also identified the hypothetical negotiation date as 2004. (Trial Tr. at 1851:17-
22). The 2004 hypothetical negotiation date was the only date of record presented to the jury by
all parties’ damages experts. Defendants did not present any other date, 2010 or otherwise, to
the jury during trial relating to damages. Nor did they cross-examine Dr. Becker about his use of
the 2004 hypothetical negotiation date. Not only is there ample evidence for Dr. Becker to use
the 2004 hypothetical negotiation date; there is no evidence of record to support the 2010
hypothetical negotiation date.
Accordingly, Defendants may not argue, contrary to their own position at trial, that the
2004 hypothetical negotiation date is a grounds for JMOL. Because they did not proffer
testimony at trial of an alternative date, any objection now, post-verdict, is waived and improper.
See Mobil Oil Corp. v. Amoco Chemicals Corp., 915 F. Supp. 1333, 1353 (D. Del. 1995)
(finding that Mobil waived its right to object to a position by taking that position itself).
B. The Jury’s Findings Regarding Dr. Becker’s Credibility Should Remain
Undisturbed
Defendants attack Dr. Becker’s credibility and argue that I/P Engine’s damages case is
not supported by substantial evidence because Dr. Becker (a) ignored Google’s evidence
supporting a lump sum over a running royalty; (b) improperly weighed the Overture licenses
versus “real-world transactions” in arriving at his opinions; and (c) the Overture patents are not
comparable. These arguments are nothing more than a rehash of arguments previously made by
Defendants in their Daubert and in limine motions, which this Court properly rejected as
invading the jury’s province of credibility. (D.I. 682 at 3-4; D.I. 705 at 9-10). Importantly, the
jury has heard Defendants’ arguments, considered the evidence presented by both sides, and
rendered its verdict. That I/P Engine’s evidence was weighed more heavily than Defendants’
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evidence fails to justify JMOL. See, e.g., Bonner v. Dawson, 404 F.3d 290, 295 (4th Cir. 2005)
(“[T]o prevail on a Rule 50(b) motion, the court must determine without weighing the evidence
or considering the credibility of the witnesses, that substantial evidence does not support the
jury's findings.”).
1. There is Substantial Evidence of Record Supporting the Jury’s
Verdict of a Running Royalty
Defendants argue (at 23) that Dr. Becker’s testimony and evidence that he presented to
the jury was “speculative, not based on substantial evidence, and inadmissible.” According to
Defendants (at 24), “none of the evidence relied on by I/P Engine or Dr. Becker to justify a
running royalty was admissible or reliable.” Defendants argue (at 25) that unlike I/P Engine (and
Dr. Becker), they “ntroduced evidence that the hypothetical negotiation would have resulted in
a lump-sum.”
Defendants are doing nothing more than improperly arguing that their evidence was more
credible and deserved more weight than I/P Engine’s evidence. See Bonner v. Dawson, 404 F.3d
290, 295 (4th Cir. 2005). Here, substantial evidence supports the jury’s verdict that a running
royalty was the appropriate measure of damages. This evidence includes Dr. Becker’s
experience, analysis, and opinion including that the general advantages to a running royalty
outweighed the advantages to a lump sum in this particular negotiation, and the multiple
comparable Overture licenses. (Trial Tr. at 772:11-21; 842:9-10; 843:1-2; 845:3-17). The
evidence also reflects that Google licensed the Overture patents. (Trial Tr. at 840:4-8), Lycos’
preference for a running royalty (Trial Tr. at 1683:14-19), and the absence of a formal Google
licensing policy. (Trial Tr. at 1684:7-1685:17). As this Court already has held, the sufficiency
of testimony and evidence relating to these issues are “best resolved at trial during the course of
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examination as they generally go to the weight of the evidence and should be resolved by the
jury.” (D.I. 705 at 9-10).
Defendants’ reliance (at 23-24) on Stickle v. Heublein, Inc., 716 F.2d 1550, 1561 (Fed.
