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Yes, it looks like we have recovered nicely, but I would like to see it close over .05
From 7/18/2013 SJ motion.
20 days from 7/18/2013 is 8/7/2013
Interwoven filed portions of these motions under seal. Interwoven and Vertical additionally
filed entire expert declarations, reports, and depositions under seal. In support of these motions
to seal, the parties declare that these documents have been designated as “highly confidential”
pursuant to the parties’ protective order. This broad act of sealing is impermissible under Civil
Local Rule 79-5, which requires that a sealing request be “narrowly tailored to seek sealing only
of sealable material,” and makes clear that a “blanket protective order” does not serve as a
sufficient justification for filing documents under seal. This Order makes reference to materials
that have been filed under seal, but which the Court has determined do not require such
protection. All motions to seal in conjunction with the pending motions are hereby denied due to
their extreme over-breadth, without prejudice to re-filing the motions in accordance with the
standards set forth in Civil Local Rule 79-5. Any revised motion to seal must be filed within
twenty (20) days of the date of this Order. If no such motion is filed within that time, unredacted
copies of all documents currently filed under seal must be filed and made public.
On 9/24/2013 (I Think) VCSY will have a Markman Hearing in Texas for the Samsung/LG Case. If Judge Gilstrap (in Texas) adopts Judge Seeborgs (in San Fracisco) claim constrution interest in this stock should go up
Increased volume and exposure
Damages Theories Survive MSJ
Posted on July 29, 2013 by pstrand Case Cite
Interwoven, Inc. v. Vertical Computer Systems, No. 3:10-cv-04645, 2013 WL 3786633 (N.D. Cal. July 18, 2013).
IPDQ Commentary
Denying a motion for summary judgment, the court in Interwoven concluded the patentee provided sufficient evidence to raise issues of fact regarding lost profits and reasonable royalty damages. Even though the court questioned the strength of the evidence, it concluded cross-examination at trial was the best way to challenge the evidence. This was likely scant comfort for the accused infringer now faced with the prospect of a trial on damages. Moreover, the likelihood that a jury award will survive Federal Circuit scrutiny under today’s more rigorous standards (e.g. LaserDynamics) may lead to an expensive, and ultimately irrelevant, trial.
Case Summary
Plaintiff filed a complaint seeking a declaratory judgment of invalidity and non-infringement. Id. at *1. Plaintiff filed a motion for summary judgment, arguing Defendant could not recover damages under either a lost profits or reasonable royalty theory and seeking to exclude the testimony of Defendant’s damages expert, Joseph Gemini, and a declaration of Defendant’s Chief Technology Officer. Id.
The court denied the motion in all respects.
Lost Profits – Referencing the four Panduit factors, and concluding the Defendant patentee had made a prima facie showing of entitlement to lost profits, the court said:
•Defendant’s evidence of the absence of acceptable non-infringing substitutes was sufficient to raise the issue to the jury. Id. at *9. Defendant’s expert relied on testimony from Defendant’s Chief Technology Officer (“CTO”) and such testimony could be the subject of “vigorous cross examination.” Id.
•Defendant also supplied sufficient evidence that it had the capacity to compete. Id. at *9 – *10. Citing Rite-Hite, the court said, “While rare that a patentee may recover lost profits without evidence of its own sales, . . . that possibility remains open. Whether [the patentee] had the ability to increase production such that it could compete in the relevant market is disputed.” Id. at *10.
•In an effort to capture all infringing sales, Defendant argued Plaintiff forced it out of a two-supplier market. Even though Plaintiff characterized that assertion as “rank speculation,” it raised a question as to whether the infringement was responsible for blocking the patentee from the market. Id.
•Defendant’s use of a 26% profit rate was based on a business plan dated just prior to the infringement and that was: (1) prepared by a subsidiary of the patentee; (2) never implemented; and (3) related to different products, provided an “indication” of expected profitability and was permissible. Id.
Reasonable Royalty
•Defendant patentee presented a question of fact as to the extent the patented technology allegedly drove consumer demand for the infringing products. Id. at *12. In concluding the entire market value of the infringing products was attributable to the patented feature, Defendant’s damages expert pointed to advertising material [it is unclear from the opinion whether the material was from the infringer or the patentee], as well as testimony from Defendant’s CTO. Id. at *11. This was sufficient to raise an issue of fact for the jury to decide. Id.
•The comparable licenses upon which Defendant’s damages expert relied were also sufficient to raise an issue for the jury, and concerns about the degree of comparability could be addressed through cross-examination. Id. There was no evidence the patents-in-suit had been licensed, and the licenses upon which the expert relied were the best evidence available. Id. While the expert’s analysis of the reason why the hypothetical license would differ from the comparable licenses, it was sufficient to get the issue to the jury. Id.
Motions to Exclude
Plaintiff sought to exclude the opinions of Defendant’s damages expert, Joseph Gemini, as unsupported and unreliable speculation. Id. at * 12. However, the court denied the motion, saying any disagreement with Gemini’s conclusions regarding lost profits was an issue of fact not properly the subject of a Daubert motion. Id. As to Gemini’s opinion regarding a reasonable royalty, the court concluded Gemini adequately considered adjustments to the royalty rate. The court reiterated that challenges were best made through cross-examination.
The court also denied the motion to strike portions of the declaration of Defendant’s CTO. Id. Rule 701 does not preclude all opinion evidence by lay witnesses. Opinions based on specialized knowledge are allowed. Id. The CTO had extensive personal experience regarding the functionality of the patented product. Id. Such opinions, though based on personal knowledge, were not so specific as to require technical or other specialized knowledge in violation of Rule 701. Id. Finally, motions to strike are disfavored. Id.
http://ipdamquick.com/damage-case/damages-theories-survive-msj/
Summary of yesterday's Court action in San Francisco. Courtesy of PETERD13 Raging bull #373665:
"Just got home - long drive in rush hour traffic...
I go to the court room at 12:45 and 6 IWOV attys were already there. Within 15 minutes the courtroom filled up with 20 more attys, clearly there were a number of cases to heard this day. At 1:10, another 6 attys came in and sat on the IWOV side (YIKES!!) That's right, 12 attys showed up for their side (although only 4/5 sat at the atty bench. At 1:15 MRR came in. At 1:20, Valdetero and Dossas arrived, handshakes between the 4 of us all around.
First case called (not us) at 1:35. Sort of interesting, about a preliminary injunction being removed (Seeborg leaning heavily on the plaintive to explain why, after 3 yrs, the injunction should stay in place and not be removed) - of value because it involved an injunction (which Seeborg clearly stated was a VERY powerful tool within infringement lawsuits and should be used VERY sparingly - it was not his case originally and the injunction was not ordered by him...), and it again offered an insight into how Seeborg sees things. He always tells the attys which way he is leaning, and so far, he has never been persuaded to change his mind.
Second case is us, called about 2:45, lasted until 3:40. Attys introduced, the surprise - 2 attys from HP, 2 attys from Autonomy - first time either company had any representation there. Dossas and Valdetero for VCSy.
First thing Seeborg says: Bad news, the trail has to be postponed. A criminal case in his court (which naturally takes priority over all civil matters ) ended in a hung jury, and must be retried on that date. He did say that he would rule on today’s motions, and then set up a conference to establish a new date fairly quickly, knowing that this has dragged on for quite some time. (After the hearing, Dossas told us this was good news. Ray Niro will/wants to be here to litigate and had a scheduling conflict in August.)
Moving on, Seeborg suggests there are many motions to be heard, let’s do one at a time. This process quickly changed as he realized that most of the motions were inter-related, and taking all aspects at once, point by point was more prudent, covering all ground…
Okay, as usual, he states his leanings. And as expected, he seemed to not want to ‘prevent’ anything/anyone from presenting evidence at trial.
IWOV argued a lot at almost every point, and routinely ran into the same constant reply from Seeborg. Most of what they argued was trial/cross examination material and not applicable to this hearing. The second atty (whom I had never seen before) was called on to argue the ‘damage’ declarations by both of our experts, especially Gemini (who he kept pronouncing like the astrologic sign), suggesting that their methods were inaccurate. Seeborg repeatedly asked him, if any of their testimony was inaccurate, should all their testimony be ‘not allowed’? ‘Yes’ was the response, and I don’t think Seebord was buying it AT ALL.
Some disagreement about the ‘two’ purported intellectual property thieves. IWOV argued that it was too late to bring them into this case – Dossas argued that he had to dig to find them (‘connect the dots’ he said – lol) and that IWOV never mentioned them. IWOV attys argued McAuley’s deposition never mentioned them, but he was deposed by IWOV, not VCSY – seemed that ended the argument, but Seeborg might rule against their admission. I asked Dossas about this after the hearing, he said it didn’t matter, he could always just ask McAuley about them. I liked the answer – don’t have to ‘prove’ anything, just the mention of this is ‘fire’.
Finally, Bijal pushed hard on some old points and Seeborg appeared to get angry, or as angry as he will show. He stopped the atty, and told him to stop arguing the ‘Markman’ ruling! He said we must agree to disagree. He appreciated his persistence, knows he doesn’t agree with the ruling or like it at all, but ‘move on’. He did say that others ‘higher up’ than he might agree w/ their position, but not he, and not now. It wasn’t a ruling per se, but once again it did indicate something about Seeborg. And the more Bajil argued, the worse for him it got. It felt like some people never know when to shut up, or something like that…
Anyway, my opinion: The only point where IWOV seemed to win was the ‘indirect’ infringement argument put forward by Maly. And as Valdetero and I agreed, small potatoes.
Status quo when the rulings are announced. No Summary Judgment, most, if not all expert testimony allowed. All declarations allowed."
Calendar for: Judge Richard Seeborg
Courtroom 3, 17th Floor
Courtroom Deputy: Corinne Lew
Thursday, June 20,2013
1:30 PM
- CIVIL LAW AND MOTION
3:10-cv-04645-RS - Interwoven, Inc. v. Vertical Computer Systems, Inc.
Motion Hearing
1,446,667 shares (short volume) today.
http://regsho.finra.org/FORFshvol20130612.txt
Critical Dates:
JonnyQwan Raging Bull #371829
Motion Hearing 06/20/2013 at 01:30 PM
Release of Transcript Restrict 07/22/2013
Pretrial Conference 08/01/2013 at 10:00 AM
Jury Selection 08/12/2013 at 09:00 AM
Jury Trial 08/12/2013 at 09:00 AM
Over $200,000,000 in damages sought....
Plus the Potential for 3 times that amount if infringment was found to be willful.
Courtesy Of JonnyQwan Raging Bull #371441
INTERWOVEN, INC.
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION
INTERWOVEN, INC.,
Plaintiff,
vs.
VERTICAL COMPUTER SYSTEMS, INC.,
Defendant.
Civil Case No. 3:10-cv-04645-RS
PLAINTIFF INTERWOVEN, INC.’S
REPLY IN SUPPORT OF MOTION TO
EXCLUDE THE TESTIMONY OF
JOSEPH GEMINI AND MOTION TO
STRIKE THE DECLARATION OF
LUIZ VALDETARO
Date: June 20, 2013
Time: 1:30 p.m.
Dept: Courtroom 3
Judge: Hon. Richard Seeborg
JURY TRIAL DEMANDED
TABLE OF CONTENTS
I. INTRODUCTION................................................................................................................... 1
II. GEMINI’S LOST PROFITS ANALYSIS IS UNRELIABLE. .............................................. 1
A. Gemini Failed To Establish Absence Of Non-Infringing Substitutes. ......................... 2
B. There Is No Evidence That Vertical Had Any Capacity To Meet Demand. ................ 4
C. Gemini’s Use Of 26% Profit Rate Is Improper. ........................................................... 6
III. GEMINI’S REASONABLE ROYALTY ANALYSIS IS NOT BASED ON SOUND
ECONOMIC PRINCIPLES AND METHODOLOGY .................................................................. 6
A. Gemini Failed To Identify The Smallest Salable Practicing Unit. ............................... 6
B. Gemini Improperly Applies The Entire Market Value Rule. ....................................... 7
C. Basix1 Agreements Are Not Comparable License As A Matter Of Law. ................... 8
IV. DECLARATION OF LUIZ VALDETARO SHOULD BE STRICKEN ............................. 11
A. Improper Expert Opinions By Mr. Valdetaro Should Be Stricken. ........................... 11
B. New Information Never Disclosed During Discovery Should Be Stricken. .............. 12
V. CONCLUSION ..................................................................................................................... 13
TABLE OF AUTHORITIES
Page(s)
CASES
ActiveVideo Networks v. Verizon Communications,
694 F.3d 1312 (Fed. Cir. 2012) ................................................................................................. 9
Am. Booksellers Assn., Inc. v. Barnes & Noble, Inc.,
135 F. Supp. 2d 1031 (N.D. Cal. 2001) .................................................................................... 4
AVM Tech., LLC v. Intel Corp.,
Case No. 1:10-cv-00610, WL 126233 (D. Del. Jan 4, 2013) .............................................. 7, 10
BIC Leisure Prods. v. Windsurfing Int’l, Inc.,
1 F.3d 1214 (Fed. Cir. 1993) ..................................................................................................... 2
Communities Actively Living Independent & Free v. City of Los Angeles,
Case No. 2:09-cv-0287, 2011 WL 4595993 (C.D. Cal. Feb. 10, 2011).................................. 13
Dataquill Ltd. v. High Tech Comp. Corp.,
887 F. Supp. 2d 999 (S.D. Cal. 2011) ................................................................................... 8, 9
Daubert v. Merrell Dow Pharms., Inc.,
509 U.S. 579 (1993) .................................................................................................................. 1
Ford v. Maricopa County Super. Ct.,
Case No. 2:08-cv-1977, 2010 WL 2266719 (D. Ariz. June 4, 2010) ..................................... 13
Fresenius Med. Care Holdings, Inc. v. Baxter Int’l, Inc.,
Case No. 4:03-cv-01431, 2006 WL 133002, (N.D. Cal. May 15, 2006). ........................... 3, 12
Grain Processing Corp. v. Am. Maize-Prods. Co.,
185 F.3d 1341 (Fed. Cir. 1999) ............................................................................................. 1, 2
IP Innovation LLC v. Red Hat, Inc.,
705 F. Supp. 2d 687 (E.D. Tex. 2010) (Rader, J.) .................................................................... 8
LaserDynamics, Inc. v. Quanta Computer, Inc.,
694 F.3d 51 (Fed. Cir. 2012) ........................................................................................... 7, 8, 10
Lucent Tech., Inc. v. Gateway, Inc.,
580 F.3d 1301 (Fed. Cir. 2009) ................................................................................................. 8
Masimo Corp. v. Philips Elec. N. Am. Corp.,
Case No. 1:09-cv-00080, slip op. (D. Del. May 20, 2013) ................................................... 4, 9
Panduit Corp. v. Stahlin Bros. Fibre Works, Inc.,
575 F.2d 1152 (6th Cir. 1978) .......................................................................................... passim
Rite-Hite Corp. v. Kelly Co., Inc.,
56 F. 3d 1538 (Fed. Cir. 1995) (en banc) .................................................................................. 5
Sitrick v. Dreamworks, LLC,
Case No. 2:03-cv-04265, 2006 WL 6116641 (C.D. Cal. July 20, 2006) ............................ 3, 12
Uniloc USA, Inc. v. Microsoft Corp.,
632 F.3d 1292 (Fed. Cir. 2011) ................................................................................................. 7
Versata Software, Inc. v. SAP Am., Inc.,
Case Nos. 2012–1029, 2012–1049, 2013 WL 1810957 (Fed. Cir. May 1, 2013) .................... 5
Wechsler v. Macke Int'l Trade, Inc.,
486 F.3d 1286 (Fed. Cir. 2007) ............................................................................................. 1, 2
OTHER AUTHORITIES
Federal Rules of Civil Procedure 26(a)(2) .......................................................................... 4, 11, 12
Federal Rules of Evidence 702 ....................................................................................... 1, 3, 11, 12
I. INTRODUCTION.
Vertical’s Opposition confirms that Mr. Gemini’s opinions ignore, or misapply, legally proper methodologies and are based on speculation and the improper expert opinion of Vertical’s own CTO, Luiz Valdetaro, rather than facts. First, Mr. Gemini’s analysis of the Panduit factors to establish lost profits is unsupported by the facts and evidence and fails to meet the requisite threshold that Vertical and Interwoven competitively sell within the same relevant market during the infringement period. In particular, Mr. Gemini cannot (1) establish that there was an absence of acceptable noninfringing substitutes (Panduit factor 2); (2) establish that Vertical had the
capacity to meet the demand (Panduit factor 3); and (3) show the amount of profit Vertical would have made (Panduit factor 4). See Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d
1152 (6th Cir. 1978).
Second, Mr. Gemini’s reasonable royalty analysis lacks the requisite “sound economic and factual predicates.†Mr. Gemini fails to identify the “smallest salable practicing unit†and improperly applies the entire market value rule to set the royalty base. Mr. Gemini further relies on a non-comparable license to derive the reasonable royalty rate. Accordingly, because Mr. Gemini’s opinions fall short of the reliability and relevance standards of Rule 702 of the Federal Rules of Evidence and Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993) and its progeny, they should be excluded.
Finally, paragraphs 8, 10, 11, 13, and 14 of Mr. Valdetaro’s declaration submitted in support of Vertical’s Opposition should be stricken as they are improper expert testimony.
Declaration of Vasilios D. Dossas in Opposition to Interwoven’s Motion for Summary Judgment (“Dossas Decl.â€) Ex. 6. Paragraph 4 of Mr. Valdetaro’s declaration should also be stricken as it
includes new information that was never disclosed during discovery.
II. GEMINI’S LOST PROFITS ANALYSIS IS UNRELIABLE.
“To recover lost profits, the patent owner must show ‘causation in fact,’ establishing that ‘but for’ the infringement, he would have made additional profits.†Grain Processing Corp. v. Am. Maize-Prods. Co., 185 F.3d 1341, 1349 (Fed. Cir. 1999). Whether lost profits are available
s a threshold question of law for the court. Wechsler v. Macke Int'l Trade, Inc., 486 F.3d 1286,1293 (Fed. Cir. 2007). Thus, the patentee must make a threshold showing that during the alleged infringement period (i.e., November 2004 onward) it was selling a product in competition with the alleged infringer within the same relevant market. BIC Leisure Prods. v. Windsurfing Int’l, Inc., 1 F.3d 1214, 1218-19 (Fed. Cir. 1993). Moreover, where the patentee seeks to capture all of the infringer’s sales as lost profits, it must produce specific evidence that it would have done so. Wechsler, 486 F.3d at 1293-94 (finding the plaintiff failed its heavy burden to show ability to meet demand). The foregoing requires “sound economic proof,†rather than speculation. Grain Processing, 185 F.3d at 1350.
Vertical argues that Mr. Gemini has addressed the Panduit factors and that “[t]his is all that is required.â€1 Opposition at 7. However, merely reciting the Panduit factors is not enough to prove the “but for†causation required to establish lost profits. Mr. Gemini must establish that each Panduit factor is supported by actual facts and evidence of the case. Mr. Gemini fails to do so. In particular, Mr. Gemini cannot (1) establish that there was an absence of acceptable
noninfringing substitutes (Panduit factor 2); (2) establish that Vertical had the capacity to meet the demand (Panduit factor 3); and (3) show the amount of profit Vertical would have made (Panduit factor 4). Accordingly, Mr. Gemini’s testimony relating to lost profits is unreliable and should be excluded.