Cir. 1983), and LaserDynamics, 694 F.3d at 78-81, does nothing to undermine the jury’s
determination that a running royalty is appropriate. The Federal Circuit rejected the damages
awards in those cases because the evidence of the form of the royalty (either in the industry or
the licenses of record) being a lump sum was effectively undisputed or was completely devoid of
any connection to either the patented technology or the industry. Stickle, at 716 F.2d at 1553;
LaserDynamics, 694 F.3d at 64-65, 80.9
2. There Is Sufficient Evidence for the Jury to Have Found that the
Overture Licenses Were Comparable
Defendants claim (at 28) that Dr. Becker “compounded” his error by relying on the noncomparable
Overture licenses. Defendants argue that the Overture licenses are not comparable
because (a) they do not involve comparable technology; (b) there is no evidence that value of the
Overture technology was comparable to the technology of the patents-in-suit; (c) Dr. Becker
“selectively ignored comparable real-world transactions” in arriving at his opinion; and (d) the
negotiating positions of the Overture licensees and Yahoo! were radically different than Google
and Lycos. This is a factual matter that was the subject of conflicting expert testimony, and the
9 In Stickle, there was no evidence that the relevant industry ever used the type of royalty that the
district court adopted. In fact, Stickle does not adopt a lump-sum as that term is used in this case;
rather, it used a royalty based on a lump-sum for each machine that is sold. 716 F.2d at 1562.
Unlike in Stickle, the Overture licenses establish that running royalties are used in the search
advertising industry. Likewise, LaserDynamics did not prohibit a patentee from presenting a
running royalty theory to the jury. LaserDynamics prohibited the expert from presenting a
royalty rate that was not tethered to a comparable license, but explicitly held, “we do not hold
that LaserDynamics’ past licenses create an absolute ceiling on the amount of damages to which
it may be entitled, see 35 U.S.C. § 284, or that its history of lump sum licenses precludes
LaserDynamics from obtaining damages in the form of a running royalty.” 694 F. 3d at 81.
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jury disagreed with Defendants’ evidence and arguments. Defendants’ arguments provide no
reason to take the case away from the jury.
The proper issue for JMOL is whether “there is no legally sufficient evidentiary basis for
a reasonable jury to have found for [I/P Engine] with respect to [damages].” Fed. R. Civ. P. 50.
Defendants are merely rearguing their Daubert motion against Dr. Becker’s opinion (D.I. 320),
which the Court rejected. (D.I. 705 at 9-10). As set forth below, there is ample evidence of
record that the Overture licenses are comparable in technology and value. And Dr. Becker
addressed the “real world transactions” and the parties’ negotiating positions in his analysis of
the Georgia Pacific factors.
For example, Google licensed the technology of the Overture licenses (Trial Tr. at 840:4-
8). Dr. Frieder, I/P Engine’s technical expert, testified that the ‘361 patent (which is the subject
of the Overture licenses) is comparable technology. (Trial Tr. at 630:17-23). Dr. Becker relied
on Dr. Frieder’s opinions regarding comparability, and properly testified about the Overture
licenses under Georgia Pacific factor 12 (comparable licenses in the industry).10 (Trial Tr. at
924:20-925:5). That both patents cover search advertising makes them sufficiently comparable
for damages purposes. See Lucent, 580 F.3d at 1329 (requiring similar technology);
ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 870 (Fed. Cir. 2010) (rejecting licenses not
showing a “discernible link to the claimed technology”).
10 Citing ResQNet, Defendants suggest (at 28) that because the Overture licenses are directed to
patents other than the patents-in-suit, they are automatically suspect. ResQNet does not stand for
this premise. The licenses in ResQNet were licenses granted from the patent holder, which failed
to license any patent at all. 594 F.3d at 870. The licenses were “re-branding or re-bundling
licenses” directed to “marketing and other services” rather than the technology covered by the
patent owned by the licensor. Further, ResQNet heavily criticizes misrepresenting non-patent
license agreements as suitable for use in a patent case, something not relevant here.
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Defendants point out that the ‘361 patent does not talk about relevance, as the patents-insuit
do. But Defendants fail to mention that Dr. Frieder testified that “[the ‘361 patent] is
definitely missing the relevance. That is why [the patents-in-suit] are better.” (Trial Tr. at
716:20-23). Dr. Frieder provided an easily discernible link between these two similar
technologies. He also provided justification as to why the patents-in-suit have a greater value
than the Overture technology.11
Dr. Becker also testified that he considered all of the licenses on which Defendants relied
and identified the evidence that he believed to be most relevant, comparable, and temporal to the
2004 hypothetical negotiation date.12 (e.g. Trial Tr. at 835:15-839:6; 925:6-926:6; 930:2-17).
This includes considering the differences between the negotiating positions of Lycos and Google
(as compared to the Overture licensees) under Georgia Pacific factor 5 (the commercial
relationship between the licensor and licensee). Georgia-Pacific Corp. v. U.S. Plywood Corp.,
318 F. Supp. 1116, 1120 (S.D.N.Y 1970). In analyzing each of the Georgia Pacific factors, Dr.
11 There is no “breadth of the claims” or “ease with which a patent can be designed around” test
as Defendants imply (at 28). The “vigilance” that ResQNet refers to when technologies other
than the patent-in-suit are involved is vigilance to make sure that other technologies are similar.
Indeed, ResQNet states “A… damages award… cannot stand solely on evidence which amounts
to little more than a recitation of royalty numbers… particularly when it is doubtful that the
technology of those license agreement is in any way similar to the technology being litigated
here.” ResQNet, 594 F.3d at 869 (quoting Lucent, 580 F.3d at 1329) (emphasis added). The
portion of ResQNet cited by Defendants addresses the technological similarity requirement that
Dr. Frieder’s testimony satisfies, not a “breadth of the claims” or “ease with which a patent can
be designed around” test. Nonetheless, I/P Engine notes that Dr. Frieder testified that the
Defendants’ non-infringing alternatives are not suitable (Trial Tr. at 630:25-631:13), thereby
avoiding any risk that I/P Engine’s patents could be worth less than the Overture patents.
12 Defendants argue (at 28) that the Overture agreements are not comparable because they are
remote in time from a 2010 hypothetical negotiation date. This argument merely repeats
Defendants’ unsupported allegation that a 2010 date for the hypothetical negotiation should be
adopted. See section V.A, supra. The Overture licenses were executed in 2005; they are
temporal to the 2004 hypothetical negotiation date, certainly more so than the Meyer agreement,
which was from 2007, and the only agreement on which Defendants relied for Dr. Ugone’s
opinion.
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Becker acknowledged the differences between the negotiating parties (including their size).
(Trial Tr. at 891:22-892:7). He testified that “the respective bargaining positions is something
you take into account in factor 5, but that has to be done in the context of this hypothetical
negotiation where [the] patent holder has the cards on the table of the valid and infringed patent.”
(Trial Tr. at 932:21-933:2). Dr. Becker also agreed that Lycos was a smaller company, relative
to the accused infringer, than Yahoo! and Overture, but he disagreed that Google’s size alone
renders agreements between other parties incomparable. Id. Rather, he testified that this
consideration may affect the factual determination of whether to adjust the royalty rate up or
down in Georgia Pacific factor 15. Id. Defendants cite no case law supporting their proposition
that their size relative to Lycos prohibits license agreements between differently-sized companies
from being relevant or comparable. And indeed, such an argument would make little sense when
considering that the agreement is licensing technology.
Defendants presented their critiques and allegedly more comparable license and “real
world transactions” to the jury, cross-examined Dr. Becker regarding his testimony and
evidence, and elicited supporting and counter testimony from their own expert, Dr. Ugone.