A. Gemini Failed To Establish Absence Of Non-Infringing Substitutes.
Vertical concedes that its alleged competitive product (SiteFlash) is “de facto dead†and that it has not sold a single SiteFlash product over the entire nine year period of alleged
infringement. But it argues the reason it could not sell SiteFlash since 2004 is because Interwoven entered the market at that time and drove Vertical completely out of the market.Opposition at 3. Without defining the relevant market or producing any specific evidence
1 Vertical submitted a Declaration of Joseph Gemini dated May 30, 2013 (Dossas Decl. Ex.7), which appears to copy Mr. Gemini’s December 21, 2012 and March 20, 2013 damages reports. In addition to Mr. Gemini’s two damages reports, Mr. Gemini’s newly submitted declaration should also be excluded for the same reasons.
explaining Vertical’s over nine years of zero percent market share, Mr. Gemini incorrectly assumes a two-supplier market. Opposition at 3. Mr. Gemini’s conclusion, however, completely ignores the following undisputed facts:
• There is no evidence showing that Interwoven and Vertical were ever competitors in any market, let alone the relevant market;
• There is no evidence that Interwoven and Vertical ever made bids against each other for the same potential customers;
• Microsoft—which settled with Vertical in 2008—is one of Interwoven’s competitors in the relevant market, as indicated by the industry studies and Interwoven’s internal documents (Declaration of Bijal V. Vakil in Suppport of Motion to Exclude the Testimony of Joseph Gemini (“Vakil Gemini Decl.â€) Exs. F, G);
• In addition to Microsoft, Interwoven has several other competitors, such as IBM,Oracle, Adobe, and SDL (Dossas Decl. Ex. 10 at 134:2-5); and
• Vertical has performed no analysis and provided no expert opinion as to whether any of Interwoven’s competitors’ products allegedly infringe the patents-in-suit. Instead of relying on specific facts, Mr. Gemini relies solely on Vertical’s allegations,
namely from Vertical’s own CTO—Luiz Valdetaro—rather than an expertthat Interwoven’s TeamSite and Vertical’s SiteFlash “provide unique functionality†and that no one else, including
Microsoft’s SharePoint software, provides such unique functionality.2 Opposition at 14-15; Dossas Decl. Ex. 6 at ¶ 11. As discussed in more detail in Section IV, below, such statements constitute improper expert opinions that should be stricken. See, e.g., Fresenius Med. Care Holdings, Inc. v. Baxter Int’l, Inc., Case No. 4:03-cv-01431 SBA, 2006 WL 1330002, at *5 (N.D. Cal. May 15, 2006) (Armstrong, J.) (striking declaration of a lay witness—who was not disclosed
as an expert—submitted in support of opposition to summary judgment motion relating to statements concerning whether certain technology is “unique or innovative†because they are “clearly inadmissible expert testimony … based on ‘scientific, technical or other specialized knowledge within the scope of Rule 702’ and exceed the scope of permissible lay testimony.â€); Sitrick v. Dreamworks, LLC, Case No. 2:03-cv-04265, 2006 WL 6116641, at *21-22 n.9 (C.D.
2 Vertical also asserts that it will proffer evidence that no non-infringing substitutes existed,but does not disclose any such evidence. Opposition at 9.
Cal. July 20, 2006) (striking lay witness’s declaration submitted in support of summary judgment that opined one feature in the prior art product is the same as another feature in the accused product because it “would allow Defendants to do an end-run around the expert witness
requirements of Rule 26(a)â€). As a result, Mr. Gemini should be precluded from relying on Mr. Valdetaro’s improper opinions. See, e.g., Masimo Corp. v. Philips Elec. N. Am. Corp., Case No.
1:09-cv-00080, slip op. at 65-66 (D. Del. May 20, 2013) (excluding damages expert’s opinion and testimony regarding acceptable non-infringing alternative because the damages expert relied on
excluded analysis and conclusions of technical expert’s opinion).3
Because no factual basis exists for Mr. Gemini to show the absence of acceptable noninfringing substitutes as required by Panduit factor 2, Mr. Gemini’s testimony relating to lost profits should be excluded.
B. There Is No Evidence That Vertical Had Any Capacity To Meet Demand.
Mr. Gemini relies on Mr. Valdetaro’s conclusion that “Vertical has the capacity to sell and service the SiteFlash product.†Opposition at 11-12; Dossas Decl. Ex. 6 at ¶ 12. Mr. Valdetaro’s conclusion is apparently based on his observation that Vertical “merely requires hiring of more staff with an increase in customers.†Id. Mr. Gemini, however, conveniently ignores the specific facts in this case:
• Vertical seeks lost sales of all of TeamSite sales—more than $200 million in sales;
• In 2004 (when alleged infringement began), Interwoven had 205 people in research and development, 180 in support and professional services, 223 in sales and marketing, and 83 in general administrative roles, see Vakil Gemini Decl. Ex. H at ¶
115;
• Vertical had only sold five SiteFlash products before 2004 and none after 2004; 3 Vertical also argues that “Mr. Gemini analysis is based on the assumption that there are no acceptable, non-infringing substitutes that existed in the market.†Opposition 8. But that
assumption is Mr. Gemini’s conclusion—that Panduit factor 2 (absence of non-infringing susbstitutes) is established. Mr. Gemini’s assumption is also not supported by actual facts of the
case, and thus should be excluded. See, e.g., Am. Booksellers Assn., Inc. v. Barnes & Noble, Inc.,135 F. Supp. 2d 1031, 1041-42 (N.D. Cal. 2001) (excluding plaintiff’s expert opinion because it
“contains too many assumption and simplifications that are not supported by real-world evidence).
• In 2001, when Vertical acquired SiteFlash, Vertical had at most six or seven people working on software development, maintenance, training, testing, and quality assurance for SiteFlash, and had no full-time employees responsible for marketing SiteFlash, see Vakil Gemini Decl. Ex. E at 20:3-21:25.
In order to capture all ofTeamSite sales, Vertical would have to significantly increase its staff by hundreds. This is not a mere hiring of more staff as Mr. Valdetaro presumptuously concludes, but a huge feat. Further, Vertical argues that not having sold SiteFlash “for some time does not change the competitive landscape or Vertical’s abilities†and that “Vertical sells its other products to many large corporation and non-profit entities without a problem.†Opposition at 3;
Dossas Decl. Ex. 6 at ¶ 12. But Vertical’s recent 10-K filing states that Vertical currently only has 22 full-time and five part-time employees, and six consultants. Reply Declaration of Bijal V.
Vakil in Support of Motion to Exclude the Testimony of Joseph Gemini (“Vakil Gemini Reply Decl.â€) Ex. A at 12. It also states that it had approximately $5.5 million in revenue in 2012. Id.at 23. Even looking at Vertical’s current situation, which purportedly sells other products to “large corporation and nonprofit entities without a problem,†Vertical would need to hire hundreds of new employees and would need large resources to meet the demand of $200 million
in sales. Vertical never had, and still does not have, the capacity to meet the demand for the entirety of Interwoven TeamSite’s sales that it is seeking for lost profits. Vertical argues that this present case is similar to the facts found in Versata Software, Inc.
v. SAP Am., Inc., Case Nos. 2012–1029, 2012–1049, 2013 WL 1810957 (Fed. Cir. May 1, 2013) (rehearing en banc filed) because “the market for the patentee’s product also disappeared when the Interwoven began selling the infringing software.†Opposition at 10. Unlike this case,
however, the patentee in Versata established that before accused infringer SAP entered into the market, “it enjoyed market exclusivity similar to that which it would have had in a hypothetical
world absent SAP’s infringement.†Id. at *8. Here, there is no such evidence that Vertical enjoyed market exclusivity before the ’744 patent issued on November 30, 2004. Instead,
Vertical concedes that it was able to sell only five copies SiteFlash before the issuance of the ’744 patent. There is also no evidence that it was ever competitive in the relevant market. Vertical’s
citation of Rite-Hite Corp. v. Kelly Co., Inc., 56 F.3d 1538, 1548 (Fed. Cir. 1995) (en banc) is also unavailing. Opposition at 9. In that case, the Federal Circuit recognized that lost profits
could be recoverable in a limited situation, which is not applicable here. Rite-Hite, 56 F.3d at 1545-48. Here, it is undisputed that Vertical made no sales of the patented product during the
relevant time period, and by definition it is not entitled to lost profits. See id. (“Normally, if the patentee is not selling a product, by definition there can be no lost profits.â€). Accordingly, Mr. Gemini’s opinion that Vertical had the capacity to meet the demand as required by Panduit factor 3 is unsupportable. Mr. Gemini should be precluded from testifying relating to lost profits.
C. Gemini’s Use Of 26% Profit Rate Is Improper.
Vertical argues that Mr. Gemini used the best evidence of Vertical’s projected profits— the GIS Business Plan. Opposition at 12. However, Mr. Gemini completely ignores the circumstances underlying the GIS Business Plan:
• The GIS Business Plan was not for Vertical, but a different company, GIS (a whollyowned subsidiary of Vertical);
• The GIS Business Plan was not for SiteFlash, but a different product called Response Flash;
• There is no proof that ResponseFlash practices the patents-in-suit or is related to the technology of the patents; and
• The forecasted profits rates in the GIS Business Plan never materialized—GIS never made any revenue or profit.
There are simply no facts or data in support of Mr. Gemini’s use of 26% profit rate. Accordingly, Mr. Gemini’s testimony regarding lost profits based on the speculative profit rate is unreliable and should be excluded.
III. GEMINI’S REASONABLE ROYALTY ANALYSIS IS NOT BASED ON SOUND
ECONOMIC PRINCIPLES AND METHODOLOGY.
A. Gemini Failed To Identify The Smallest Salable Practicing Unit.
Vertical argues that Mr. Gemini has identified the “smallest salable practicing unitâ€â€”the whole of Interwoven’s TeamSite and LiveSite products. Opposition at 14. But this conclusion is
based solely on Interwoven’s on-line advertising material, which clearly shows that TeamSite has multiple components: “TeamSite is a market-leading content management platform for content authoring, multichannel delivery, site design and layout, multivariate testing, content targeting, rich media management, advanced analytics, workflow and approval, and archiving.†Dossas Decl. Ex. 25 at V007243. Most of TeamSite’s components—such as rich media management,
advanced analytics, workflow and approval, and archiving—have nothing to do with the accused patented feature of using “arbitrary objects.†These components are not part of any infringement allegation. Accordingly, Mr. Gemini failed to meet the burden to identify the “smallest salable practicing unit†required to establish reasonable royalty. See LaserDynamics, Inc. v. Quanta
Computer, Inc., 694 F.3d 51, 67 (Fed. Cir. 2012); Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1320 (Fed. Cir. 2011). In every case of this nature involving a multicomponent product,the patentee cannot calculate damages based on the sales of the entire product and must instead apportion damages based on the “smallest salable practicing unit,†lest prejudicial Uniloc error be introduced that will skew the damages horizon for the jury. Uniloc, 632 F.3d at 1320; AVM
Tech., LLC v. Intel Corp., Case No. 1:10-cv-00610, 2013 WL 126233, *3 (D. Del. Jan 4, 2013).
B. Gemini Improperly Applies The Entire Market Value Rule.
The entire market value rule is a “narrow exception†to the “smallest salable patentpracticing unit†rule. LaserDyanmics, 694 F.3d at 67. Further, the entire market value rule is permitted only where “the patented feature creates the ‘basis for customer demand’ or
‘substantially create[s] the value of the component parts.’†Uniloc, 632 F.3d at 1318 (citations omitted). Vertical argues that “even though Mr. Gemini has not applied the entire market value
theory in his calculations, he has assumed that the patented technology drives the demand for TeamSite and LiveSite.†Opposition at 15 (emphasis added). Vertical asserts that such assumption is based on the facts and data of the case. Opposition at 15.
However, the only evidence Vertical puts forth is the same Interwoven on-line advertising material discussed above, Dossas Decl. Ex. 25, and Mr. Valdetaro’s improper opinion as to what phrases from the on-line advertising material go to the benefits of arbitrary objects depicted in the specification of the patents-in-suit. Opposition at 16-17; Dossas Decl. Ex. 6 at ¶ 10. Even if Mr. Valdetaro’s improper opinion is accepted as true, the assertion that certain cherry-picked phrases in the advertising materials go to benefits of the patented features is not enough to prove the patented feature creates the “basis for customer demand†or “substantially create[s] the value of the component parts.†LaserDynamics, 694 F.3d at 68 (“It is not enough to merely show that [patentee’s invention] is viewed as valuable, important, or even essential to the use of the [accused products].â€) (emphasis added); Lucent Tech., Inc. v. Gateway, Inc., 580 F.3d 1301, 1337 (Fed. Cir. 2009) (rejecting application of entire market value rule where there was no evidence demonstrating patented method was “the basis—or even a substantial basis—of the customer
demand†for the accused product). Vertical argues Mr. Gemini was similarly challenged in Dataquill Ltd. v. High Tech Comp. Corp., 887 F. Supp. 2d 999, 1027-28 (S.D. Cal. 2011) and the court in Dataquill allowed Mr. Gemini’s testimony concerning the entire market value rule. In Dataquill, however, Mr.Gemini relied on “various documents, including HTC documents, showing that the features of the
patented technology are vital to [defendant’s] competitive position in the smart-phone market.â€
Id. at 1028 (emphasis added). Here, Mr. Gemini provides no evidence that the patented technology is vital to Interwoven’s competitive position in the market.4 In sum, Mr. Gemini failed to identify any smallest salable patent practicing unit and improperly applies entire market value rule without any analysis of the demand for the alleged
patented features. Accordingly, Mr. Gemini’s testimony relating to reasonable royalty should be excluded.
C. The Basix1 Agreements Are Not Comparable Licenses.
Interwoven argues Mr. Gemini’s testimony relating to the Basix1 Agreements should not 4 Vertical also argues that Mr. Gemini was able to eventually testify at trial after his testimony concerning the entire market value rule was excluded by the court in IP Innovation
LLC v. Red Hat, Inc., 705 F. Supp. 2d 687 (E.D. Tex. 2010) (Rader, J.). But Vertical does not state that Mr. Gemini was able to specifically testify about the entire market value rule. Indeed,
there is no indication that Mr. Gemini was actually able to testify about the entire market value rule at trial in IP Innovation after such testimony was stricken by the court.
be precluded because the issue of comparability of an existing license and a hypothetical license is measured through cross-examination, not by preclusion.5 Opposition at 17. But when there is
no evidentiary support that the licenses are technologically or economically comparable, the courts have routinely excluded expert testimony relying on non-comparable licenses. See, e.g.,
Dataquill, 887 F. Supp. 2d at 1024-25 (excluding Mr. Gemini’s testimony “to the extent he relies on the ‘significant patent agreements’ in determining the reasonable royalty that would have been
reached at the hypothetical negotiation†because “Mr. Gemini has not provided any evidence or analysis showing the ‘significant patent agreements’ are economically comparable to the license that would be reached at the hypothetical negotiation.â€).
Vertical argues the Basix1 Agreements are comparable because (1) they involved an arms-length license to technology of the patents-in-suit and (2) the Basix1 Agreements were dated September 8, 2004, the time Interwoven’s alleged infringement began. Opposition at 3-4.
However, there are no facts to support Vertical’s arguments.
First, even if the agreements were arms-length licenses, there is no evidence that they involved technology of the patents-in-suit. The Basix1 Agreements, which were entered into before the first patent-in-suit issued on November 30, 2004, were not licenses for the patents-insuit,the applications for the patents-in-suit, or even the complete SiteFlash product that Vertical asserts practices the patents-in-suit. Instead, the Agreements involved “the forums and calendar
applications†of SiteFlash. Vakil Gemini Decl. Ex. M at V006391. Mr. Gemini relies solely on Mr. Valdetaro’s improper opinion—which should be stricken as discussed below —that “forums and calendar applications of SiteFlash†are covered by the patents-in-suit. Mr. Gemini cannot rely on such improper opinions. See, e.g., Masimo Corp., Case No. 1:09-cv-00080, slip op. at 65-
66 (excluding damages expert’s opinion and testimony regarding acceptable non-infringing alternative because the damages expert relied on excluded analysis and conclusions of technical expert’s opinion). Indeed, there is no evidence or analysis that “the forums and calendar 5 Vertical relies on ActiveVideo Networks v. Verizon Communications, 694 F.3d 1312, 1333 (Fed. Cir. 2012). However, ActiveVideo did not involve absence of evidence of comparability,
but the question of the degree of comparability.
applications†relate to the patented technology.
Second, Vertical’s assertion that the Basix1 Agreements were entered into at the time when Interwoven’s infringement began is wrong. Interwoven’s alleged infringement did not
begin until the ’744 patent issued on November 30, 2004. The Basix1 Agreements were entered into, not only before the time of alleged infringement, but under very different circumstances
compared to the requisite hypothetical negotiations that would have occurred between Interwoven and Vertical. For example:
• The Basix1 Agreements were not pure technology license agreements, but a license to re-bundle pieces of SiteFlash with Basix1’s Enterprise Knowledge Gateway (“EKGâ€);
• The Basix1 Agreements did not involve the patents-in-suit (or any other patents or intellectual property);
• The Basix1 Agreements included a co-marketing agreement entered into by NOW Solutions, a wholly-owned subsidiary of Vertical, and Basix1;
• The Basix1 Agreements were entered between related parties; and
• No payments were ever made under the 10% royalty in the Basix1 Agreements. The Basix1 Agreements bear no similarity at all to the relationship between Interwoven and Vertical at the time of a hypothetical negotiation. “When 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; see also AVM Tech., 2013 WL 126233 at *3 (“With respect to the license agreements, Federal Circuit precedent is clear that [patentee] must show that the prior licenses are truly comparable to the license that the parties would have negotiated for the asserted patent before introducing this evidence to the jury.â€)
(emphasis added).
Accordingly, because Mr. Gemini’s entire reasonable royalty analysis is based on the unreliable foundation of the Basix1 Agreement, which is not closely tied to the facts of this case,his testimony concerning reasonable royalty should be precluded.
IV. DECLARATION OF LUIZ VALDETARO SHOULD BE STRICKEN
Vertical submits the Declaration of Luiz Valdetaro dated May 30, 2013 (Dossas Decl. Ex. 6) (“Valdetaro Declarationâ€) in support of its oppositions to motion for summary judgment (Dkt.
No. 175), motion to exclude the testimony of Joseph Gemini (Dkt. No. 177), and motion to exclude the testimony of John Maly (Dkt. No. 178). Paragraphs 8, 10, 11, 13 and 14 of the Valdetaro Declaration should be stricken as improper expert opinions submitted by a lay witness never disclosed as an expert. Paragraph 4 of the Valdetaro Declaration should also be stricken as new information never disclosed during discovery.
A. Improper Expert Opinions By Mr. Valdetaro Should Be Stricken.
Mr. Valdetaro was never disclosed as an expert under Rule 26(a)(2) of the Federal Rules of Civil Procedure and, as a lay witness, he is not qualified to provide any expert opinions. The Valdetaro Declaration, however, is replete with improper expert opinions which require
“knowledge, skill, experience, training, or education†under Rule 702 of the Federal Rules of Evidence:
Paragraph 8: “In any event, the products sold by Microsoft and the SiteFlash product sold by Vertical are much different products that do not compete in any market. The functionality is different – Microsoft product do things that SiteFlash product cannot do and vice-versa.â€
Paragraph 10: “Interwoven not only infringes the patents-in-suit, but they do so throughout their product. They even use the arbitrary object features of the patents-in-suit to emphasize the benefits of their platform. …The phrases “automatic rendering and automatic
display of dynamic targeted websites …†“microsites, online
communities†– are all benefits of arbitrary objects depicted on the
specification of the patents in suit. …
Paragraph 11: “The TeamSite product is a complex platform much like Vertical’s SiteFlash product. It provides virtually the same functionality as the SiteFlash platform; and it is the only competition for the SiteFlash product. …â€
Paragraph 13: “Vertical has also identified various Samsung and LG companies as infringers of the patents-in-suit, but those companies do not make anything that even remotely resembles the SiteFlash product or competes with it.â€
Paragraph 14: “In September 204 [sic], a company named Basix1, Inc.