(Trial Tr. at 849:12-920:20 (Becker cross-examination); 1556:12-1621:14 (Ugone direct
examination); 2057:21-2062:13 (closing argument)) The jury was entitled to credit Dr. Becker’s
testimony that Defendants’ proffered transactions were not comparable or not as relevant to the
hypothetical negotiation as those proffered by Dr. Becker. (e.g. Trial Tr. at 925:6-926:6; 930:2-
17). Defendants’ objections go to the weight that should be placed by the jury on the evidence—
exactly what the Court found in previously denying these same arguments ruling that
Defendants’ objections to the Overture licenses “go to the weight of the evidence and should be
resolved by the jury.” (D.I. 705 at 9-10).
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C. Defendants’ Thinly Disguised Entire Market Value Rule Argument Is A Red
Herring
Defendants attack Dr. Becker’s opinion arguing that his apportioned base was incorrectly
based on “the entire incremental impact that the entire SmartAds system had on Google’s
revenue” (at 1, 14-17) and because “he attempted to account for his improper apportionment by
adjusting the royalty rate down” (at 17). Both of these arguments are made by citing exclusively
to entire market value rule decisions. Despite this fact, Defendants go to great pains not to use
the term “entire market value rule.” Defendants attempt to avoid this nomenclature because I/P
Engine did not introduce evidence at trial relating to Defendants’ entire market value of the
accused products. In fact, the Court precluded I/P Engine from introducing at trial the total
revenues for the accused products.13
Defendants have previously made these same arguments in their in limine (D.I. 302), and
Daubert (D.I. 320 at 13-17) motions against Dr. Becker as well as repeatedly before this Court at
trial (e.g. Tr. at 948:19-952:4; 1006:4-16). Each time, the Court rejected their arguments. (D.I.
705 at 8-10 (“objections… go to the weight of the evidence and should be resolved by the
jury.”); Trial Tr. at 1028:20-21 (denying Defendants’ rule 50(a) motion on damages); 2135:8-
2136:25 (same)). As this Court held “[t]he sufficiency of this evidence in determining a
reasonable royalty is a question for the jury.” (D.I. 705 at 8-9). Defendants cross-examined Dr.
Becker on his apportionment calculations, evidence and testimony, and provided counter
testimony from their own damages expert at trial. (Trial Tr. at 902:25-919:22; 1614:25-1618:23).
The jury was entitled to credit Dr. Becker’s testimony over Dr. Ugone’s, and the jury’s
13 The total revenues for the accused products should not have been excluded. See D.I. 826 at 7-
13; Carnegie Mellon Univ., 2012 U.S. Dist. LEXIS 120558, *12 ; PACT XPP Techs., AG, 2012
U.S. Dist. LEXIS 66436, *8-9.
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acceptance of Dr. Becker’s testimony should remain undisturbed. Bonner v. Dawson, 404 F.3d
290, 295 (4th Cir. 2005) (explaining substantial evidence standard).
Despite how Defendants attempt to couch their arguments, their true complaint is that Dr.
Becker did not sub-apportion the already apportioned base—i.e., that he did not properly
apportion the royalty base. (D.I. 844 at 16). But contrary to Defendants’ creative wording, Dr.
Becker’s evidence does not implicate the entire market value rule. Whether the base was
properly apportioned was a matter of the weight to be decided by the jury, not one of
admissibility or for JMOL. Carnegie Mellon Univ. v. Marvell Tech. Group, LTD., No. 09 cv
290, 2012 U.S. Dist. LEXIS 120558, *13 (W.D. Pa. Aug. 24, 2012) (holding that defendants’
criticisms that expert’s apportionment, which relied on defendants’ customer surveys and
internal reports, go more toward weight of evidence than admissibility).
First, Defendants’ claim (at 18) that Dr. Becker violated the entire market value rule
because he allegedly “attempted to account for his improper apportionment by adjusting the
royalty rate down” is meritless. In fact, Defendants asked Dr. Becker to agree with this exact
assertion at trial, and he refused:
Q. Now, in your analysis you attempt to account for the value of
the unaccused features of SmartAds by adjusting the royalty rate
down to 3.5 percent, correct?