(“Basix1â€) entered into an agreement with Vertical. Basix1
obtained a non-exclusive license for SiteFlash and the patents-insuit
which SiteFlash practices. …â€
In sum, Mr. Valdetaro makes various opinions about:
• Functionalities of the accused product, TeamSite6;
• Functionalities of other parties’ products in the market, including Microsoft’s product;
• Conclusions that Interwoven infringes the patents-in-suit and that it does so throughout the product;
• Certain characteristics found in TeamSite are all benefits of “arbitrary objects†depicted on the specification of the patents-in-suit; and
• Basix1 Agreements relating to patented technology.
Such opinions are improper expert opinions and should be stricken. See, e.g., Fresenius Med. Care Holdings, 2006 WL 1330002 at *5 (striking declaration of a lay witness—who was not disclosed as an expert—submitted in support of opposition to summary judgment motion
relating to statements concerning whether certain technology is “unique or innovative†because they are “clearly inadmissible expert testimony … based on ‘scientific, technical or other
specialized knowledge within the scope of Rule 702’ and exceed the scope of permissible lay testimony.â€); Sitrick, 2006 WL 6116641 at *21-22 n.9 (striking a lay witness’s declaration submitted in support of summary judgment that opined that one feature in the prior art product is the same as another feature in the accused product because it “would allow Defendants to do an end-run around the expert witness requirements of Rule 26(a).â€).
B. New Information Never Disclosed During Discovery Should Be Stricken.
Paragraph 4 of the Valdetaro Declaration states: “From 2004 to 2008, while a member of an industry group called TPF User’s Group, I attempted to sell the SiteFlash product, as well as other Vertical products to the following companies†and lists a number of U.S. and International companies.7 This is the first time that Vertical ever disclosed such information despite 6 Mr. Valdetaro does not have access to any of Interwoven’s confidential material produced
in this case. Mr. Valdetaro’s opinions are both improper and incomplete.7 Mr. Valdetaro does not cite to any documentation in support of this statement.Interwoven’s discovery requests seeking the same information during discovery. See, e.g., Vakil
Gemini Decl. Ex. K, Interrogatory No. 9 (seeking information concerning alleged demand for Vertical’s SiteFlash); Vakil Gemini Reply Decl. Ex. A, Requests for Production Nos. 5, 6 & 10
(seeking information concerning marketing, offers for sale, and sales of SiteFlash). Such new information, disclosed for the first time in a declaration submitted in summary judgment briefing phase, should be stricken. See, e.g., Communities Actively Living Independent & Free v. City of Los Angeles, Case No. 2:09-cv-0287, 2011 WL 4595993, *4-5 (C.D. Cal. Feb. 10, 2011) (striking portion of declaration of a fact witness submitted in support of defendant’s opposition to
plaintiff’s summary judgment motion because it introduced new information based on documents that defendants failed to produce during discovery); Ford v. Maricopa County Super. Ct., Case
No. 2:08-cv-1977 PHX-GMS, 2010 WL 2266719, *2-3 (D. Ariz. June 4, 2010) (striking portion of declaration submitted in support of summary judgment motion because it stated a fact that was
not disclosed during fact discovery).
V. CONCLUSION
For the foregoing reasons, Interwoven respectfully submits that Mr. Gemini should be precluded from testifying at trial and his December 21, 2012 and March 20, 2013 damages reports
and May 30, 2013 Declaration (Dossas Decl. Ex. 7) should be stricken. Interwoven also respectfully submits that paragraphs 4, 8, 10, 11, 13, and 14 of Luiz Valdetaro’s May 30, 2013
Declaration (Dossas Decl. Ex. 6) should be stricken.
Dated: June 10, 2013 Respectfully submitted,
By: /s/ Bijal V. Vakil
Bijal V. Vakil
JACK Q. LEVER, JR. (pro hac vice)
jlever@whitecase.com
BIJAL V. VAKIL (Cal. Bar No. 192878)
bvakil@whitecase.com
JENNIFER P. GOSSAIN (Cal. Bar No. 254174)
jgossain@whitecase.com
THOMAS C. FLYNN (Cal. Bar No. 257945)
tflynn@whitecase.com
WHITE & CASE LLP
3000 El Camino Real
5 Palo Alto Square, 9th Floor
Palo Alto, CA 94306
Telephone: 650.213.0300
Facsimile: 650.213.8158
EDWARD G. POPLAWSKI (Cal. Bar No. 113590)
epoplawski@wsgr.com
OLIVIA M. KIM (Cal. Bar No. 228382)
okim@wsgr.com
WILSON SONSINI GOODRICH & ROSATI
633 West Fifth Street, 15th Floor
Los Angeles, CA 90071
Telephone: 323.210.2900
Facsimile: 866.974.7329
ATTORNEYS FOR PLAINTIFF AND COUNTERCLAIMDEFENDANT
INTERWOVEN, INC.
I say again $200,000,000 LARGE!!!!!!
Fresh Pacer from SF Courtesy of JonnyQwan Raging Bull #371413......
Interwoven moves to exclude VCSY's experts Testimony. To be decided on 6/20/2013.......
COUNTERCLAIMDEFENDANT
INTERWOVEN, INC.
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION
INTERWOVEN, INC.,
Plaintiff,
vs.
VERTICAL COMPUTER SYSTEMS, INC.,
Defendant.
Civil Case No. 3:10-cv-04645-RS
PLAINTIFF INTERWOVEN, INC.’S
REPLY IN SUPPORT OF MOTION TO
EXCLUDE THE TESTIMONY OF
JOHN MALY AND MOTION TO
STRIKE PORTIONS OF THE
DECLARATIONS FILED IN SUPPORT
THEREOF
Date: June 20, 2013
Time: 1:30 p.m.
Dept: Courtroom 3
Judge: Hon. Richard Seeborg
- ii -
PALOALTO 147039
INTERWOVEN’S REPLY I/S/OMOTION TO EXCLUDE MALY TESTIMONY
CASE NO. 3:10-CV-04645-RS
TABLE OF CONTENTS
Page(s)
I. INTRODUCTION ............................................................................................................... 1
II. MOTION TO EXCLUDE MALY’S TESTIMONY ........................................................... 1
A. Maly’s Testimony On The Doctrine Of Equivalents Is Unreliable And
Should Be Excluded ................................................................................................. 1
B. Maly’s Testimony Related To Indirect Infringement Is Unreliable And
Should Be Excluded ................................................................................................. 2
C. Maly’s Infringement Analysis Is Unreliable ............................................................ 3
1. Maly Does Not Show Interwoven Itself Has Practiced Every Step
Of The Methods Claimed In The ’744 Patent .............................................. 3
2. Maly Does Not Show That Interwoven Provides A Computer With
Processor And Memory As Required By The ’629 Patent .......................... 5
3. Maly Mixes Documents from Different Versions of the Accused
Products ........................................................................................................ 6
III. MOTION TO STRIKE PORTIONS OF THE MALY DECLARATION ........................... 7
A. Maly Should Not Be Allowed To Expand The Scope Of His Expert
Opinion ..................................................................................................................... 7
IV. MOTION TO STRIKE PORTIONS OF CLIFFORD KRAFT’S DECLARATION .......... 9
V. MOTION TO STRIKE PORTIONS OF AUBREY MCAULEY’S
DECLARATION ............................................................................................................... 11
VI. CONCLUSION .................................................................................................................. 13
- iv -
PALOALTO 147039
INTERWOVEN’S REPLY I/S/OMOTION TO EXCLUDE MALY TESTIMONY
CASE NO. 3:10-CV-04645-RS
Synthes et al v. Spinal Kinetics, Inc.,
Case No. 5:09-cv-01201, 2011 U.S. Dist. LEXIS 93093 (N.D. Cal. Aug. 19, 2011) ............ 11
Therasense, Inc. v. Becton, Dickinson & Co.,
Case No. 3:04-cv-02123, 2008 WL 2323856 (N.D. Cal. May 22, 2008) ............................... 10
Torres v. City of Los Angeles,
548 F.3d 1197 (9th Cir. 2008) ................................................................................................... 8
Uniloc USA, Inc., v. Microsoft Corp., 632 F.3d 1292 (Fed. Cir. 2011) .......................................... 5
Van Asdale v. Int’l Game Tech.,
577 F. 3d 989 (9th Cir. 2009) .................................................................................................... 9
Yeti by Molly, Ltd. v. Deckers Outdoor Corp.,
259 F.3d 1101 (9th Cir. 2001) ................................................................................................... 8
OTHER AUTHORITIES
Federal Rule of Civil Procedure 26(a) ................................................................................ 8, 11, 12
Federal Rule of Civil Procedure 26(e) ................................................................................ 8, 11, 12
Federal Rule of Civil Procedure 37(c)(1)........................................................................................ 8
Federal Rule of Evidence 702 ................................................................................................... 1, 11
Federal Rule of Evidence 403 ......................................................................................................... 2
PALOALTO 147039
INTERWOVEN’S REPLY I/S/OMOTION TO EXCLUDE MALY TESTIMONY
CASE NO. 3:10-CV-04645-RS
I. INTRODUCTION.
This Court should exclude Mr. Maly’s opinions regarding infringement; they fall far short
of the gatekeeping standards set forth by Federal Rule of Evidence 702 and are fundamentally
unreliable under Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993). Should Mr. Maly’s
unreliable testimony be admitted, it would be confusing to the jury and severely prejudicial to
Interwoven. Vertical’s opposition and its supplemental declarations of Mr. Maly and Mr.
Clifford Kraft (in support thereof) to Interwoven’s Motion to Exclude John Maly’s Testimony
should be rejected for at least the following reasons:
• Vertical concedes that it does not have the evidence to support a finding of indirect
infringement, or infringement under the Doctrine of Equivalents;
• Mr. Maly failed to analyze a single alleged product accused of infringement;
• Portions of Mr. Maly’s supplemental report should be stricken because these
recently added opinions were provided outside the expert discovery period; and
• Portions of Mr. Kraft’s declaration, on which Mr. Maly relies, should be stricken
because they consist of unqualified and inadmissible expert opinion.
This court should also exclude the declaration of Mr. Aubrey McAuley, as it is untimely
and irrelevant to the issues for summary determination.
II. MOTION TO EXCLUDE MALY’S TESTIMONY.
A. Maly’s Testimony On The Doctrine Of Equivalents Is Unreliable And Should
Be Excluded.
Vertical concedes that it has not satisfied the requirements to show infringement under the
Doctrine of Equivalents. Yet, Vertical refuses to drop these allegations despite its own admission
that they lack factual support in the record. See Vertical’s Opposition to Interwoven’s Motion to
Exclude the Testimony of John Maly (“Oppositionâ€) at 12.
Vertical’s seven-line rebuttal fails to refute Interwoven’s contention that Vertical has not
met its burden of showing infringement under the Doctrine of Equivalents. Mr. Maly made no
effort to show that any part of the accused products performs substantially the same function in
substantially the same way to achieve substantially the same result as any element of any claim of the patents-in-suit. Vertical Opposition at 11-12. Such methodology is improper under the
standards of Daubert and this district. See Rambus Inc. v. Hynix Semiconductor Inc., Case No.
5:05-cv-00334, 2008 WL 5411564, *2 (N.D. Cal. Dec. 29, 2008) (Whyte, J.) (granting summaryjudgment of non-infringement under the Doctrine of Equivalents where the expert failed to“compare or explain the equivalence between any particular feature and a limitation of an
asserted patent claim,†and instead did nothing more than “incant[] the magic words (once, in a footnote), but left out the analysis…â€).
Rather than performing the required analysis, even Vertical admits that Mr. Maly neither identified any alleged differences nor showed that any alleged differences are insubstantial.1 See Vertical Opposition at 12 (asserting that, “f Interwoven had identified any differences, Mr.Maly would have shown in detail that those differences are entirely insubstantialâ€) (emphasis added). Moreover, Vertical emphasized “there are no differences†and that “[Vertical’s] doctrine of equivalents argument is in hypothetical form.†Vertical Opposition at 12. It is not Interwoven’s burden to identify to Vertical where it must make an argument under the Doctrine of Equivalents. “Expert evidence can be both powerful and quite isleading because of the difficulty in evaluating it.†See Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 589 (1993)
(“Rule 403 permits the exclusion of relevant evidence ‘if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury….’â€). To allow Mr. Maly to provide these vague, conclusory, and fundamentally unreliable and unsupported statements on infringement under the Doctrine of Equivalents would unduly prejudice Interwoven.
B. Maly’s Testimony Related To Indirect Infringement Is Unreliable And
Should Be Excluded.
Vertical makes three passing references to indirect infringement in its entire Opposition.
See Opposition at 3, 5, and 11. These references only refer back to the boilerplate statements Mr.Maly made in his expert report, where the entirety of his opinion on indirect infringement 1 Interwoven acknowledges an inadvertent error in its opening brief on page 10 (as pointed out by Vertical in its opposition); however, this non-substantive error does not change the fact that Mr. Maly admitted he did not perform a Doctrine of Equivalents analysis separate from his
infringement analysis.
It is also my expert opinion that Interwoven induces others to
practice the patented invention and contributes to others infringing
the patented invention. Interwoven induces others to infringe
through their advertising and educational programs, and it
contributes to others infringing by providing updates, software
support and fixes.
See Declaration of Bijal V. Vakil in Support of Motion to Exclude the Testimony of John Maly (“Vakil Maly Decl.â€) Ex. A at 11.
Mr. Maly does not point to even an iota of evidence supporting the opinions set forth in his expert reports. Vertical’s Opposition also does nothing to refute Interwoven’s assertion that this type of conclusory statement is unreliable.
C. Maly’s Infringement Analysis Is Unreliable.
Vertical attempts to mislead the Court with its statement that “Mr. Maly has had access to TeamSite and LiveSite products sold by Interwoven to its customers.†Opposition at 8. This statement implies that Mr. Maly used the TeamSite and LiveSite products, which is contradicted by his own deposition testimony. During his deposition, Mr. Maly admitted that he has never used any versions of the accused Interwoven product or looked at any source code.
See Reply Declaration of Bijal V. Vakil in Support of Motion to Exclude Testimony of John Maly (“Vakil Maly Reply Declâ€) Ex. A at 89:24-90:2 (“Q. Have you ever used any version of the TeamSite
product? A. No, I have not.â€). As outlined in Interwoven’s motion for summary judgment, Mr. Maly’s infringement analysis is also unreliable for the three reasons below. Vertical has provided no information in its Opposition that addresses these issues.
1. Maly Does Not Show Interwoven Itself Has Practiced Every Step Of
The Methods Claimed In The ’744 Patent.
To show direct infringement, Vertical must go beyond allegations of possible usage and show that Interwoven, itself, practices every step of the methods claimed in the ’744 patent.
See
Ormco Corp. v. Align Tech., Inc., 463 F.3d 1299, 1311 (Fed. Cir. 2006) (“Method claims are only infringed when the claimed process is performed, not by the sale of an apparatus that is capable of
infringing use.â€). Mr. Maly’s expert reports did not make such a showing. Instead, his reports merely stated that “it is my expert opinion that the TeamSite Product directly infringes each of
the asserted claims.†Vakil Maly Decl. Ex. A at 11 (emphasis added).†The “TeamSite Product†referenced by Mr. Maly is a complicated piece of software, with many features (many or most of which are unrelated to the claimed invention), and without the input of a person, does not do anything. See, e.g., Declaration of Vasilios D. Dossas in Opposition to Motion for Summary Judgment (“Dossas Decl.â€) Ex. 25 (identifying numerous features of Teamsite, including “content authoring, multichannel delivery, site design and layout,multivariate testing, content targeting, rich media management, advanced analytics, workflow and approval, and archivingâ€).
At this fundamental level, the “TeamSite Product†is a piece of software that, on its own,does nothing and requires a separate actor to operate it and, potentially, perform the steps of the method. Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, 1328 (Fed. Cir. 2008) (“The law of this circuit is axiomatic that a method claim is directly infringed only if each step of the claimed
method is performed.â€) (emphasis added). See Dossas Decl. Ex. 8 at 200:7-9 (acknowledging possibility that users do not necessarily use TeamSite to practice all steps of the method of the patent,stating “I mean they could take the TeamSite’s software and put it on CDs in a big stack and use them as a doorstopâ€). For there to be direct infringement of the method claims of the ’744 patent, this actor must be Interwoven. If Interwoven itself does not actually use TeamSite to
perform all the steps of the claimed method, there can be no direct infringement. See Mirror Worlds, LLC v. Apple Inc., 692 F.3d 1351, 1359 (Fed. Cir. 2012) (holding that for direct infringement “[the patentee] has to show that [the alleged infringer] performed all of the steps in the claimed methodsâ€). Mr. Maly’s expert reports supplied no opinions that Interwoven (or any party) actually
performed all of the steps of the method claimed in the ’744 patent. Vertical’s Opposition provides no additional analysis, and in eleven short lines instead only refers to Mr. Maly’s earlier report asserting in conclusory fashion that Mr. Maly found infringement. See Vertical Opposition at 11-12. Mr. Maly identifies no evidence showing Interwoven’s performance of all the steps of any of the asserted method claims of the ’744 patent, as required for a finding of
direct infringement. See Mirror Worlds, 692 F.3d at 1359.2
2. Maly Does Not Show That Interwoven Provides A Computer With
Processor And Memory As Required By The ’629 Patent.
As to the ’629 patent, Vertical does not argue that Mr. Maly analyzed whether the accused TeamSite products include hardware components. Vertical explains, instead, that such a determination was not necessary because hardware components are not required elements of the
‘629 patent claims. See Opposition at 10-11. This is incorrect. The ’629 patent claims each claim a system and recite “said system including a computer comprising a processor and a memory operably coupled to said processor.†Vakil Maly Decl. Ex. C at 7:19-20, 8:13-14, 8:64- 65 (emphasis added). Therefore, each of these claims unambiguously require computer hardware (i.e., a processor and a memory coupled to the processor). The Federal Circuit has evaluated
similar claims “comprising†hardware elements and held that they were not merely a preamble stating the invention’s field of use:
In this case, claim 16’s beginning and, in our view, controlling
language could hardly be clearer. Claim 16 states: ‘A centrifugal
2 With respect to any possible claim by Vertical of contributory infringement, those claims also fail as a matter of law. Mr. Maly admitted that his analysis did not focus on whether or not
TeamSite was capable of non-infringing uses (other than his facetious doorstop example). See Vakil Maly Reply Decl Ex. A at 202:19-203:1 (explaining he “focused primarily on infringing use†and expressing no opinion on non-infringing uses). Mr. Maly, likewise, failed to provide any serious response when asked if he had analyzed whether it might be possible that customers use TeamSite without also engaging in the patent’s required deployment step: “Sure, if they used it as a paperweight or if they used it for some very limited capability like revision control and rollback.†Id. at 203:14-16. In sum, Mr. Maly’s opinion that someone actually performs all the steps of the method in the ’744 patent is based entirely on assumptions and conjecture:
Like I said, you could never even break the shrink wrap on the package and you would not be—you would have purchased it, but
you would not be using it if you don’t even install it, so of course
it’s possible, but that’s I just don’t think it’s likely.
Id. at 204:24-205:3 (emphasis added). Despite the fact that proof of infringement requires a showing that the party accused of direct infringement itself performs each step of a claimed method, Mr. Maly does not know if any party at all performed the steps of the claimed method.This is no substitute for a thorough expert analysis that must be closely tied to the facts and data of the case. Uniloc USA, Inc., v. Microsoft Corp., 632 F.3d 1292, 1315 (Fed. Cir. 2011)
(excluding testimony for failure to tie expert theories to facts); see also General Elec. Co. v.Joiner, 522 U.S. 136, 147 (1997) (holding that the trial court may exclude testimony with “too
great an analytical gap†between the data and an expert opinion). With regard to direct infringement of the ’744 which requires a showing that Interwoven itself performed all of the steps of the claimed method, Mr. Maly has not provided any such analysis that is tied to the facts of the case, and his methodology is therefore unreliable under the Daubert standard.
unit comprising a centrifugal component and a plurality of tubes . . .
.’ It does not merely state the intended field of use in a preamble as
Haemonetics argues. Rather, it unambiguously defines ‘centrifugal
unit’ as ‘comprising’ two structural components: a centrifugal
component and a plurality of tubes. Haemonetics Corp. v. Baxter Healthcare Corp., 607 F.3d 776, 782 (Fed. Cir. 2010). Though Vertical attempts to diminish the importance of the “processor and a memoryâ€
claim language, classifying it as part of a non-limiting preamble, Vertical relied upon the addition of this very language during prosecution of the ’629 patent to overcome a rejection from the
Patent Office. Vakil Maly Reply Decl. Ex. B at 2. In the rejection, the Examiner stated: “The claimed invention is directed to non-statutory subject matter. Newly amended claims . . . are directed toward a system and while a system itself is normally considered to consist of hardware,the hardware components in the present set of claims do not appear to exist.†Id. at 2 (emphasis added). In its Amendment dated May 1, 2009, Vertical responded to the rejection by amending each of the ’629 patent claims to specifically add hardware components by including the “computer comprising a processor and a memory†language. See Vakil Maly Reply Decl. Ex. C at 2, 4. Further, Vertical stated that the claims were being amended “to recite that the system includes a system comprising a processor and a memory operably coupled to the processor.†See id. at 6. Therefore, by Vertical’s own admission and limiting statements made during
prosecution, the ’629 claims each require a processor and a memory.
Because Mr. Maly has not evaluated any Interwoven product for the presence of a processor and a memory, Mr Maly’s opinions regarding infringement of the ’629 patent are fundamentally flawed and unreliable.
3. Maly Mixes Documents from Different Versions of the Accused
Products.
Maly should have used the only reliable methodology available to him to analyze the accused products in this case: look at and report on one particular version of TeamSite. Instead,Mr. Maly both failed to look at any source code or executable version of TeamSite or LiveSite,
and used a hodgepodge of documents from a number of versions to piece together an analysis.Interwoven argued that Vertical failed to present a comprehensive infringement allegation as to any one version of any accused product. See Motion at 6-8. Vertical asserted that it is not required to do so. Opposition at 8. As a threshold matter, Maly did not make any attempt to justify Vertical’s preparation of infringement contentions for a representative product—he did not
analyze materials for any one version of TeamSite and argue that it qualifies as a representative product. Instead, Maly began with an unauthorized third-party book, cherry picked some additional documents from different versions or modules of TeamSite, and alleged on this basis that all versions of TeamSite infringe, starting with the version available in 2004.
Vertical’s Opposition cites deposition testimony from one of Interwoven’s Rule 30(b)(6)witnesses, Shashi Mazumdar, in which Mr. Mazumdar noted that bug fixes and UI enhancements differentiated the major versions, though TeamSite was the same product from March 2006 to the present.3 Vakil Maly Reply Decl. Ex. D at 14:24-15:7. Vertical did not ask Mr. Mazumdar for any explanation of what constitutes bug fixes and UI enhancements; even though UI enhancements relate to the same type of features at issue here. Nor did Vertical did not ask any
questions of Mr. Mazumdar clarifying the changes made between each version of TeamSite, and whether or not such bug fixes and UI enhancements altered any features of TeamSite identified by Vertical in its infringement contentions.
To remedy Vertical’s failure to explore these critical questions and collect reliable information for his infringement analysis, Mr. Maly should have walked through specific differences with each version or attempted to identify (and justify the use of) a representative
product. He failed to do so. Without any evidence to support his uniform claims of infringement by all versions of the TeamSite product, and without any version-specific analysis, Mr. Maly’s
testimony on infringement should be excluded as outlined in the concurrently filed Motion to Strike.
III. MOTION TO STRIKE PORTIONS OF THE MALY DECLARATION.
A. Maly Should Not Be Allowed To Expand The Scope Of His Expert Opinion.
To support Vertical’s Opposition to Interwoven’s Motion for Summary Judgment, Mr.3 Mr. Mazumdar brought a list of versions of TeamSite to his deposition for discussion. Vakil Reply Decl. Ex. E (listing versions 6.7.0 through 7.3.2). The version that was the basis for
the unauthorized third-party book, 6.5, was not even one of the versions on this list. Dossas Decl.Ex. 12 at 120:4-7 (“Q. Okay, but because 6.5 is mentioned in the book, you think that 6.5 was the
version that you were dealing with? A. Right.â€).
Maly provides new opinions on alleged infringement based on examples without any evidentiary support. See Dossas Decl. Ex. 5 at ¶¶ 91-97. He provided these opinions for the first time in connection with this motion practice, well after the close of expert discovery. It is highly prejudicial to allow this type of trial by ambush. KFD Enterprises, Inc. v. City of Eureka, Case No. 3:08-cv-04571, 2013 WL 2384236, at *2 (N.D. Cal. May 30, 2013) (Corley, J.) (“The
purpose of the rule is to prevent surprise or ambush at trial.â€).
It is well-established that an expert witness must prepare a written report containing a complete statement of all opinions the witness will express and the basis and reasons for them. See Fed. R. Civ. P. 26(a); Torres v. City of Los Angeles, 548 F.3d 1197, 1212 (9th Cir. 2008).4 Not once did Mr. Maly refer to any of these newly added examples in either of his reports or during his deposition. There is no excuse for the failure to disclose these opinions earlier.
Mr. Maly’s declaration fails to qualify as a supplemental expert report. Any supplemental expert report must be made “in a timely manner†when the prior report is determined to be “incomplete or incorrect.†Hoffman v. Constr. Protective Servs., Inc., 541 F.3d 1175, 1179 (9th Cir. 2008). “Although Fed.R.Civ.P. 26(e) requires a party to ‘supplement or correct’ disclosure upon information later acquired, that provision does not give license to sandbag one’s opponent with claims and issues which should have been included in the expert witness’ report[.]â€5 KFD Enterprises, Inc. v. City of Eureka, Case No. 3:08-cv-04571, 2013 WL 2384236, at *2 (N.D. Cal.
May 30, 2013) (Corley, J.). Federal Rule of Civil Procedure 37(c)(1) “gives teeth to [this requirement]†and forbids the use of such testimony on a motion, at a hearing, or at a trial, if the
4 The Federal Circuit applies the law of the appropriate regional circuit in reviewing evidentiary rulings, which are procedural matters not unique to patent law. Chimie v. PPG Indus., Inc., 402 F.3d 1371, 1376 (Fed. Cir. 2005); see also O2 Micro Int’l Ltd. v. Monolithic Power Sys., Inc., 467 F.3d 1355, 1368 (Fed. Cir. 2006) (applying Ninth Circuit’s abuse of discretion standard for denial of leave to supplement expert report). 5 Vertical has not provided any justification for its new infringement theory designed to oppose Interwoven’s motion for summary judgment. To the extent Vertical claims this is in response to a “new†argument, such claims are contradicted by the rebuttal report prepared by Interwoven’s expert, Dr. George Necula. The Necula Report contains the same arguments
regarding interchangeability set forth in Interwoven’s motion for summary judgment. Vertical should not be permitted to use this evidence in its motion absent a showing of harmlessness or
substantial justification—a showing Vertical has not even attempted to make. See Yeti by Molly,Ltd. v. Deckers Outdoor Corp.,259 F.3d 1101, 1106 (9th Cir. 2001) (The party facing exclusion
of newly disclosed information has the burden to prove that the “failure to disclose the required information is substantially justified or harmless.â€).
information is not properly disclosed in accordance with Rule 26(a)). Id. Interwoven should not be forced to contend with new expert opinions or an improper supplemental expert witness report
on this key issue on the eve of trial. Accordingly, paragraphs 91-97 of Mr. Maly’s declaration should be stricken.Finally, Paragraphs 78-89 of Mr. Maly’s declaration should also be excluded because the
underlying document is based on unreliable hearsay from Mr. Clifford Kraft. While an expert can rely on hearsay, he cannot base his opinion on unreliable methodology. As described in the
concurrently filed reply in support of Interwoven’s Motion for Summary Judgment, Mr. Kraft is not qualified to render the expert opinions he provided to Mr. Maly. Here, Mr. Maly included a
report, authored by Mr. Kraft,6 in the body of his declaration describing events and actions in which Mr. Maly did not participate, and that Mr. Maly did not supervise, direct, or independently
verify, as he acknowledged during his deposition. See, e.g., Vakil Maly Reply Decl. Ex. A at 94:22-24 (“Q. You were not present during the September 21st, 2012 site inspection; is that correct? A. Right.â€). Mr. Maly declaring that he had any personal knowledge of the inspection,contradicting his prior deposition testimony, is also impermissible. Van Asdale v. Int’l Game Tech., 577 F. 3d 989, 998 (9th Cir. 2009) (“The general rule in the Ninth Circuit is that a party cannot create an issue of fact by an affidavit contradicting his prior deposition testimony.â€). Thus, the paragraphs in Mr. Maly’s declaration that were based on information received from Mr.
Kraft should be stricken.
IV. MOTION TO STRIKE PORTIONS OF CLIFFORD KRAFT’S DECLARATION.
Vertical relies on a declaration by Mr. Kraft, who claims to have “read The Definitive Guide to Interwoven TeamSite†and “confirmed that the TeamSite product is substantially as
described in The Definitive Guide and that it has not changed in any significant way since the 2006 publication of The Definitive Guide.†Dossas Decl. Ex. 4 at ¶¶ 3-4. Vertical never disclosed Mr. Kraft as an expert and he also never submitted an expert report. He is a paid
consultant of Vertical’s counsel, who had the option to try qualifying him as an expert in a timely fashion. Vertical relies upon Mr. Kraft’s opinions by including them in the opinions of its
6 Mr. Kraft is a paid consultant for Vertical’s outside counsel, Niro, Haller & Niro Ltd.
infringement expert, Mr. Maly.
One cannot simply transform lay witness testimony to expert testimony in this manner.Under the circumstances, Mr. Maly could only rely on his testimony if the work was reliably done at his request or direction, which it clearly was not. See Therasense, Inc. v. Becton,
Dickinson & Co., Case No. 3:04-cv-02123 WHA, 2008 WL 2323856 (N.D. Cal. May 22, 2008)(Alsup, J.) (excluding expert testimony for reliance on results of experiments in which the expert “did not participate in, observe, or supervise any of the experimentsâ€); MTX Commc’ns Corp. v.LDDS/WorldCom, Inc., 132 F. Supp. 2d 289, 292-93 (S.D.N.Y. 2001) (holding testimony inadmissible because it was based on information that “was neither verified nor submitted in a
way that permits meaningful review†and is “unreliable in that a major ingredient . . . is itself lacking in sufficient indicia of reliability to be put before the juryâ€). However, since Mr. Kraft’s
inspection was not done at Mr. Maly’s request or direction, this Court should exclude any reliance upon it in Vertical’s motions.
The Kraft declaration adds statements that were kept hidden during the discovery period.This is not how discovery should proceed under the Federal Rules of Civil Procedure. Moreover,the statements are untimely and unreliable. While Mr. Kraft may have a “doctorate degree in Electrical and Computer Engineering†and “experience in the design and development of large hardware and software systems,†there is no evidence that Mr. Kraft has any understanding of
software development tools for creating websites. Dossas Decl. Ex. 4 at ¶ 2. Mr. Kraft’s opinion also lacks an element-by-element comparison of the purported product in The Definitive Guide
with the product he inspected, the version of which he did not identify, and which Mr. Maly did not confirm. Mr. Kraft also purports to have tested creating, calling by name, and interchanging
components, the results of which were reported to Mr. Maly for his infringement analysis. Not only were these tests not directed, verified, or performed by Mr. Maly, but upon his first look at
Mr. Kraft’s inspection results (in the form of a number of screenshots), Mr. Maly was not even able to understand what they represented. Vakil Maly Reply Decl. Ex. A at 101:22-23 (“A. When
I first was given the screen shots it was not clear to me what was going on in them.â€) This is not the careful analysis one of ordinary skill in the art would have performed.
As Mr. Kraft is not a properly disclosed and qualified expert, the Court should exclude his opinion regarding whether the software has changed and whether the software meets elements of the asserted patent claims. See Synthes et al v. Spinal Kinetics, Inc., Case No. 5:09-cv-01201,2011 U.S. Dist. LEXIS 93093, at *22-23 (N.D. Cal. Aug. 19, 2011) (Whyte, J.) (striking the technical testimony and conclusory statements of a non-expert, holding that “it is an abuse of
discretion to permit a witness to testify as an expert on the issues of noninfringement or invalidity unless that witness is qualified as an expert in the pertinent art†(quoting Sundance, Inc. v.
DeMonte Fabricating Ltd., 550 F.3d 1356, 1363 (Fed. Cir. 2008))). Expert opinions have specialized reliability and disclosure requirements based on Federal Rule of Evidence 702 and Daubert. Vertical’s use of Mr. Kraft’s declaration is an attempt to circumvent these established requirements by introducing unreliable expert testimony under the guise of layperson testimony.
If Vertical had sought to qualify Mr. Kraft as an expert, then Mr. Kraft would have needed to abide by the expert disclosure requirements of Federal Rule of Civil Procedure 26(a)(2) by
preparing and signing a written report, and follow reliable methodology as required of experts. Mr. Kraft should also have been disclosed pursuant to the stipulated protective order, and would
have had to be available for discovery. See Dkt. No. 120.
Finally, this new theory—that there were no significant differences between the inspected product and the product described in the Definitive Guide—was not disclosed or supplemented in accordance with the requirements of Rules 26(a) and 26(e), and should be precluded on that ground as well. See Apple, Inc. v. Samsung Elecs. Co., Case No. 5:11-cv-01846, 2012 WL 3155574, at *4 (N.D. Cal. Aug. 2, 2012) (Koh, J.) (“Rule 37 mandates that a party’s failure to comply with the obligations under Federal Rule of Civil Procedure 26(e)(1) results in that party being precluded from ‘use [of] that information . . . to supply evidence on a motion, at a hearing or at trial, unless the failure was substantially justified or is harmless.’†(quoting Fed. R. Civ. P.
37(c)(1))).
V. MOTION TO STRIKE PORTIONS OF AUBREY MCAULEY’S DECLARATION.
Vertical submitted a declaration of Mr. Aubrey McAuley in support of its Oppositions to Interwoven’s motions. The declaration only appears to contain information irrelevant to the issues for summary determination, and is also an untimely disclosure. In Paragraph 2 of Mr. McAuley’s declaration, he alleges contact with Messrs. Livaudais
and Miller, each of who were previous employees of Interwoven. Any testimony about these meetings, including paragraph 2, should be stricken for failure to comply with Rule 26. Vertical
would have already known of any alleged meetings with Interwoven employees long ago, and should have disclosed relevant individuals so Interwoven could have taken appropriate discovery. It is too late now to introduce new individuals purported to have information relevant to
Vertical’s claims. Vertical was required to disclose the existence of these witnesses long ago in accordance with the Federal Rules of Civil Procedure, Patent Local Rules, and through the discovery
exchanged in this case. Vertical failed to disclose either Mr. Livaudais or Mr. Miller in its May 26, 2011 initial disclosures—or any time since—as persons with discoverable information that
Vertical may use to support its claims, in clear disregard of the requirements of Federal Rule of Civil Procedure 26(a). See Fed. R. Civ. P. 26(a)(1)(A)(i) (“A party must . . . provide to the other
parties . . . the name . . . of each individual likely to have discoverable information—along with the subjects of that information—that the disclosing party may use to support its claims or
defenses . . . .â€). Instead, Vertical kept its alleged “evidence†close to its vest until now, using it to oppose Interwoven’s motions for summary judgment.7 KFD Enterprises, Inc. v. City of
Eureka, Case No. 3:08-cv-04571, 2013 WL 2384236, at *2 (N.D. Cal. May 30, 2013) (Corley, J.)
(“The purpose of [Federal Rule of Civil Procedure 26(e)(1)(A)] is to prevent surprise or ambush at trial.†).
Vertical’s use of Mr. McAuley’s new declaration also violates Patent Local Rule 3-1(h), which requires a party to disclose the basis of any willful infringement allegations in its infringement contentions. Alleged copying should have been part of Vertical’s willful infringement allegations. However, Vertical failed to disclose the existence of a purported 7 Had Vertical revealed these individuals at the proper time as sources of information relevant to its willful infringement allegations, Interwoven would have taken appropriate
discovery and depositions. Interwoven noticed for deposition every person disclosed by Verticalin its initial disclosures.
presentation made by Mr. McAuley to Mr. Livaudais and Mr. Miller in either its May 26, 2011 Infringement Contentions or its August 31, 2012 Amended Infringement Contentions. See Vakil Maly Reply Decl. Ex. F at 11. “[The] purpose underlying Rule 3-1 is to require the party claiming infringement to crystallize its theories of the case early in the litigation and to adhere to those theories once disclosed.†Bender v. Adv. Micro Devices, Inc., Case No. 3:09-cv-01149, 2010 WL
363341, at *1 (N.D. Cal. Feb. 1, 2010) (Chen, J.).
VI. CONCLUSION.
For at least the reasons set forth in Interwoven’s Motion to Exclude the Expert Testimony of John Maly, this Court should exclude the inadmissible opinions set forth by Mr. Maly and strike the portions of Mr. Maly’s, Mr. Kraft’s, and Mr. McAuley’s declarations indicated above.
PALOALTO 147039
INTERWOVEN’S REPLY I/S/OMOTION TO EXCLUDE MALY TESTIMONY
CASE NO. 3:10-CV-04645-RS
Dated: June 10, 2013 Respectfully submitted,
By: /s/ Bijal V. Vakil
Bijal V. Vakil
JACK Q. LEVER, JR. (pro hac vice)
jlever@whitecase.com
BIJAL V. VAKIL (Cal. Bar No. 192878)
bvakil@whitecase.com
JENNIFER P. GOSSAIN (Cal. Bar No. 254174)
jgossain@whitecase.com
THOMAS C. FLYNN (Cal. Bar No. 257945)
tflynn@whitecase.com
WHITE &CASE LLP
3000 El Camino Real
5 Palo Alto Square, 9th Floor
Palo Alto, CA 94306
Telephone: 650.213.0300
Facsimile: 650.213.8158
EDWARD G. POPLAWSKI (Cal. Bar No. 113590)
epoplawski@wsgr.com
OLIVIA M. KIM (Cal. Bar No. 228382)
okim@wsgr.com
WILSON SONSINI GOODRICH &ROSATI
633 West Fifth Street, 15th Floor
Los Angeles, CA 90071
Telephone: 323.210.2900
Facsimile: 866.974.7329
ATTORNEYS FOR PLAINTIFF AND COUNTERCLAIMDEFENDANT
INTERWOVEN, INC.