A. I -- no, I wouldn't agree with the way you've stated that.
(Trial Tr. at 918:24-919:2). Dr. Becker did not “adjust the royalty rate down” due to any
concerns about the royalty base. He properly arrived at the 3.5% royalty rate by analyzing the
Georgia Pacific factors. (e.g. Trial Tr. at 784:24-786:15; 792:17-799:1).
The out-of-context testimony to which Defendants cite refers to Dr. Becker’s analysis of
Georgia Pacific factor 13, which reads “The portion of the realizable profit that should be
credited to the invention as distinguished from non-patented elements, the manufacturing
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process, business risks, or significant features or improvements added by the infringer.”
Georgia-Pacific Corp., 318 F. Supp. at 1120. Dr. Becker set his 3.5% royalty rate after
considering all of the Georgia-Pacific factors, including this one. But as he expressly testified,
he did not set or adjust his rate due to any concern about an improper (or over-inclusive) royalty
base. There is no evidence of an inflated royalty base here. Defendants’ comparisons to
LaserDynamics (at 18) and Uniloc (at 19) are therefore inapt.
In LaserDynamics, the expert developed a 6% royalty rate based on the correct royalty
base (an optical disc drive). 694 F.3d at 60. The expert then changed the royalty base
(incorrectly) to the entire market value of a laptop computer and adjusted the royalty rate down
to 2% to partially compensate for the inflated base. Id. at 61. The Court noted that this 2% rate
“appears to have been plucked out of thin air….” Id. at 69. Unlike in LaserDynamics, Dr.
Becker never adjusted the royalty base, nor did he alter the royalty rate to compensate for any
such adjustment.
Defendants’ references to Uniloc (at 19) are similarly unsound. I/P Engine does not now
nor has it ever contended that “the royalty base need not be properly apportioned” as Defendants
claim. As explained above, Defendants’ objections to Dr. Becker’s apportionment are
inconsistent with Federal Circuit law, including the very cases to which Defendants cite. The
royalty base was properly apportioned. Again, if Defendants believed Dr. Becker’s
apportionment was overinflated, they could have presented their own apportionment to the jury.
See PACT XPP Techs. , 2012 U.S. Dist. LEXIS 66436, *8 (holding that defendants’ criticisms of
expert’s apportionment go to the weight of the evidence rather than to admissibility). They did
not. Defendants did, however, proffer evidence to the jury attacking Dr. Becker’s apportionment
base (and made the same arguments that they make now). (Trial Tr. at 1614:25-1618:23). The
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jury was entitled to weigh and discredit that evidence and Defendants’ arguments, just as it
clearly did.
Second, there is substantial evidence to support Dr. Becker’s apportionment of the
royalty base. Relying on Google’s own documents and other evidence, Dr. Becker apportioned
the incremental revenues Google received by using the infringing systems. Dr. Becker properly
apportioned the overall revenue of the accused products (AdWords, AdSense For Search, and
AdSense For Mobile Search) by apportioning only that incremental revenue attributable to the
accused functionality in the accused products (SmartAds, Disabling, and Promotion
functionalities). (See Trial Tr. at 803:16-21 (Becker testimony identifying accused
functionality); 461:15-18 (underlying testimony explaining infringement by accused
functionality); 494:1-10 (same); 495:8-10 (same); 496:13-15 (same)). Defendants’ argument
that Dr. Becker’s apportionment overstates the royalty base because it includes some
unidentified impact on revenue of unpatented features (an argument I/P Engine rejects) raises a
factual dispute, not a question of Dr. Becker’s methodology. PACT XPP Techs., 2012 U.S. Dist.
LEXIS 66436, at *8. Defendants fail to cite a single case to support their novel theory that the
entire market value rule is violated (or apportionment is improper) by failing to sub-apportion the
already apportioned revenue attributable to each inseparable feature of the accused system, as
opposed to failing to apportion altogether. This is because this is not the law.
LaserDynamics and Uniloc relate to a plaintiff’s failure to apportion a royalty base at all.
LaserDynamics explains that the royalty base should be based on the “smallest salable patentpracticing
unit,” not the entire product. LaserDynamics, 694 F.3d at 67 (internal citations
omitted, emphasis added). This case does not require, as Defendants suggest, that the revenues
associated with the smallest salable patent-practicing unit be further subdivided.