Amount of short selling last week
-------------------Shares----------
Date-------------Short Vol.------Total Volume
6/3/2013---------374,068---------943,710
6/4/2013---------434,622---------1,447,676
6/5/2013---------261,648---------1,291,789
6/6/2013---------10,346----------600,606
6/7/2013---------658,129---------1,651,005
http://regsho.finra.org/regsho-Index.html
Courtesy of Smoothsailing 20 raging bull #370936:
Published today: 13/491,372 System and Method for Running an Internet Server Behind a Closed Firewall 2556.214
Select New Case Application Data Transaction History Image File Wrapper Continuity Data Published Documents Correspondence Data Display Download References
Bibliographic Data
Application Number: 13/491,372 Customer Number: -
Filing or 371 (c) Date: 06-07-2012 Status: Docketed New Case - Ready for Examination
Application Type: Utility Status Date: 05-20-2013
Examiner Name: HWANG, JOON H ELECTRONIC
Group Art Unit: 2447 Location Date: -
Confirmation Number: 7813 Earliest Publication No: US 2013-0144935 A1
Attorney Docket Number: 2556.214
Earliest Publication Date: 06-06-2013
Class / Subclass: 709/218 Patent Number: -
First Named Inventor: Luiz Claudio Valdetaro , Coppell, TX (US) Issue Date of Patent: -
Entity Status: Small AIA (First Inventor to File): No
II. RELEVANT FACTS
Vertical retained Mr. Gemini to assist in its damages assessment. He is a Certified Public Accountant licensed in the State of Illinois for over 25 years. (Gemini Decl., Exhibit 7 ¶ 5)1. He has testified in over fifty cases on damages, including patent cases. Id. at ¶ 4. In calculating damages for Vertical, he considered various sources of information including the pleadings, the patents-in-suit, interrogatory responses, financial data, deposition transcripts, and publicly available information. (Id. at ¶ 9; see also the attachments to Gemini Decl.). In addition, Mr. Gemini had numerous discussions with Luiz Valdetaro, the Chief Technical Officer of Vertical. (Gemini Decl., Exhibit 7 ¶ 9). Mr. Gemini prepared two reports on damages, his initial report, which Vertical served on December 12, 2012, and a supplemental report, served on March 30, 2013. Vertical has consolidated the reports verbatim into Mr. Gemini's Declaration, Exhibit 7. (Gemini Decl., Exhibit 7 ¶¶ 1-58 and ¶¶ 59-75, respectively). In his Declaration, Mr. Gemini delves into a thorough analysis of Vertical's entitlement to lost profits and reasonable royalties based on the facts in evidence.
Regarding lost profits, Mr. Gemini considered the demand and unique functionality of the patented products at issue in this case, TeamSite and SiteFlash. Id. at ¶¶ 29-36. He determined, based on discussions with Mr. Valdetaro, that the parties are the only competitors that provide such functionality. (Gemini Decl., Exhibit 7 ¶ 39; Valdetaro Decl., Exhibit 6 ¶¶ 8, 11). Mr. Gemini also based his analysis on the assumption that Vertical had the capacity to meet demand
1 For efficiency, Vertical has cited to Exhibits 1-25 corresponding to Vertical Computer Systems, Inc.’s Opposition to Interwoven Inc.’s Motion for Summary Judgment, all of which are attached to the Declaration of Vasilios D. Dossas in Support of Vertical's Opposition to Interwoven's Motion for Summary Judgment filed concurrently herewith. In addition, Vertical cites to the Declaration of Joseph Gemini, Vertical’s damages expert. The Declaration fully incorporates Mr. Gemini’s December 12, 2012 Expert Report and March 30, 2013 Supplemental Expert Report for ease of reference.
for the patented product. (Gemini Decl., Exhibit 7 ¶ 39). Again, he based this assumption on discussions with Mr. Valdetaro. (Valdetaro Decl., Exhibit 6 ¶ 12). For example, Mr. Valdetaro has stated that Vertical has the capacity to sell and service the SiteFlash product. Id. at ¶ 12. This would merely require hiring more staff as Vertical acquires more customers. Id. The fact that Vertical has not sold SiteFlash for some time does not change the competitive landscape nor Vertical's abilities. Vertical provides its other products to many large corporations and non-profit entities without a problem. Id.
Interwoven trumpets the fact that Vertical has not sold its SiteFlash system since 2004, arguing that this shows the unavailability of lost profits. On the contrary, this fact is powerful circumstantial evidence in favor of lost profits, in that it demonstrates the lack of acceptable non-infringing alternatives. It supports the conclusion that Vertical could not make any sales after 2004 because that is when Interwoven entered the market with the infringing TeamSite product. It supports a conclusion that the market in which Interwoven and Vertical compete is essentially a two-supplier market – Vertical and the infringers. Microsoft Corp.'s SharePoint product is not a potential non-infringing substitute. Vertical sued Microsoft Corp. for infringement of its SharePoint products. The parties settled that litigation with Microsoft receiving a license under the patents-in-suit. (Gemini Decl., Exhibit 7, ¶ 39). But, as Mr. Valdetaro points out in his Declaration, Sharepoint does not have the functionality and does not compete with the parties' products. (Valdetaro Decl., Exhibit 6, ¶ 8; Gemini Decl., Exhibit 7, ¶39; see also Sengupta Dep., Exhibit 10 at 134:1-19).
Regarding reasonable royalties, Mr. Gemini has devoted most of his analysis to the widely accepted Georgia-Pacific factors. One important element of Vertical's proof is an agreement dated September 8, 2004 between Vertical and a company called Basix1. (Exhibit 24). This Agreement, despite Interwoven's protestations, is an arms-length transaction that Case3:10-cv-04645-RS Document177 Filed06/03/13 Page7 of 24
This is a two supplier market with Interwoven strangely able to exercise Monopoly Power. Especially given the fact that a Patent is a Government grant of Monopoly Power.( page 91-92 Antitrust Law, Richard Posner)
Interwoven improperly argues that Mr. Gemini does not establish "causation in fact" of lost profits. However, the Federal Circuit has held that "[c]ausation of lost profits 'is a classical jury question.'" Versata Software, Inc., 2013 U.S. App. LEXIS 8838, at *19 (Fed. Cir. May 1, 2013) (quoting Brooktree Corp. v. Advanced Micro Devices, Inc., 977 F.2d 1555, 1578 (Fed. Cir. 1992)). Under Rule 702, Vertical must only show that Mr. Gemini has used reliable methodologies in his calculation, and that he applied these calculations to the facts of the case. Fed.R.Evid. 702.
Interwoven also argues incorrectly that the lost profit analysis requires two separate showings: (1) a "threshold" showing that the patent holder would have made and sold the products "but for" the infringement, and (2) a showing that the Panduit factors are present. (Dkt. No. 168-3 at 6). However, Interwoven misinterprets the law governing the lost profits analysis. There is no threshold requirement that the patentee meet a threshold requirement of showing "but for" causation. Rather, the Panduit test serves as a useful, albeit non-exclusive, way for a patentee to make a "but for" showing, namely whether a patent owner would have made the sales but for the infringement. Rite-Hite Corp. v. Kelley Co., Inc., 56 F.3d 1538, 1545 (Fed. Cir. 1995) ("A showing under Panduit permits a court to reasonably infer that the lost profits claimed were in fact caused by the infringing sales, thus establishing a patentee's prima facie case with respect to 'but for' causation."). Thus, although Interwoven argues that Mr. Gemini failed to establish "but for" causation, Interwoven admits that Mr. Gemini has addressed the Panduit factors. (Dkt. No. 168-3 at 9). This is all that is required. To prove "but for" causation, Vertical must establish (1) a demand for the patented product, (2) an absence of acceptable non-infringing substitutes, (3) the manufacturing and marketing capability to exploit the demand, and (4) the amount of profits it would have made. Rite-Hite Corp., 56 F.3d at 1546 (citing Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575
Case3:10-cv-04645-RS Document177 Filed06/03/13 Page11 of 24
F.2d 1152 (6th Cir. 1978)). Interwoven does not dispute that there was a demand for the patented product. (It cannot – the sales it has made alone proves this factor.) Therefore, Vertical must only demonstrate that Mr. Gemini addressed each of the factors (2), (3), and (4) under reliable methodology, as required by Daubert.
1. No Acceptable Non-Infringing Substitutes Exist
Interwoven avers that Mr. Gemini failed to establish the absence of non-infringing substitutes. However, Interwoven's arguments improperly challenge Mr. Gemini's conclusions, not his methodology. Mr. Gemini analysis is based on the assumption that there are no acceptable, non-infringing substitutes that existed in the market:
I understand that Vertical believes most CMS (Content Management Systems) in the market, in on way or another, infringe the patents-in-suit. I understand from Vertical that the SharePoint 2007 product licensed under the patents-in-suit by Microsoft does not compete in the CMS market.
Interwoven chose to provide versions of its TeamSite product that included the infringing capabilities. Interwoven sales of its versions prior to 6.0 had been slowing, as indicated by the Interwoven 10-Ks. It would seem that the prior versions of TeamSite were not acceptable alternatives.
(Gemini Decl., Exhibit 7, ¶ 39). The basis of this assumption is provided in the text of Mr. Gemini's report and listed in Exhibit B to his report. (Id. at ¶¶ 9-10). Of course, Interwoven disagrees with Mr. Gemini's opinions regarding the absence of non-infringing substitutes; however, "it is not the role of the trial court to evaluate the correctness of facts underlying one expert's testimony." Micro Chem., 317 F.3d at 1392 (finding that the trial court properly found plaintiff's damages expert's testimony admissible even though it was based on plaintiff's version of the contested facts).
Contrary to Interwoven's assertion, Mr. Gemini need not prove the nonexistence of adequate, non-infringing substitute during the relevant time period because he is only testifying on damages. The type of technical knowledge and skill required to prove that no non-infringing alternatives exist is outside the range of Mr. Gemini's expertise. See Micro Chem., 317 F.3d at 1392 (affirming that damages expert's testimony was admissible even though he relied on the statements of others and did not undertake an independent investigation of the industry or personally review the parties' financial records.). Instead, Vertical will proffer evidence that no non-infringing substitutes existed, as it is so entitled. Oracle Am., Inc. v. Google, Inc., 2011 U.S. Dist. LEXIS 136172, at **7-8 (Nov. 28, 2011). Interwoven's objections to Mr. Gemini's testimony are more properly addressed at trial on cross-examination or by presenting evidence rebutting the facts upon which his analysis is based. See US Gypsum Co. v. LaFarge N.Am. Inc., 670 F. Supp. 2d 737, 742-43 (N.D. Ill. 2009).
Interwoven also argues that, even where there is a presence of acceptable non-infringing substitutes, Mr. Gemini could have satisfied the second Panduit factor by providing a market share analysis. However, because Mr. Gemini's testimony is based on the absence of non-infringing substitutes, a market share analysis is not required. State Indus., Inc., 883 F.2d at 1576-77. 2. Vertical has the Manufacturing and Marketing Capability to Meet the Demand for the Patented Product
Interwoven argues that there is no evidence that Vertical had the capacity to meet demand. Again, it applies an improper standard, arguing that Vertical must be selling products that practice the patents-in-suit. However, sitting en banc, the Federal Circuit has stated that "[w]hether a patentee sells its patented invention is not crucial in determining lost profits damages." Rite-Hite Corp. v. Kelley Co., Inc., 56 F.3d 1538, 1548 (Fed. Cir. 1995) (en banc). And, as the Federal Circuit recently provided, the patentee "need not have actually sold [a competing product] during the damages period to show demand for the patented functionality,"
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particularly where, as here, the infringer eroded the market for the patentee's product during the damages period. Versata, 2013 U.S. App. LEXIS 8838, at *24.
Versata is factually similar to the case at bar. There, the infringer challenged the jury's award of lost profits. Id. at *19. It argued that the patentee was not entitled to lost profits because the patentee had not made any sales of its patented software, "Pricer," during the damages period, which started in 2003. Id. at **23-24. During trial, the patentee showed that it had made 82 sales of Pricer between 1995 and 1998. Id. at *23. It made no sales after 2001, two years before the damages period began. Id. In the present case, the market for the patentee's product also disappeared when the Interwoven began selling the infringing software. Id. at *24. The Federal Circuit found the jury's award proper, finding the patentee need not have actually sold its product during the damages "particularly given the economic reality that [the defendant] had eroded the market for Pricer through bundling [the infringing invention] into its own software." Id. This is precisely the case here, and Mr. Gemini properly addressed this in his analysis. Mr. Gemini provided that Vertical had the capacity to meet the demand. (Gemini Decl., Exhibit 7, at ¶ 39). He stated, in relevant part, that Vertical had the personnel to develop, train, test and market the SiteFlash product during 2002 to 2004. Id. Interwoven argues that the evidence does not support his conclusion because Vertical had at most six or seven people working on the development and maintenance of SiteFlash. (Dkt. No. 168-3 at 11). However, Vertical ignores Mr. Gemini's statements that Vertical also had 4 to 5 personal working in marketing, Vertical also used independent marketers, and that Vertical had the ability to employ Now Solutions employees to perform necessary services for the SiteFlash product sales. (Gemini Decl., Exhibit 7, ¶ 39). (Now Solutions is a subsidiary of Vertical.) Furthermore, Mr. Gemini has based his analysis on the understanding that the SiteFlash product is easier and less labor intensive to service and support than TeamSite, and, therefore, requires less personnel than those employed by Interwoven. Id. These conclusions are all based on the testimony of Mr. Valdetaro or the discussions with him. Interwoven's disagreement with these facts is not a basis to exclude Mr. Gemini's testimony. See Micro Chem., Inc., 317 F.3d at 1392; US Gypsum Co., 670 F. Supp. 2d at 742-43.
Interwoven cites Kumho Tire Co. v. Carmichael, 526 U.S. 137, 152 (1999) and Apple, Inc. v. Motorola, Inc., 2012 U.S. Dist. LEXIS 105387 (N.D. Ill. May 22, 2012) to support its argument that an expert may not rely on testimony from a party source to support its conclusions. However, neither of these cases supports this proposition, and this argument is in direct contravention of the well-established law under Fed.R.Evid. 702 and Daubert. In Kumho, the Supreme Court affirmed the district court's exclusion of an expert based on his unreliable methodology, not the facts underlying this methodology. Kumho, 526 U.S. at 153-54. In Apple, the Court excluded both parties' experts' because, in addition to using flawed methodology, the experts did not apply the same approach that they "would have been required by the applicable professional standards to use to deal with an identical issue outside the litigation context." 2012 U.S. Dist. LEXIS 105387, at 18. Here, Mr. Gemini's method of obtaining information relating to Vertical's business operations and manufacturing capabilities comprised interviewing the individual with the most knowledge, Vertical's Chief Technology Officer. If Interwoven has any concerns about bias, "it should make its arguments on cross-examination [at trial]." Oracle Am., 2011 U.S. Dist. LEXIS 136172, at **9-10.
3. Mr. Gemini Applied a Proper Profit Rate
Mr. Gemini properly applied a 26% profit rate to calculate lost profits. "A patent owner can compute his lost profits directly, through his anticipated profit margin, or indirectly, through use of the infringer's profit margin." Illinois Tool Works, Inc. v. MOC Prods. Co., Inc., 2012 U.S. Dist. LEXIS 116471, at *28 (S.D. Cal. Aug. 17, 2012) (citations omitted). And indeed, lost profits need only be proven to a "reasonable probability." Yarway Corp., 775 F.2d at 275. "Although the exact amount of lost profits cannot be precisely fixed, fundamental principles of justice require us to throw the risk of any uncertainty upon the wrongdoer instead of upon the injured party." Id. at 276 (internal citations omitted). Contrary to Interwoven's arguments, Mr. Gemini determined this rate came not only from the best evidence of projected profits, the GIS business plan, but also from discussions with Mr. Valdetaro. (Gemini Decl., Exhibit 7, ¶ 39). Therefore, Interwoven's argument that the 26% rate is not tied to the facts of this case is simply incorrect. Mr. Gemini took this 26% rate from a business plan dated July 2004, which is just prior to the date Interwoven's infringement began. Id. In addition, as Mr. Gemini stated in his deposition, the GIS plan "provides an indication of the expected profitability for products that used the technology of the patents." (Gemini Dep., Exhibit 9 at p. 117:14-21.) In addition, Mr. Valdetaro discussed with Mr. Gemini further relevant information regarding SiteFlash, including development costs and sales and services costs. (Gemini Decl., Exhibit 7, ¶ 39).
Interwoven's argument that the forecasted profit rates did not materialize actually supports Vertical's entitlement to lost profits. Mr. Gemini based his analysis on the assumption that, had Interwoven not infringed Vertical's patents, Vertical could have expected profits at the rate of 26%. If Vertical had experienced profits in the projected amount, as Interwoven argues it should, Vertical could not have collected damages for lost profits due to Interwoven's infringement at all. Thus, the absence of sales/profits by Vertical supports the conclusion that Interwoven's infringement drove it out of the market.
Interwoven again tries to discredit the testimony of Mr. Valdetaro, Vertical's Chief Technology Officer. As explained above, a Rule 702 motion is not the proper vehicle for resolving the disputed facts; rather, Interwoven's argument goes to the weight of the evidence,
not its admissibility. In fact, Interwoven's cited case law supports this proposition. In Illinois Tool Works, Inc., the damages expert based his lost profits damages calculation on the assumption that the plaintiff would have captured 50% of the defendant’s sales of the accused products. 2012 U.S. Dist. LEXIS 116471, at **21-22. The basis for this assumption was an estimate provided by the plaintiff''s Director of Technology. Id. The court found the expert's lost profits testimony admissible, if based on the underlying factual assumption that the plaintiff held 50% of the market share. Id. at 22 (citing Micro Chem., Inc., 317 F.3d at 1392) (holding that defendant's concerns with regard to the expert's testimony go to the weight and not its admissibility).
Like Illinois Tool Works, Mr. Gemini makes assumptions based on Vertical's evidence. Unsurprisingly, Interwoven disagrees with these facts. However, Interwoven's disagreement with Mr. Gemini's conclusions does not support precluding Mr. Gemini's testimony. Accordingly Mr. Gemini bases his lost profit analysis on sound principles and methodology, and thus is admissible.
C. Mr. Gemini's Reasonable Royalty Analysis is Proper
Mr. Gemini's report includes a calculation of a reasonable royalty, which is the minimum basis for damages guaranteed to a patentee under 35 U.S.C. § 284. Mr. Gemini's reasonable royalty analysis follows a well-accepted methodology for determining a reasonable royalty, namely applying the Georgia Pacific factors to the facts of this case in a hypothetical negotiation at the time infringement began.
The Federal Circuit has held that "[t]he amount of damages based on a reasonable royalty is an issue of fact." Micro Chem., Inc. v. Lextron, Inc., 317 F.3d at 1394. "The correct measure of damages is a highly case specific and fact-specific analysis." Hebert v. Lisle Corp., 99 F.3d 1108, 1119 (Fed. Cir. 1996). The Federal Circuit has also stated that a reasonable royalty may be measured as a percentage of a variety of different numbers. See, e.g., Fromson, 853 F.2d 1568, 1578 (Fed. Cir. 1988) ("The royalty may, for example, be measured as a percentage of Western's gross or net profit dollars, or as a set amount per infringing plate sold, or as a percentage of the gross or net price received for each infringing plate"). "The hypothetical negotiation tries, as best as possible, to recreate the ex ante licensing negotiations scenario and to describe the resulting agreement. In other words, if infringement had not occurred, willing parties would have executed a license agreement specifying a certain royalty payment scheme." Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir. 2009). The hypothetical negotiation "necessarily involves an element of approximation and uncertainty." Id. at 1326.
The Federal Circuit has consistently approved of an experts use of a hypothetical negotiation utilizing the Georgia Pacific factors to estimate a reasonably royalty. See, e.g., Micro Chem., Inc., 317 F.3d at 1393. Mr. Gemini has addressed each of these factors in his report. Like its arguments concerning Mr. Gemini's lost profit analysis, Interwoven again challenges Mr. Gemini's conclusions. However, these conclusions do not undermine Mr. Gemini's well-reasoned methodology and relate to the weight or Mr. Gemini's testimony, not its admissibility. Interwoven may challenge his conclusions at trial and present contrary evidence through its own experts. Ultimately, Interwoven's arguments rest on a fundamental misunderstanding of the analysis performed by Mr. Gemini.
1. Mr. Gemini's Royalty Base was Proper Because the TeamSite Platform and LiveSite Products use the Patented Technology
Interwoven argues that Mr. Gemini uses an improper royalty base under LaserDynamics, Inc. v. Quanta Comp., Inc., 694 F.3d 51, 67-68 (Fed. Cir. 2012), because Mr. Gemini has not identified the smallest salable patent practicing unit and has thus failed to apportion the damages to that part of the TeamSite and LiveSite products that use the patented technology. However,
the entire market value rule does not apply in this scenario and, even if it does, the patented technology drives the demand for the Teamsite and LiveSite products.