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Here, the only revenue stream associated with the accused systems is the advertising
revenue received for advertisements served using the accused infringing systems. Thus, the
accused systems are the smallest salable patent-practicing unit. But Dr. Becker apportioned the
revenues associated with the infringing systems even more (again, using Google’s own
apportionment documents).14 Dr. Becker apportioned the total revenues of the accused products
to cover only the discrete accused functionality (SmartAds, including disabling and promotion).
(Trial Tr. at 799:19-807:20). There is no smaller salable unit to use as a royalty base nor have
Defendants ever identified any such smaller unit. The royalty base reflects the direct value that
the infringing functionalities added to the pre-existing revenue stream, nothing more. (PX-64
(discussed at 799:19-807:20), PX-34 (discussed at 807:21-810:13), PX-32 (discussed at 811:9-
815:22), PX-337 (discussed at 815:23-817:25), and PX-228 (discussed at 818:1-819:9)). Indeed,
Defendants did not introduce any other apportionment calculation or base at trial. They now
simply argue that Dr. Becker’s apportioned base is wrong and that it was error for I/P Engine to
use a graphic like PDX-444 (at 15) to show the jury what portion of the apportioned base I/P
Engine was seeking. But the Federal Circuit cases relied on by Defendants do not support
Defendants’ arguments. They support Dr. Becker’s apportioned royalty base.
Indeed, in LaserDynamics, the patent-practicing component accused was an optical disc
drive (ODD), which is a component of a computer that can be separated from the rest of the
computer. The LaserDynamics Court found error because “[t]he royalty was expressly
14 Google attacks the veracity of one of the documents that Dr. Becker relied upon to apportion
the revenues to arrive at the apportioned royalty base. (Motion at 2, 5, 15-16, regarding “draft”
document.) This argument goes to the weight and credibility of the evidence and witnesses.
Notably, Defendants did not proffer any evidence that this document or Dr. Becker’s
apportionment numbers were wrong or even suggest a number in the alternative. Moreover, the
document shows actual sales figures extending back over time, which puts the future projections
into context. Despite the fact that this was a Google document, Google never made any effort to
clarify or introduce a later or alternative version of this document.
Case 2:11-cv-00512-RAJ-TEM Document 871 Filed 01/25/13 Page 28 of 34 PageID# 22341
27
calculated as a percentage of the entire market value of a laptop computer rather than a patentpracticing
ODD alone”. 694 F.3d at 68. It does not suggest that the value of the ODD must be
further sub-divided to arrive at a royalty base. Notably, the ODDs were the proper royalty base,
regardless of the fact that numerous aspects of ODDs, such as their ability to read CDs, were not
covered by the patents. Id. at 70.15 Similar to LaserDynamics, Dr. Becker’s royalty base is
proper regardless of whether some inseparable sub-component of the accused functionality is
arguably not covered by the patents.
In Uniloc, the Federal Circuit’s concern with the plaintiff’s introduction of the $19 billion
dollars total revenue of the infringing product was because that revenue had no relevance
whatsoever to the “isolated value” of the accused infringing component. Indeed, even though the
plaintiff had identified the amount of a reasonable royalty using an isolated value of $10 per
license, it went out of its way to reference the total revenue numbers. 632 F.3d at 1318-21. The
$19 billion number was in no way needed (and completely irrelevant) to calculating the royalty
base. Id. The plaintiff then compared his royalty number ($565 million) to the larger $19 billion
for the sole purpose of expressing his royalty as a percentage (2.9%) of the larger figure. Id.
This is what the Federal Circuit took umbrage to, and has no semblance to the present case.
Thus, contrary to Defendants’ characterization (at 15), this case is completely distinguishable.