As stated above, the Federal Circuit has stated that the reasonable royalty may be measured as a percentage of any variety of different numbers, including the gross or net price from each infringing product. See Fromson, 853 F.2d at 1578-1579. The entire market value rule is a "narrow exception to the general rule that royalties are awarded based on the smallest salable patent-practicing unit." Versita 2013 U.S. App. LEXIS 8838, at *31-32 (citing LaserDynamics, Inc., 94 F.3d at 67). It applies if an infringer sells a patented product, but the patent only relates to a part of the product sold. Id. If this is the case, a patent owner can only claim damages on the entire market value of the product sold, if "the patent-related feature is the basis for customer demand.'" Lucent Techs., Inc., 580 F.3d at 1336 (citing Rite-Hite, 56 F.3d at 1549).
Here, Mr. Gemini did not apply the entire market value theory. The whole of Interwoven's Teamsite and LiveSite products use the patented technology, and Mr. Gemini has cited advertising materials that support this conclusion. (Valdetaro Decl., Exhibit 6 ¶ 10; Gemini Decl., Exhibit 7, ¶¶ 33, 53, 62-64). Thus, contrary to Interwoven's arguments, Mr. Gemini has identified the "smallest salable practicing unit." Therefore, Mr. Gemini need not have apportioned damages.
However, even though Mr. Gemini has not applied the entire market value theory in his calculations, he has assumed that the patented technology drives the demand for TeamSite and LiveSite. (Gemini Decl., Exhibit 7, ¶¶ 32-33, 53). This assumption is supported by the facts and data in this case. (Valdetaro Decl., Exhibit 7, ¶ 10).
As Interwoven duly noted in its motion, Mr. Gemini's testimony was similarly challenged in Dataquill Ltd. v. High Tech Comp. Corp., 887 F.Supp 2d 999, 1027-28 (S.D. Cal. 2011). Case3:10-cv-04645-RS Document177 Filed06/03/13
There, the defendant argued that the entire market value rule was not sufficiently addressed in Mr. Gemini's report because Mr. Gemini did not tie the patented feature to the basis for customer demand. Id. The court found that Mr. Gemini cited articles showing that the patented feature was important to the defendant's ability to compete in the market, and this was sufficient evidence from which a jury could find that the entire market value rule had been satisfied. Id. Therefore, the court declined to exclude his testimony using the total revenue of the accused products as the royalty base. Id. Here, Mr. Gemini has done just that. As provided above, he has based his testimony on the importance of the patented features to customer demand for the accused products.
Interwoven also cites IP Innovation LLC v. Red Hat, Inc., 705 F. Supp. 2d 687 (E.D. Tex. 2010) to attack Mr. Gemini's analysis. Judge Rader, Chief Judge of the Federal Circuit and sitting by designation as the presiding judge, preliminarily excluded opinions that applied the entire market rule because he found the supporting evidence to be insufficient. Id. at 689-90. However, the court invited additional evidence and a revised report. Id. at 691. Eventually, Mr. Gemini did testify at trial, so Interwoven's citation does little to discredit Mr. Gemini's report.
For these reasons, Mr. Gemini's use of the total revenue from TeamSite and LiveSite sales is proper and admissible.
Pacer Update from SF CA. Courtesy of JonnyQwan Raging bull# 370070:
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
INTERWOVEN, INC.,
Plaintiff,
v.
VERTICAL COMPUTER SYSTEMS, INC.,
Defendant.
Case No. 3:10-cv-04645-RS
VERTICAL'S OPPOSITION TO INTERWOVEN'S MOTION TO EXCLUDE THE TESTIMONY OF JOHN MALY
DATE: JUNE 20, 2013 TIME: 1:30 P.M.
DEPT: COURTROOM 3 JUDGE: HON. RICHARD SEEBORG
Case3:10-cv-04645-RS Document178 Filed06/03/13 Page1 of 16
VERTICAL'S OPPOSITION TO INTERWOVEN'SMOTION TO EXCLUDE THE
TESTIMONY OF JOHNMALY− CASE NO. 3:10-CV-04645-RS
TABLE OF CONTENTS
Page
I. INTRODUCTION .............................................................................................................. 1
II. THE FACTS ....................................................................................................................... 2
III. ARGUMENT...................................................................................................................... 5
A. Legal Standard ........................................................................................................ 5
B. The Accused Products Did Not Change Over the Relevant Time.......................... 8
C. Mr. Maly has had Access to TeamSite and LiveSite Products Sold by Interwoven to its Customers ...................................................................... 8
D. Interwoven Need Not Sell Computer Hardware to Infringe the '629 Patent-In-Suit .......................................................................................... 10
E. Mr. Maly has Proven that the TeamSite Product Performs Each Step of the Asserted Claims of the '744 Patent and Includes Each Element of the Asserted Claims of the '629 Patent............................................... 11
IV. CONCLUSION................................................................................................................. 12 Case3:10-cv-04645-RS Document178 Filed06/03/13 Page2 of 16
VERTICAL'S OPPOSITION TO INTERWOVEN'SMOTION TO EXCLUDE THE
TESTIMONY OF JOHNMALY− CASE NO. 3:10-CV-04645-RS
TABLE OF AUTHORITIES
Page(s)
CASES
Bai v. L & L Wings, Inc., 160 F.3d 1350 (Fed. Cir. 1998)................................................................................................10
Catalina Marketing International v. Coolsavings.com, Inc., 289 F.3d 801 (Fed. Cir. 2002)....................................................................................................9
Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993)...................................................................................................................5
DeGeorge v. Bernier, 768 F.2d 1318 (Fed Cir. 1985)...................................................................................................9
Gen. Mills, Inc. v. Hunt-Wesson, Inc., 103 F.3d. 978 (Fed. Cir. 1997).................................................................................................10
Gentry Gallery, Inc. v. Berkline Corp., 134 F.3d 1473 (Fed. Cir. 1998)................................................................................................10
Honeywell International, Inc. v. Universal Avionics Systems Corp., 488 F. 3d 982 (Fed. Cir. 2007)...................................................................................................5
Implicit Networks, Inc. v. F5 Networks, Inc., 2013 U.S. Dist. LEXIS 34984 (N.D. Ca. March 13, 2013) ...................................................6, 7
Marylou Primiano v. Yan Cook, 598 F.3d 558 (9th Cir. 2010) ......................................................................................................5
Pitney Bowes, Inc. v. Hewlett-Packard Co., 182 F.3d 1298 (Fed. Cir. 1999)..................................................................................................9
Techsearch, LLC v. Intel Corp., 286 F.3d 1360 (Fed. Cir. 2002)..................................................................................................5
Transmatic, Inc. v. Gulton Indus., 53 F.3d 1270 (Fed.Cir. 1995)...................................................................................................10
I. INTRODUCTION
Interwoven, Inc. ("Interwoven") has elevated a lapse of memory in a day-long deposition of Vertical Computer Systems, Inc.'s ("Vertical") technical expert, Mr. John Maly, into a motion to exclude his testimony and prevent Vertical from presenting its infringement case at trial. Interwoven does not challenge Mr. Maly's competency or his methods of analyzing infringement. It merely tries to mischaracterize and criticize Vertical's proofs and the evidence that Mr. Maly relied upon to prepare his report and his Declaration (Exhibit 5)1 in opposition to the present motion and to the motion for summary judgment filed by Interwoven. Interwoven has not offered any credible non-infringement defense – its defenses amount to contrived claim constructions and procedural challenges meant to prevent a trial on the merits at all cost.
Mr. Maly used a vast number of references to analyze infringement and reach his conclusions in this case. He considered the avalanche of documents produced by Interwoven and selected the ones he needed for support; he read a book titled Definitive Guide to Interwoven TeamSite (Exhibit 11) which completely describes the accused products; he considered the report of Dr. Clifford Kraft (Exhibit 4); he prepared the claim charts for this case (Exhibit 13); and he read the deposition testimony of Messrs. Rajib Sengupta and Shashi Mazumdar, Interwoven's 30(b)(6) designees in this case, (Exhibits 23 and 10, respectively) and others. He did an element-by-element infringement analysis that is an established part of any patent infringement presentation in almost every patent trial.
Mr. Maly did not rely on just a single reference to prepare his report and declaration or to reach his conclusions. He relied on all of the references. He did not address each version of the
1 For efficiency, Vertical has cited to Exhibits 1-25 corresponding to Vertical Computer Systems, Inc.’s Opposition to Interwoven Inc.’s Motion for Summary Judgment, all of which are attached to the Declaration of Vasilios D. Dossas in Support of Vertical's Opposition to Interwoven's Motion for Summary Judgment filed concurrently herewith.
accused TeamSite and LiveSite products because, for purposes of this litigation, those products remained the same from the time infringement began to the present. He did not identify any differences between the literal terms of the asserted claims of the patents-in-suit (Exhibits 1 and 2) and the accused products because there are no differences. If Interwoven had mounted any credible non-infringement defense and identified any differences that it believed to be present, then Mr. Maly would have addressed those differences. But, Interwoven failed to do so.
Interwoven does not challenge the competency and qualifications of Mr. Maly or his methodology. It challenges evidence which it created and upon which Mr. Maly now relies. But, such a challenge should come in the form of cross-examination and contrary evidence – not exclusion. Interwoven seeks a procedural "home run" rather than a proper trial on the merits. Interwoven fails completely; and for the reasons outlined below, Vertical respectfully requests that the Court deny Interwoven's Motion to Exclude the Testimony of Mr. Maly.
II. THE FACTS
Vertical retained Mr. Maly as a technical expert to assist in the investigation of possible infringers of the patents-in-suit. He located the Definitive Guide to Interwoven TeamSite ("the Definitive Guide") (Exhibit 11) and, together with Luiz M. Valdetaro, Chief Technical Officer of Vertical, prepared the claim charts used in this case (Exhibit 13). The Definitive Guide is a 537-page book that describes the accused TeamSite product, specifically Version 6.5, which Interwoven had issued before the 2006 publication of the book. (See The Definitive Guide, Exhibit 11, p. xi; Valdetaro Decl., Exhibit 6, ¶ 9,). The authors of the Definitive Guide are Messrs Brian Hastings and Justin McNeal.
Vertical deposed Mr. Hastings and confirmed that Mr. Tom Shell, an enterprise services executive for Interwoven, was the technical reviewer of the book (see Exhibit 11, p. xxix); that Mr. Russell Nakano, co-founder and former principle consultant of Interwoven,
forward to the book; and that Mr. Sunil Menon, senior product manager of web content management at Interwoven, greatly assisted the two authors (see Exhibit 11, p. xxxi). (Mr. Hastings' deposition transcript attached as Exhibit 12). The book describes the TeamSite product available at the time which Interwoven had sold to Federal Express.
On September 21, 2012, Dr. Clifford Kraft, a technical consultant employed by counsel for Vertical, visited the offices of Interwoven's counsel, inspected the TeamSite product, and confirmed that the information provided in the Definitive Guide was correct. He further confirmed that the TeamSite product did not materially change from the time of the Definitive Guide to the time of his inspection. (See Kraft Decl., Exhibit 4, ¶ 5; the deposition of Interwoven's 30(b)(6) designee, Mr. Sashi Mazumdar, Exhibit 14 at pp. 14:24-15:7). He reported all this information and the elements and functionality of the TeamSite product to Mr. Maly. (the information discovered by Dr. Kraft appears in Mr. Maly's Declaration, Exhibit 5).
Mr. Maly reviewed all this information and the technical documents produced by Interwoven, prepared his expert report and expressed his opinions on infringement. He performed an element-by-element analysis of all of the accused claims and provided his opinions on direct and indirect infringement. Vertical has attached Mr. Maly's Declaration as Exhibit 5. (This Declaration also provides proof that even under Vertical's new proposed claim construction for arbitrary objects, the TeamSite product infringes the asserted claims of the patents in suit.) Mr. Maly prepared a 94 page expert report on the issue of infringement and a 111 page rebuttal report in response to the report of Interwoven's technical expert. Mr. Maly's Declaration in opposition to the present motion and to the motion for summary judgment includes his report on infringement and an additional section that addresses infringement under Interwoven's new proposed construction. (See Exhibit 5, and specifically ¶¶ 91 to 97 directed to the new proposed construction.) Mr. Maly provides a technical presentation, not a legal dissertation.
Interwoven deposed Mr. Maly and used its full allotment of time under the Federal Rules of Civil Procedure. As one can easily garner from the deposition transcript (Exhibit 8), Interwoven repeatedly tested Mr. Maly's memory on the vast amount of material that Mr. Maly had reviewed without showing him that material and allowing him to refresh his recollection and answer specific questions on specific material. The quotes Interwoven has extracted from his deposition are all examples of this approach to examination. Even when quoting Mr. Maly's testimony, Interwoven does not quote it accurately. On page 10 of its memorandum, Interwoven provides the following quote with respect to infringement under the doctrine of equivalents which is an alternative ground for infringement:
I think that I have never seen a case where some technicality came up and then it wasn't captured under the Doctrine of Equivalents.
(See page 10 of Interwoven's Memorandum) What Mr. Maly really said was:
I think that I have never seen a case where things were so obviously directly in use where some technicality came up and then it wasn't captured under the Doctrine of Equivalents.
Interwoven left out the highlighted phrase in the above quote.
At other times during the deposition of Mr. Maly, Interwoven manufactured issues which unsurprisingly confused Mr. Maly. On page 5 of its Memorandum, Interwoven quotes deposition testimony relating to Versions of the TeamSite product. Once again, however, version types of the accused product are not material. The products were the same throughout the infringement period.
The arguments that Interwoven presents do not comport with the facts. First, as stated above, the accused products have not changed over the relevant time period for purposes of infringement. (Exhibit 4, ¶ 5; see also, the deposition transcript of Shashi Mazumdar, Interwoven's 30(b)(6) designee, Exhibit 14 at pp. 14:24-15:7). Second, the claims of the '629 patent do not require that Interwoven supply any computer hardware to anyone. These claims mirror the method claims of the '744 patent and define a system. Nowhere do the patents-in-suit describe or claim any computer hardware. Finally, Vertical does not present Mr. Maly as an expert on patent law. That is the province of the Court. Mr. Maly has, however, followed time-tested and court-tested methodology in analyzing all forms of infringement – direct and indirect.
Even if Mr. Maly's report and the Declaration submitted in opposition to the present motion to exclude and in opposition to the concurrent motion for summary judgment did suffer the deficiencies alleged by Interwoven, such deficiencies do not compel exclusion of Mr. Maly's Declaration or testimony. Courts have uniformly denied attempts at exclusion, preferring to allow the moving party to test the evidence by cross-examination and rebuttal. Vertical respectfully requests that the Court similarly decide the present motion and deny it.
III. ARGUMENT
A. Legal Standard
Rule 702 of the Federal Rules of Evidence governs the admissibility of expert testimony in this case. It provides:
If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.
Fed. R. Evid. 702.
Because the admission of expert testimony is a procedural matter, the law of the Ninth Circuit Court of Appeals governs the admission of expert testimony in the present patent action. Techsearch, LLC v. Intel Corp., 286 F.3d 1360, 1376-77 (Fed. Cir. 2002); Honeywell International, Inc. v. Universal Avionics Systems Corp., 488 F. 3d 982, 994 (Fed. Cir. 2007). In Marylou Primiano v. Yan Cook, 598 F.3d 558, 564-566 (9th Cir. 2010), the Ninth Circuit applied
Fed. R. Evid. 702 to what it characterized as "shaky "opinion testimony in accordance with the U.S. Supreme Court's decision in Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993):
The requirement that the opinion testimony 'assist the trier of fact' 'goes primarily to relevance.' For scientific opinion, the court must assess the reasoning or methodology, using as appropriate such criteria as testability, publication in peer reviewed literature, and general acceptance, but the inquiry is a flexible one. Shaky but admissible evidence is to be attacked by cross examination, contrary evidence, and attention to the burden of proof, not exclusion. In sum, the trial court must assure that the expert testimony 'both rests on a reliable foundation and is relevant to the task at hand.' Kumho Tire Co. v. Carmichael holds that the Daubert framework applies not only to scientific testimony but to all expert testimony. It emphasizes, though, that the 'test of reliability is 'flexible' and Daubert's list of specific factors neither necessarily nor exclusively applies to all experts or in every case.' The 'list of factors was meant to be helpful, not definitive,' and the trial court has discretion to decide how to test an expert's reliability as well as whether the testimony is reliable, based on 'the particular circumstances of the particular case.'
* * *
When considering the applicability of Daubert criteria to the particular case before the court, the inquiry must be flexible. Peer reviewed scientific literature may be unavailable because the issue may be too particular, new, or of insufficiently broad interest, to be in the literature. Lack of certainty is not, for a qualified expert, the same thing as guesswork. 'Expert opinion testimony is relevant if the knowledge underlying it has a valid connection to the pertinent inquiry. And it is reliable if the knowledge underlying it has a reliable basis in the knowledge and experience of the relevant discipline.' '[T]he factors identified in Daubert may or may not be pertinent in assessing reliability, depending on the nature of the issue, the expert's particular expertise, and the subject of his testimony.' Reliable expert testimony need only be relevant, and need not establish every element that the plaintiff must prove, in order to be admissible.
Thus the court held that even "shaky" evidence should be attacked by cross-examination and contrary evidence – not exclusion. Here, the evidence is anything but "shaky."
This Court has applied Rule 702 in the context of patent litigation. In Implicit Networks, Inc. v. F5 Networks, Inc., Case Nos. C10-3365 SI and C10-4234 SI, 2013 U.S. Dist. LEXIS 34984 (N.D. Ca. March 13, 2013), the Court considered a patent owner's challenge to the testimony of an accused infringer's expert on infringement. Even though in the present motion it
is the accused infringer who has challenged the testimony of the patent owner's expert on infringement, the analysis provided by this Court applies to the present motion as well:
As an initial matter, Implicit moves to exclude the expert testimony of Juniper's non-infringement expert, Dr. Peter Alexander. Juniper opposes that motion and, in response, cross-moves to exclude the expert testimony of Implicit's infringement expert, Dr. Scott Nettles. Implicit attacks Dr. Alexander's testimony on two grounds. The first ground is that Dr. Alexander did not independently explore how the accused products operate [*36] and, therefore, his opinions are baseless. The second ground is that when Dr. Alexander testified that Implicit's expert Dr. Scott Nettles failed to prove by a 'preponderance of the evidence' that Juniper infringed, Dr. Alexander is not only incorrect, he is attempting to usurp the jury's function.
Federal Rule of Evidence 702 provides that expert testimony is admissible if 'scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue.' Fed. R. Evid. 702. Expert testimony under Rule 702 must be both relevant and reliable. Daubert v. Merrell Dow Pharms., 509 U.S. 579, 589, 113 S. Ct. 2786, 125 L. Ed. 2d 469 (1993). When considering evidence proffered under Rule 702, the trial court must act as a 'gatekeeper' by making a preliminary determination that the expert's proposed testimony is reliable. Elsayed Mukhtar v. Cal. State Univ., 299 F.3d 1053, 1063 (9th Cir. 2002), amended by 319 F.3d 1073 (9th Cir. 2003).
Regarding Implicit's first argument, the Court finds that given the scope of Dr. Alexander's role – which was to rebut Implicit's expert's infringement analysis – Dr. Alexander was not required to conduct the in-depth 'infringement analysis' [*37] Implicit contends he should have undertaken. Moreover, Implicit's arguments do not establish that Dr. Alexander's opinions are unreliable such that they should be excluded, but go more to the weight a jury may give to Dr. Alexander's opinion (assuming Dr. Alexander's understanding of the accused products is relevant to his assertion that Dr. Nettles' opinions are deficient). With respect to the second argument, the Court finds that Implicit's contentions regarding the deficiencies in Dr. Alexander's testimony (i.e., how Dr. Alexander criticized Dr. Nettles' conclusions and the basis for those criticisms) go to the weight a jury might give Dr. Alexander's conclusions and not their admissibility. See, e.g., Daubert, 509 U.S. at 596 ('Vigorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof are the traditional and appropriate means of attacking shaky but admissible evidence.'). Finally, the fact that Dr. Alexander opines that Dr. Nettles has not established infringement by a preponderance of the evidence, is not a basis on which to exclude his testimony. See, e.g., Symbol Technologies, Inc. v. Opticon, Inc., 935 F.2d 1569, 1575 (Fed. Cir. 1991) [*38] ('testimony on the ultimate issue of infringement is permissible in patent cases').