15 Another example is Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301 (Fed. Cir. 2009). In
Lucent the expert used an entire computer as royalty base, despite opining on a patent that only
covered the date-picker component of Microsoft’s Outlook software program. Id. at 1338. After
a motion in limine, the expert reduced the royalty base to the price of the accused software, but
unjustifiably adjusted the royalty rate from 1% to 8% in order to arrive at the same end result.
Id. The Federal Circuit criticized the adjustment to the royalty rate. Id. The Federal Circuit did
not criticize using the price of the software as the royalty base, despite the patent covering only
the date-picker feature of the software.
Case 2:11-cv-00512-RAJ-TEM Document 871 Filed 01/25/13 Page 29 of 34 PageID# 22342
28
The fact that the apportioned royalty base here is large (over $14 billion) or that I/P
Engine is only seeking 3.5% of that approximately 20% increase in Defendants’ total revenues
from the accused systems does not make Dr. Becker’s apportionment wrong or run afoul of
LaserDynamics, Uniloc or any other entire market value rule decision. Dr. Becker testified at
length regarding the evidence supporting his apportionment calculations and apportioned royalty
base, including PX-64 (discussed at 799:19-807:20), PX-34 (discussed at 807:21-810:13), PX-32
(discussed at 811:9-815:22), PX-337 (discussed at 815:23-817:25), and PX-228 (discussed at
818:1-819:9). Dr. Becker’s apportionment is supported by substantial evidence; the base was
directly related to the accused systems and the increased demand by customers for the infringing
systems (Id.), and the base was essential to establishing the reasonable royalty. Defendants cite
no contrary evidence, let alone any evidence justifying JMOL.
VI. A NEW TRIAL IS WARRANTED ONLY ON THE DOLLAR AMOUNT OF PAST
DAMAGES
Defendants argue that the Court’s mid-trial changes to the damages period caused jury
confusion. (D.I. 844 at 29). I/P Engine agrees. (See D.I. 826). Thus, both sides believe that a
new trial on the dollar amount of past damages is warranted. For the reasons set forth in sections
II-V supra, and as set forth in I/P Engine’s Rule 59 Motion for a New (D.I. 826), aside from the
dollar amount of the past damages award, there were no defects in any other aspect of the trial or
jury verdict. (Id. at 1.) Therefore, only a new trial on the dollar amount of past damages for all
defendants is warranted.
Notably, Defendants limit their request for a new trial to the non-Google defendants, but
this limitation does not make sense. A review of the evidence suggests that the award for Google
is too small, not that the award for the non-Google defendants is too large. The shortened
damages period is about 15% as long as the original damages period. The award for the
Case 2:11-cv-00512-RAJ-TEM Document 871 Filed 01/25/13 Page 30 of 34 PageID# 22343
29
shortened damages period should be more than 15% of the award for the original damages period
because the evidence showed that the royalty base increased each year. (See Ex. 1, PDX-83).
The jury’s awards for the non-Google defendants are consistent with this logic, but the jury’s
award for Google is not. Indeed, as illustrated by the chart below, the jury allocated 35% of the
revenues in the original damages period to the shortened damages period for the non-Google
defendants, but only 3.5% of the revenues in the original damages period to the shortened
damages period for Google, even though the plaintiff’s damages evidence showed that Google is
liable for the vast majority of the claimed damages.
Defendant
Royalties Sought
For Original
Damages Period
Royalties Awarded
For Shortened
Damages Period
Royalties Award As
Percentage of Royalties
Originally Sought
AOL, Inc. $22,693,51716 $7,943,000 35.0%
IAC Search & Media, Inc. $18,917,570 $6,650,000 35.2%
Gannett Co., Inc. $12,348 $4,322 35.0%
Target Corp. $282,380 $98,833 35.0%
Google, Inc. $451,190,903 $15,800,000 3.5%
The tenfold difference between the jury’s award for the Google and for the non-Google
defendants strongly suggests that the jury simply misplaced a decimal point when calculating
Google’s damages. Defendants’ assumption that the award for each of the non-Google
defendants is flawed assumes that the jury misplaced a decimal point, not once when calculating
Google’s damages, but four separate times: once each time that the jury calculated each of the
non-Google defendants’ damages. The more logical conclusion is that a single error occurred
when the jury calculated Google’s damages.