This analysis applies here and compels denial of Interwoven's motion.
B. The Accused Products Did Not Change Over the Relevant Time
In attacking Mr. Maly's report and testimony, Interwoven has made a number of mischaracterizations and contrived arguments. It states that Mr. Maly did not compare the claims to any existing Interwoven product. It argues that the accused TeamSite and LiveSite products have changed over the years and that Mr. Maly did not take that into account. But, as shown above, the accused products did not change over the relevant time period of infringement, 2004 to the present. Mr. Maly carefully selected documents that describe the accused product and that prove infringement. Mr. Maly relied on the inspection conducted by Dr. Kraft of the current TeamSite product. He also relied upon the Definitive Guide which describes the TeamSite and LiveSite products available during the 2004 to 2006 time period. Dr. Kraft confirmed that there are no material differences between the two and so did Mr. Mazumdar (Exhibit 4, ¶ 5; Exhibit 14 at pp. 14-24-15:7). Thus, Mr. Maly did compare the claims to the existing TeamSite product.
Interwoven quotes Mr. Maly's deposition testimony where it quizzes Mr. Maly on the Version numbers of TeamSite and when Interwoven first offered those Versions for sale (See Interwoven's Memorandum, Dkt No. 169-3 at p. 5). Whether Mr. Maly could recite from memory each of the Version numbers is simply not relevant. It is a contrived issue meant to discredit Mr. Maly and his testimony. TeamSite did not change at all for purposes of this lawsuit from the time infringement began in 2004 to the present.
C. Mr. Maly has had Access to TeamSite and LiveSite Products Sold by Interwoven to its Customers
Mr. Maly and Vertical learned of the infringing TeamSite products through the 537-page book titled The Definitive Guide to Interwoven TeamSite, authored by Messrs. Hastings and McNeal, two employees of Federal Express, a purchaser of the TeamSite productand introductory pages of the book included in Exhibit 11). As outlined above, Vertical deposed Mr. Hastings and confirmed that Mr. Tom Shell, an enterprise services executive for Interwoven, was the technical reviewer of the book (see Exhibit 11, p. xxix); that Mr. Russell Nakano, co-founder and former principle consultant of Interwoven, wrote the forward to the book; and that Mr. Sunil Menon, senior product manager of web content management at Interwoven, greatly assisted the two authors (see Exhibit 11, p. xxxi). (See also Mr. Hasting's deposition transcript attached as Exhibit 12).
On page xi of The Definitive Guide, the Table of Contents shows that the subject matter of the book was the 6.5 Version of the TeamSite product and that the authors had familiarity with that version through their employment at Federal Express. Federal Express was an Interwoven customer that had purchased the TeamSite and LiveSite products and used them in its business. Not only did Interwoven assist Federal Express in installing and practicing that system, but its officers, founder and personnel helped two Federal Express employees write a book about the system – a book that is over 500 pages long.
Mr. Maly also reviewed Interwoven's documents, selecting those that are the most relevant to the patents-in-suit. Those documents show the pervasive use of the patented technology throughout; and they confirm the fact that every accused product that Interwoven sold throughout the infringement period used the patents-in-suit. Therefore, Mr. Maly's report is not deficient in any of the ways suggested by Interwoven.
Interwoven has also had knowledge of the inventions of the patents-in-suit as early as the time that infringement began. After filing the application for the '744 patent, Aubrey McAuley, the inventor of the patents-in-suit, implemented the inventions of his patents in a product that his company, Adhesive Software, Inc., called "SiteFlash." He made a number of technical presentations of the inventions and the product, including presentations to two individuals who ultimately became employees of Interwoven. (See McAuley Decl., Exhibit 3, ¶ 3). Those two individuals, Mr. Frank Livaudais and Mr. Eben Miller, helped implement arbitrary objects throughout the accused TeamSite and LiveSite products. After talking to Mr. McAuley, Messrs. Livaudais and Miller formed Thirteen Colonies, which they sold to Interwoven in 2004. They then went to work for Interwoven and helped develop the infringing TeamSite and LiveSite products. Their names appear throughout the documents produced by Interwoven in this litigation. (See the deposition transcript of Rajib Sengupta, Interwoven's 30(b)(6) designee, Exhibit 10, at pp. 14-20)
D. Interwoven Need Not Sell Computer Hardware to Infringe the '629 Patent-In-Suit
Interwoven has seized upon some language that appears in the preamble of the claims in the '629 patent-in-suit to argue that those claims require computer hardware. For example, the preamble of claim 21 of the '629 patent describes an environment in which a computer program operates and then recites the three elements of the computer program. The hardware tersely recited in the preamble does not appear in the body of the claim and it does not give life and meaning into the body, i.e., the three recited elements. Nowhere in the specifications of the patents-in-suit does the inventor even suggest that computer hardware components are part of his invention. The method and software system runs on a computer, but that does not make a computer part of the invention.
Generally, the preamble of a claim is non-limiting. DeGeorge v. Bernier, 768 F.2d 1318, 1322, n.3 (Fed Cir. 1985). As the Federal Circuit has explained,
f…the body of the claim fully and intrinsically sets forth the complete invention, including all of its limitations, and the preamble offers no distinct definition of any of the claimed invention's limitations, but rather merely states, for example, the purpose or intended use of the invention, then the preamble is of no significance to claim construction because it cannot be said to constitute or explain a claim limitation.
Pitney Bowes, Inc. v. Hewlett-Packard Co., 182 F.3d 1298, 1305 (Fed. Cir. 1999). A claim preamble is limiting only "if it recites essential structure or steps, or if it is 'necessary to give life, meaning, and vitality' to the claim." Catalina Marketing International v. Coolsavings.com, Inc., 289 F.3d 801, 808 (Fed. Cir. 2002). As explained above, the patents-in-suit do not make any computer hardware component a part of the invention, and thus the reference in a claim preamble is merely definition of the environment on which the method and software system of the inventions run. (Even if such components were part of the invention (and they clearly are not), Interwoven would still be an infringer, indirectly, because the accused products cannot run on anything except a computer.)
E. Mr. Maly has Proven that the TeamSite Product Performs Each Step of the Asserted Claims of the '744 Patent and Includes Each Element of the Asserted Claims of the '629 Patent
A determination of infringement requires a two-step analysis. See, e.g., Gentry Gallery, Inc. v. Berkline Corp., 134 F.3d 1473, 1476 (Fed. Cir. 1998). First, the Court must properly construe the claims to determine their scope and meaning. Id. Second, the claim as properly construed, must be compared to the accused device or process. Id. "Literal infringement requires that every limitation of the patent claim be found in the accused device." Gen. Mills, Inc. v. Hunt-Wesson, Inc., 103 F.3d. 978, 981 (Fed. Cir. 1997). If the patent owner proves literal infringement, the analysis ends. Transmatic, Inc. v. Gulton Indus., 53 F.3d 1270, 1275 (Fed.Cir. 1995). A patentee need only rely on the doctrine of equivalents if he cannot prove literal infringement. Id. Determination of infringement, whether literal or under the doctrine of equivalents, is a question of fact. Bai v. L & L Wings, Inc., 160 F.3d 1350, 1353 (Fed. Cir. 1998).
Mr. Maly's Declaration does indeed provide an element-by-element comparison between the asserted claims of the patent-in-suit and the accused TeamSite and LiveSite products. infringement requires that every limitation of a patent claim be found, and Mr. Maly found them, literally. Mr. Maly also conducts an analysis under the alternative theory of doctrine of equivalents. Vertical need not rely on the doctrine of equivalents if it proves literal infringement which it has done here. Interwoven argues that Mr. Maly has not shown any difference between the claim terms and the accused device. That is true. It has proved the opposite – there are no differences. Its doctrine of equivalents argument is in hypothetical form because of that outcome. If Interwoven had identified any differences, Mr. Maly would have shown in detail that those differences are entirely insubstantial, and not supported by the claim language.
Throughout his reports, testimony and Declaration, Mr. Maly used widely accepted methodology to show that Interwoven infringes. Interwoven cannot preclude his testimony on that basis that its interpretation of the facts or law is different.
IV. CONCLUSION
In view of the foregoing, Vertical respectfully requests that the Court deny Interwoven's motion to preclude the testimony of John Maly.
Respectfully submitted, /s/ Vasilios D. Dossas
VASILIOS D. DOSSAS (Pro Hac Vice)
dossas@nshn.com
NIRO, HALLER &NIRO
181 West Madison, Suite 4600
Chicago, IL 60602-4515
Telephone: (312) 236-0733
Facsimile: (312) 236-3137
MARK V. ISOLA (SBN 154614)
misola@rehonroberts.com
REHON &ROBERTS, APC
830 The Alameda
San Jose, CA 95126
Telephone: (408) 494-0900
Facsimile: (408) 494-0909
Attorneys for Vertical Computer Systems, Inc.
CERTIFICATE OF SERVICE
The undersigned hereby certifies that on June 3, 2013 the foregoing
VERTICAL'S OPPOSITION TO INTERWOVEN'S MOTION TO EXCLUDE THE TESTIMONY OF JOHN MALY
was filed with the Clerk of Court using the CM/ECF system, which will then send a notification of such filing to the following counsel of record.
BIJAL V. VAKIL (Cal. Bar No. 192878)
bvakil@whitecase.com
NOAH A. BRUMFIELD (Cal. Bar No. 203653)
nbrumfield@whitecase.com
JENNIFER P. GOSSAIN (Cal. Bar No. 254174)
jgossain@whitecase.com
THOMAS C. FLYNN (Cal. Bar. No. 257945)
tflynn@whitecase.com
WHITE &CASE LLP
3000 El Camino Real
5 Palo Alto Square, 9th Floor
Palo Alto, CA 94306
Telephone: (650) 213-0300
Facsimile: (650) 213-8158
Jack O. Lever jlever@whitecase.com WHITE &CASE LLP 701 Thirteenth Street, NW Washington, DC 20005-3807
Telephone: (202) 626-3600
Facsimile: (202) 639 9355
Edward G. Poplawski (Cal. Bar No. 113590) epoplawski@wsgr.com Olivia M. Kim (Cal. Bar No. 22832) okim@wsgr.com WILSON SONSINI GOODRICH & ROSATI
650 Page Mill Road Palo Alto, CA 94304-1050 Telephone: (650) 493-9300 Facsimile: (650) 493-6811
Attorneys for Plaintiff, Interwoven, Inc.
I certify that all parties in this case are represented by counsel who are CM/ECF participants.
/s/ Vasilios D. Dossas
Attorneys for Vertical Computer Systems, Inc.
Case3:10-cv-04645-RS Document178 Filed06/03/13 Page16 of 16
Pacer Update from SF CA. Courtesy of JonnyQwan Raging bull# 370067:
FOR THE NORTHERN DISTRICT OF CALIFORNIA
INTERWOVEN, INC.,
Plaintiff,
v.
VERTICAL COMPUTER SYSTEMS, INC.,
Defendant.
Case No. 3:10-cv-04645-RS
VERTICAL'S OPPOSITION TO INTERWOVEN'S MOTION TO EXCLUDE THE TESTIMONY OF JOSEPH GEMINI
DATE: JUNE 20, 2013 TIME: 1:30 P.M.
DEPT: COURTROOM 3 JUDGE: HON. RICHARD SEEBORG
Case3:10-cv-04645-RS Document177 Filed06/03/13 Page1 of 24
VERTICAL'S OPPOSITION TO INTERWOVEN'SMOTION TO EXCLUDE THE
TESTIMONY OF JOSEPH GEMINI− CASE NO. 3:10-CV-04645-RS
TABLE OF CONTENTS
Page
I. INTRODUCTION .............................................................................................................. 1
II. RELEVANT FACTS.......................................................................................................... 2
III. LEGAL STANDARD......................................................................................................... 4
IV. ARGUMENT...................................................................................................................... 6
A. Mr. Gemini's Testimony will Help the Jury ........................................................... 6
B. Mr. Gemini's Testimony Regarding Lost Profits is Admissible............................. 6
1. No Acceptable Non-Infringing Substitutes Exist ....................................... 8
2. Vertical has the Manufacturing and Marketing Capability to Meet the Demand for the Patented Product ............................................ 9
3. Mr. Gemini Applied a Proper Profit Rate................................................. 11
C. Mr. Gemini's Reasonable Royalty Analysis is Proper.......................................... 13
1. Mr. Gemini's Royalty Base was Proper Because the TeamSite Platform and LiveSite Products use the Patented Technology ................. 14
D. The Basix Agreement is the Most Relevant and Comparable License................. 16
V. CONCLUSION................................................................................................................. 19 Case3:10-cv-04645-RS Document177 Filed06/03/13 Page2 of 24
VERTICAL'S OPPOSITION TO INTERWOVEN'SMOTION TO EXCLUDE THE
TESTIMONY OF JOSEPH GEMINI− CASE NO. 3:10-CV-04645-RS
TABLE OF AUTHORITIES
Page(s)
CASES
ActiveVideo Networks v. Verizon Communications, 694 F.3d 1312 (Fed. Cir. 2012)................................................................................................17
Apple, Inc. v. Motorola, Inc., 2012 U.S. Dist. LEXIS 105387 (N.D. Ill. May 22, 2012) .......................................................11
AVM Techs., LLC v. Intel Corp., 2013 U.S. .................................................................................................................................18
Calouri v. One World Techs., Inc., US Dist. LEXIS 25508 (C.D. Cal. Feb. 27, 2012).............................................................16, 17
Carnegie Mellon Univ. v. Marvell Tech. Grp., Ltd., 2012 U.S. Dist. LEXIS 159794 (W.D. Pa. Nov. 7, 2012) .......................................................17
Dataquill Ltd. v. High Tech Comp. Corp., 887 F.Supp 2d 999 (S.D. Cal. 2011)..................................................................................15, 16
Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993).................................................................................................1, 5, 6, 8, 11
DSU Med. Corp. v. JMS Co., Ltd., 296 F. Supp. 2d 1140 (N.D. Cal. 2003) .................................................................................5, 6
Hebert v. Lisle Corp., 99 F.3d 1108 (Fed. Cir. 1996)..................................................................................................13
Honeywell International, Inc. v. Universal Avionics Systems Corp., 488 F. 3d 982 (Fed. Cir. 2007)...................................................................................................5
Illinois Tool Works, Inc. v. MOC Prods. Co., Inc., 2012 U.S. Dist. LEXIS 116471 (S.D. Cal. Aug. 17, 2012) .........................................11, 12, 13
IP Innovation LLC v. Red Hat, Inc., 705 F. Supp. 2d 687 (E.D. Tex. 2010).....................................................................................16
Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999).................................................................................................................11
LaserDynamics, Inc. v. Quanta Comp., Inc., 694 F.3d 51 (Fed. Cir. 2012)........................................................................................14, 15, 18
Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301 (Fed. Cir. 2009)..........................................................................................14, 15
Micro Chemical, Inc. v. Lextron, Inc., 317 F.3d 1387 (Fed. Cir. 2003)............................................................................5, 8, 11, 13, 14
Minks v. Polaris Indus., Inc., 546 F.3d 1364 (Fed. Cir. 2008)................................................................................................18
Oracle Am., Inc. v. Google, Inc., 2011 U.S. Dist. LEXIS 136172 ...........................................................................................9, 11
Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152 (6th Cir. 1978) ...........................................................................................1, 7, 9
ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860 (Fed. Cir. 2010)..................................................................................................18
Rite-Hite Corp. v. Kelley Co., Inc., 56 F.3d 1538 (Fed. Cir. 1995)..............................................................................7, 9, 10, 16, 17
Siemens Med. Sols. USA, Inc. v. Saint-Gobain Ceramics & Plastics, Inc., 637 F.3d 1269 (Fed. Cir. 2011)..................................................................................................6
State Indus. Inc. v. Mor-Flo Indus., Inc., 883 F.2d 1573 (Fed. Cir. 1989)..................................................................................................9
Techsearch, LLC v. Intel Corp., 286 F.3d 1360 (Fed. Cir. 2002)..................................................................................................5
US Gypsum Co. v. LaFarge N.Am. Inc., 670 F. Supp. 2d 737 (N.D. Ill. 2009) ...................................................................................9, 11
Yarway Corp. v. Eur-Control USA, Inc., 775 F.2d 268 (Fed. Cir. 1985)........................................................................................6, 11, 12
STATUTES
35 U.S.C. § 284..........................................................................................................................6, 13
I. INTRODUCTION
Interwoven seeks to preclude Mr. Joseph Gemini, Vertical's damage expert, from testifying as to Vertical's entitlement to lost profits or the proper reasonable royalty rate. However, Interwoven's Motion to Exclude the Testimony of Joseph Gemini does not apply the standards provided in Fed.R.Evid. 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993) and fails to provide any basis for exclusion.
Interwoven does not challenge Mr. Gemini's expertise or qualifications, nor does it challenge the propriety of his principles or methods. Indeed, Mr. Gemini is well-qualified to testify in this case; and he has applied time-tested and consistently accepted methods of proving lost profits and reasonable royalties under the Panduit test and Georgia-Pacific factors. Instead, Interwoven's brief is riddled with factual argument that does not address the reliability or admissibility of Mr. Gemini's analysis or methodology. This argument includes attacking the testimony of Vertical's party witness, Mr. Valdetaro, the Chief Technical Officer. Interwoven's proposition that a damages expert may not rely on the testimony or information gleaned from a party officer is without merit. A party officer would indeed be most knowledgeable about Vertical's products and marketing and manufacturing capabilities.
However, the role of the Court under Rule 702 and Daubert is not to judge the reliability or correctness of the facts upon which Mr. Gemini bases his testimony. This is a function of the trier of fact, after Interwoven has challenged those facts through rebuttal evidence and cross-examination. Thus, for the reasons set forth below, Vertical respectfully requests that the Court deny Interwoven's motion.
II. RELEVANT FACTS
Vertical retained Mr. Gemini to assist in its damages assessment. He is a Certified Public Accountant licensed in the State of Illinois for over 25 years. (Gemini Decl., Exhibit 7 ¶ 5)1. He has testified in over fifty cases on damages, including patent cases. Id. at ¶ 4. In calculating damages for Vertical, he considered various sources of information including the pleadings, the patents-in-suit, interrogatory responses, financial data, deposition transcripts, and publicly available information. (Id. at ¶ 9; see also the attachments to Gemini Decl.). In addition, Mr. Gemini had numerous discussions with Luiz Valdetaro, the Chief Technical Officer of Vertical. (Gemini Decl., Exhibit 7 ¶ 9). Mr. Gemini prepared two reports on damages, his initial report, which Vertical served on December 12, 2012, and a supplemental report, served on March 30, 2013. Vertical has consolidated the reports verbatim into Mr. Gemini's Declaration, Exhibit 7. (Gemini Decl., Exhibit 7 ¶¶ 1-58 and ¶¶ 59-75, respectively). In his Declaration, Mr. Gemini delves into a thorough analysis of Vertical's entitlement to lost profits and reasonable royalties based on the facts in evidence.