16 This amount does not include $510,746 that was identified separately as damages for AOL
Search Marketplace. Including the $510,746 in the total royalties sought for AOL, Inc. would
result in the jury’s award equaling 34.2% of the royalties sought.
Case 2:11-cv-00512-RAJ-TEM Document 871 Filed 01/25/13 Page 31 of 34 PageID# 22344
30
Neither do Defendants’ arguments (at 29-30) justify a new trial on any issues other than
the dollar amount of past damages. The damages period is irrelevant to the jury’s determination
that a running royalty was the correct form of reasonable royalty. And the damages period is
irrelevant to the jury’s determination that the rate of the running royalty is 3.5%. These findings
were based on the substantial evidence of record (see § V, supra), and expressly set forth in the
special interrogatory verdict form (D.I. 789). The special verdict enables the Court to localize
the errors so that the sound portions of the verdict may be saved. Richardson-Vicks Inc. v.
Upjohn Co., 122 F.3d 1476, 1484-85 (Fed. Cir. 1997); see also, Walker v. Pettit Const. Co., Inc.,
605 F.2d 128, 131 (4th Cir. 1979) (“to grant a new trial on all issues on the basis of an error
relating to only one issue would undermine the principal purposes of the special verdict”). The
mid-trial change to the damages period, and any resulting juror confusion as to the dollar amount
of damages, fails to justify a new trial on these independent issues. A new trial should therefore
be granted on the dollar amount of past damages only.
VII. CONCLUSION
For the foregoing reasons, Defendants motion for judgment as a matter of law or
alternatively a new trial on all damages issues should be denied.
Dated: January 25, 2013 By: /s/ Jeffrey K. Sherwood
Donald C. Schultz (Virginia Bar No. 30531)
W. Ryan Snow (Virginia Bar No. 47423)
CRENSHAW, WARE & MARTIN PLC
150 West Main Street
Norfolk, VA 23510
Telephone: (757) 623-3000
Facsimile: (757) 623-5735
Jeffrey K. Sherwood (Virginia Bar No. 19222)
Frank C. Cimino, Jr.
Kenneth W. Brothers
Case 2:11-cv-00512-RAJ-TEM Document 871 Filed 01/25/13 Page 32 of 34 PageID# 22345
31
Charles J. Monterio, Jr.
DICKSTEIN SHAPIRO LLP
1825 Eye Street, NW
Washington, DC 20006
Telephone: (202) 420-2200
Facsimile: (202) 420-2201
Dawn Rudenko Albert
DICKSTEIN SHAPIRO LLP
1633 Broadway
New York, NY 10019
Telephone: (212) 277-6500
Facsimile: (212) 277-6501
Counsel for Plaintiff I/P Engine, Inc.
Case 2:11-cv-00512-RAJ-TEM Document 871 Filed 01/25/13 Page 33 of 34 PageID# 22346
32
CERTIFICATE OF SERVICE
I hereby certify that on January 25, 2013, the foregoing, was served via the Court’s
CM/ECF system on the following:
Stephen Edward Noona
Kaufman & Canoles, P.C.
150 W Main St
Suite 2100
Norfolk, VA 23510
senoona@kaufcan.com
David Bilsker
David Perlson
Quinn Emanuel Urquhart & Sullivan LLP
50 California Street, 22nd Floor
San Francisco, CA 94111
davidbilsker@quinnemanuel.com
davidperlson@quinnemanuel.com
Robert L. Burns
Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
Two Freedom Square
11955 Freedom Drive
Reston, VA 20190
robert.burns@finnegan.com
Cortney S. Alexander
Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
3500 SunTrust Plaza
303 Peachtree Street, NE
Atlanta, GA 94111
cortney.alexander@finnegan.com
/s/ Jeffrey K. Sherwood
Case 2:11-cv-00512-RAJ-TEM Document 871 Filed 01/25/13 Page 34 of 34 PageID# 22347
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