Regarding lost profits, Mr. Gemini considered the demand and unique functionality of the patented products at issue in this case, TeamSite and SiteFlash. Id. at ¶¶ 29-36. He determined, based on discussions with Mr. Valdetaro, that the parties are the only competitors that provide such functionality. (Gemini Decl., Exhibit 7 ¶ 39; Valdetaro Decl., Exhibit 6 ¶¶ 8, 11). Mr. Gemini also based his analysis on the assumption that Vertical had the capacity to meet demand
1 For efficiency, Vertical has cited to Exhibits 1-25 corresponding to Vertical Computer Systems, Inc.’s Opposition to Interwoven Inc.’s Motion for Summary Judgment, all of which are attached to the Declaration of Vasilios D. Dossas in Support of Vertical's Opposition to Interwoven's Motion for Summary Judgment filed concurrently herewith. In addition, Vertical cites to the Declaration of Joseph Gemini, Vertical’s damages expert. The Declaration fully incorporates Mr. Gemini’s December 12, 2012 Expert Report and March 30, 2013 Supplemental Expert Report for ease of reference.
for the patented product. (Gemini Decl., Exhibit 7 ¶ 39). Again, he based this assumption on discussions with Mr. Valdetaro. (Valdetaro Decl., Exhibit 6 ¶ 12). For example, Mr. Valdetaro has stated that Vertical has the capacity to sell and service the SiteFlash product. Id. at ¶ 12. This would merely require hiring more staff as Vertical acquires more customers. Id. The fact that Vertical has not sold SiteFlash for some time does not change the competitive landscape nor Vertical's abilities. Vertical provides its other products to many large corporations and non-profit entities without a problem. Id.
Interwoven trumpets the fact that Vertical has not sold its SiteFlash system since 2004, arguing that this shows the unavailability of lost profits. On the contrary, this fact is powerful circumstantial evidence in favor of lost profits, in that it demonstrates the lack of acceptable non-infringing alternatives. It supports the conclusion that Vertical could not make any sales after 2004 because that is when Interwoven entered the market with the infringing TeamSite product. It supports a conclusion that the market in which Interwoven and Vertical compete is essentially a two-supplier market – Vertical and the infringers.
Microsoft Corp.'s SharePoint product is not a potential non-infringing substitute. Vertical sued Microsoft Corp. for infringement of its SharePoint products. The parties settled that litigation with Microsoft receiving a license under the patents-in-suit. (Gemini Decl., Exhibit 7, ¶ 39). But, as Mr. Valdetaro points out in his Declaration, Sharepoint does not have the functionality and does not compete with the parties' products. (Valdetaro Decl., Exhibit 6, ¶ 8; Gemini Decl., Exhibit 7, ¶39; see also Sengupta Dep., Exhibit 10 at 134:1-19).
Regarding reasonable royalties, Mr. Gemini has devoted most of his analysis to the widely accepted Georgia-Pacific factors. One important element of Vertical's proof is an agreement dated September 8, 2004 between Vertical and a company called Basix1. (Exhibit 24). This Agreement, despite Interwoven's protestations, is an arms-length transaction that Case3:10-cv-04645-RS Document177 Filed06/03/13 Page7 of 24
occurred at approximately the same time that Interwoven's infringement began, the date of the so called hypothetical negotiation. (Valdetaro Decl., Exhibit 6, ¶ 14).
The licensed products under the Basix 1 Agreement are "forums and calendar applications of SiteFlash," the Vertical product covered by the patents-in-suit. And, the royalty rate is 10%. Id. at ¶ 44. What happened later does not diminish these facts. The parties negotiated the license fully expecting that Basix1 would obtain funding and that it would introduce the Enterprise Knowledge Gateway (EKG) product that it intended to market. Id.
Interwoven asserts that Mr. Gemini has not made any attempt to apportion the damages to that part of the TeamSite and LiveSite products that uses the patented technology. But, the whole of these products uses the patented technology; and Interwoven uses the patented features to sell the TeamSite product and related components. Thus, contrary to Interwoven's assertions, Mr. Gemini has identified the smallest salable patent practicing unit. Copies of the Autonomy website show just that. Vertical has attached those as Exhibit 25; and the Declaration of Mr. Valdetaro identifies the language on this Exhibit which promotes the patented features. (Valdetaro Decl., Exhibit 6, ¶ 10). If anything, Vertical is entitled to application of the entire market value rule to obtain damages for convoyed sales associated with the TeamSite product.
Therefore, Interwoven's arguments regarding the sufficiency of the facts simply lack merit.
III. LEGAL STANDARD
Rule 702 of the Federal Rules of Evidence governs the admissibility of expert testimony in this case. It provides:
If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and Case3:10-cv-04645-RS Document177
methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.
Fed. R. Evid. 702.
Because the admission of expert testimony is a procedural matter, the law of the Ninth Circuit Court of Appeals governs the admission of expert testimony in the present patent action. Techsearch, LLC v. Intel Corp., 286 F.3d 1360, 1376-77 (Fed. Cir. 2002); Honeywell International, Inc. v. Universal Avionics Systems Corp., 488 F. 3d 982, 994 (Fed. Cir. 2007). Under Rule 702 and Daubert, the trial court acts as a "gatekeeper" to determine "whether the reasoning or methodology underlying [an expert's] testimony is scientifically valid and whether that reasoning or methodology can properly be applied to the facts at issue." Daubert, 509 U.S. at 592-93. The Court's role under Rule 702 also includes determining whether the expert possesses some specialized knowledge such that his or her testimony will be helpful to the trier of fact and, if so, whether that knowledge arises from reliable methods applied in a reliable manner. Daubert, 509 U.S. at 590-91. This gatekeeper function is limited and is not intended to supplant the adversary system or the role of the jury. DSU Med. Corp. v. JMS Co., Ltd., 296 F. Supp. 2d 1140, 1147 (N.D. Cal. 2003) (citations omitted).
A Rule 702 Motion is not the appropriate vehicle to argue about the reliability of the facts in evidence. See Micro Chemical, Inc. v. Lextron, Inc., 317 F.3d 1387, 1392 (Fed. Cir. 2003). The Federal Circuit has affirmed that it is not the court's role to determine the accuracy of the fact's underlying an expert's testimony:
Defendants confuse the requirement for sufficient facts and data with the necessity for a reliable foundation in principles and method, and end up complaining that [the expert's] testimony was not based on '"reliable facts." The parties disputed many of the facts relevant in determining a reasonable royalty . . . . When, as here, the parties' experts rely on conflicting sets of facts, it is not the role of the trial court to evaluate the correctness of facts underlying one expert's testimony.
Id.
IV. ARGUMENT
A. Mr. Gemini's Testimony will Help the Jury
Interwoven fails to address the second prong of Daubert, namely whether the disputed testimony of the expert will be helpful to the jury. Mr. Gemini possesses specialized knowledge that will allow his testimony to aid the trier of fact. Daubert, 509 U.S. at 592-93. Mr. Gemini is a certified public accountant. He has a bachelor's degree from Western Illinois University with a major in accounting and a Masters of Business Administration from DePaul University with a major in finance. (Gemini Decl., Exhibit 7, ¶ 5). Over the years, Mr. Gemini has done auditing work, valuations of intellectual property, and consulting and expert work in the area of litigation damages. Id. He has testied as an expert numerous times over his career, including patent cases in federal courts in California. Id. He is well qualified to testify as a damages expert in this case and will offer testimony that will help the jury.
B. Mr. Gemini's Testimony Regarding Lost Profits is Admissible
Under 35 U.S.C. § 284, the Court "shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use of the invention by the infringer." Vertical need prove lost profits only to a reasonable probability; "t is well settled that proof of lost profits need not be absolute." Yarway Corp. v. Eur-Control USA, Inc., 775 F.2d 268, 275 (Fed. Cir. 1985). To recover lost profits, Vertical must show that, "but for the infringement, [it] would have made additional profits." Siemens Med. Sols. USA, Inc. v. Saint-Gobain Ceramics & Plastics, Inc., 637 F.3d 1269, 1287 (Fed. Cir. 2011). However, in order to show lost profits, a patent holder need not negate every possibility of a purchaser deciding to buy a different product or foregoing the purchase altogether. DSU Med. Corp.., 296 F. Supp. 2d at 1148 (citing State Indus. Inc. v. Mor-Flo Indus., Inc., 883 F.2d 1573, 1577 (Fed. Cir. 1989)).
Case3:10-cv-04645-RS Document177 Filed06/03/13 Page10 of 24
Interwoven improperly argues that Mr. Gemini does not establish "causation in fact" of lost profits. However, the Federal Circuit has held that "[c]ausation of lost profits 'is a classical jury question.'" Versata Software, Inc., 2013 U.S. App. LEXIS 8838, at *19 (Fed. Cir. May 1, 2013) (quoting Brooktree Corp. v. Advanced Micro Devices, Inc., 977 F.2d 1555, 1578 (Fed. Cir. 1992)). Under Rule 702, Vertical must only show that Mr. Gemini has used reliable methodologies in his calculation, and that he applied these calculations to the facts of the case. Fed.R.Evid. 702.
Interwoven also argues incorrectly that the lost profit analysis requires two separate showings: (1) a "threshold" showing that the patent holder would have made and sold the products "but for" the infringement, and (2) a showing that the Panduit factors are present. (Dkt. No. 168-3 at 6). However, Interwoven misinterprets the law governing the lost profits analysis. There is no threshold requirement that the patentee meet a threshold requirement of showing "but for" causation. Rather, the Panduit test serves as a useful, albeit non-exclusive, way for a patentee to make a "but for" showing, namely whether a patent owner would have made the sales but for the infringement. Rite-Hite Corp. v. Kelley Co., Inc., 56 F.3d 1538, 1545 (Fed. Cir. 1995) ("A showing under Panduit permits a court to reasonably infer that the lost profits claimed were in fact caused by the infringing sales, thus establishing a patentee's prima facie case with respect to 'but for' causation."). Thus, although Interwoven argues that Mr. Gemini failed to establish "but for" causation, Interwoven admits that Mr. Gemini has addressed the Panduit factors. (Dkt. No. 168-3 at 9). This is all that is required.
To prove "but for" causation, Vertical must establish (1) a demand for the patented product, (2) an absence of acceptable non-infringing substitutes, (3) the manufacturing and marketing capability to exploit the demand, and (4) the amount of profits it would have made. Rite-Hite Corp., 56 F.3d at 1546 (citing Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575
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F.2d 1152 (6th Cir. 1978)). Interwoven does not dispute that there was a demand for the patented product. (It cannot – the sales it has made alone proves this factor.) Therefore, Vertical must only demonstrate that Mr. Gemini addressed each of the factors (2), (3), and (4) under reliable methodology, as required by Daubert.
1. No Acceptable Non-Infringing Substitutes Exist
Interwoven avers that Mr. Gemini failed to establish the absence of non-infringing substitutes. However, Interwoven's arguments improperly challenge Mr. Gemini's conclusions, not his methodology. Mr. Gemini analysis is based on the assumption that there are no acceptable, non-infringing substitutes that existed in the market:
I understand that Vertical believes most CMS (Content Management Systems) in the market, in on way or another, infringe the patents-in-suit. I understand from Vertical that the SharePoint 2007 product licensed under the patents-in-suit by Microsoft does not compete in the CMS market.
Interwoven chose to provide versions of its TeamSite product that included the infringing capabilities. Interwoven sales of its versions prior to 6.0 had been slowing, as indicated by the Interwoven 10-Ks. It would seem that the prior versions of TeamSite were not acceptable alternatives.
(Gemini Decl., Exhibit 7, ¶ 39). The basis of this assumption is provided in the text of Mr. Gemini's report and listed in Exhibit B to his report. (Id. at ¶¶ 9-10). Of course, Interwoven disagrees with Mr. Gemini's opinions regarding the absence of non-infringing substitutes; however, "it is not the role of the trial court to evaluate the correctness of facts underlying one expert's testimony." Micro Chem., 317 F.3d at 1392 (finding that the trial court properly found plaintiff's damages expert's testimony admissible even though it was based on plaintiff's version of the contested facts).
Contrary to Interwoven's assertion, Mr. Gemini need not prove the nonexistence of adequate, non-infringing substitute during the relevant time period because he is only testifying on damages. The type of technical knowledge and skill required to prove that no non-infringing alternatives exist is outside the range of Mr. Gemini's expertise. See Micro Chem., 317 F.3d at 1392 (affirming that damages expert's testimony was admissible even though he relied on the statements of others and did not undertake an independent investigation of the industry or personally review the parties' financial records.). Instead, Vertical will proffer evidence that no non-infringing substitutes existed, as it is so entitled. Oracle Am., Inc. v. Google, Inc., 2011 U.S. Dist. LEXIS 136172, at **7-8 (Nov. 28, 2011). Interwoven's objections to Mr. Gemini's testimony are more properly addressed at trial on cross-examination or by presenting evidence rebutting the facts upon which his analysis is based. See US Gypsum Co. v. LaFarge N.Am. Inc., 670 F. Supp. 2d 737, 742-43 (N.D. Ill. 2009).
Interwoven also argues that, even where there is a presence of acceptable non-infringing substitutes, Mr. Gemini could have satisfied the second Panduit factor by providing a market share analysis. However, because Mr. Gemini's testimony is based on the absence of non-infringing substitutes, a market share analysis is not required. State Indus., Inc., 883 F.2d at 1576-77.
2. Vertical has the Manufacturing and Marketing Capability to Meet the Demand for the Patented Product
Interwoven argues that there is no evidence that Vertical had the capacity to meet demand. Again, it applies an improper standard, arguing that Vertical must be selling products that practice the patents-in-suit. However, sitting en banc, the Federal Circuit has stated that "[w]hether a patentee sells its patented invention is not crucial in determining lost profits damages." Rite-Hite Corp. v. Kelley Co., Inc., 56 F.3d 1538, 1548 (Fed. Cir. 1995) (en banc). And, as the Federal Circuit recently provided, the patentee "need not have actually sold [a competing product] during the damages period to show demand for the patented functionality,"
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VERTICAL'S OPPOSITION TO INTERWOVEN'SMOTION TO EXCLUDE THE
TESTIMONY OF JOSEPH GEMINI− CASE NO. 3:10-CV-04645-RS - 10 -
particularly where, as here, the infringer eroded the market for the patentee's product during the damages period. Versata, 2013 U.S. App. LEXIS 8838, at *24.
Versata is factually similar to the case at bar. There, the infringer challenged the jury's award of lost profits. Id. at *19. It argued that the patentee was not entitled to lost profits because the patentee had not made any sales of its patented software, "Pricer," during the damages period, which started in 2003. Id. at **23-24. During trial, the patentee showed that it had made 82 sales of Pricer between 1995 and 1998. Id. at *23. It made no sales after 2001, two years before the damages period began. Id. In the present case, the market for the patentee's product also disappeared when the Interwoven began selling the infringing software. Id. at *24. The Federal Circuit found the jury's award proper, finding the patentee need not have actually sold its product during the damages "particularly given the economic reality that [the defendant] had eroded the market for Pricer through bundling [the infringing invention] into its own software." Id. This is precisely the case here, and Mr. Gemini properly addressed this in his analysis.
Mr. Gemini provided that Vertical had the capacity to meet the demand. (Gemini Decl., Exhibit 7, at ¶ 39). He stated, in relevant part, that Vertical had the personnel to develop, train, test and market the SiteFlash product during 2002 to 2004. Id. Interwoven argues that the evidence does not support his conclusion because Vertical had at most six or seven people working on the development and maintenance of SiteFlash. (Dkt. No. 168-3 at 11). However, Vertical ignores Mr. Gemini's statements that Vertical also had 4 to 5 personal working in marketing, Vertical also used independent marketers, and that Vertical had the ability to employ Now Solutions employees to perform necessary services for the SiteFlash product sales. (Gemini Decl., Exhibit 7, ¶ 39). (Now Solutions is a subsidiary of Vertical.) Furthermore, Mr. Gemini has based his analysis on the understanding that the SiteFlash product is easier and less labor intensive to service and support than TeamSite, and, therefore, requires less personnel than those employed by Interwoven. Id. These conclusions are all based on the testimony of Mr. Valdetaro or the discussions with him. Interwoven's disagreement with these facts is not a basis to exclude Mr. Gemini's testimony. See Micro Chem., Inc., 317 F.3d at 1392; US Gypsum Co., 670 F. Supp. 2d at 742-43.
Interwoven cites Kumho Tire Co. v. Carmichael, 526 U.S. 137, 152 (1999) and Apple, Inc. v. Motorola, Inc., 2012 U.S. Dist. LEXIS 105387 (N.D. Ill. May 22, 2012) to support its argument that an expert may not rely on testimony from a party source to support its conclusions. However, neither of these cases supports this proposition, and this argument is in direct contravention of the well-established law under Fed.R.Evid. 702 and Daubert. In Kumho, the Supreme Court affirmed the district court's exclusion of an expert based on his unreliable methodology, not the facts underlying this methodology. Kumho, 526 U.S. at 153-54. In Apple, the Court excluded both parties' experts' because, in addition to using flawed methodology, the experts did not apply the same approach that they "would have been required by the applicable professional standards to use to deal with an identical issue outside the litigation context." 2012 U.S. Dist. LEXIS 105387, at 18. Here, Mr. Gemini's method of obtaining information relating to Vertical's business operations and manufacturing capabilities comprised interviewing the individual with the most knowledge, Vertical's Chief Technology Officer. If Interwoven has any concerns about bias, "it should make its arguments on cross-examination [at trial]." Oracle Am., 2011 U.S. Dist. LEXIS 136172, at **9-10.
3. Mr. Gemini Applied a Proper Profit Rate
Mr. Gemini properly applied a 26% profit rate to calculate lost profits. "A patent owner can compute his lost profits directly, through his anticipated profit margin, or indirectly, through use of the infringer's profit margin." Illinois Tool Works, Inc. v. MOC Prods. Co., Inc., 2012
U.S. Dist. LEXIS 116471, at *28 (S.D. Cal. Aug. 17, 2012) (citations omitted). And indeed, lost profits need only be proven to a "reasonable probability." Yarway Corp., 775 F.2d at 275. "Although the exact amount of lost profits cannot be precisely fixed, fundamental principles of justice require us to throw the risk of any uncertainty upon the wrongdoer instead of upon the injured party." Id. at 276 (internal citations omitted). Contrary to Interwoven's arguments, Mr. Gemini determined this rate came not only from the best evidence of projected profits, the GIS business plan, but also from discussions with Mr. Valdetaro. (Gemini Decl., Exhibit 7, ¶ 39). Therefore, Interwoven's argument that the 26% rate is not tied to the facts of this case is simply incorrect. Mr. Gemini took this 26% rate from a business plan dated July 2004, which is just prior to the date Interwoven's infringement began. Id. In addition, as Mr. Gemini stated in his deposition, the GIS plan "provides an indication of the expected profitability for products that used the technology of the patents." (Gemini Dep., Exhibit 9 at p. 117:14-21.) In addition, Mr. Valdetaro discussed with Mr. Gemini further relevant information regarding SiteFlash, including development costs and sales and services costs. (Gemini Decl., Exhibit 7, ¶ 39).
Interwoven's argument that the forecasted profit rates did not materialize actually supports Vertical's entitlement to lost profits. Mr. Gemini based his analysis on the assumption that, had Interwoven not infringed Vertical's patents, Vertical could have expected profits at the rate of 26%. If Vertical had experienced profits in the projected amount, as Interwoven argues it should, Vertical could not have collected damages for lost profits due to Interwoven's infringement at all. Thus, the absence of sales/profits by Vertical supports the conclusion that Interwoven's infringement drove it out of the market.
Interwoven again tries to discredit the testimony of Mr. Valdetaro, Vertical's Chief Technology Officer. As explained above, a Rule 702 motion is not the proper vehicle for resolving the disputed facts; rather, Interwoven's argument goes to the weight of the evidence,
not its admissibility. In fact, Interwoven's cited case law supports this proposition. In Illinois Tool Works, Inc., the damages expert based his lost profits damages calculation on the assumption that the plaintiff would have captured 50% of the defendant’s sales of the accused products. 2012 U.S. Dist. LEXIS 116471, at **21-22. The basis for this assumption was an estimate provided by the plaintiff''s Director of Technology. Id. The court found the expert's lost profits testimony admissible, if based on the underlying factual assumption that the plaintiff held 50% of the market share. Id. at 22 (citing Micro Chem., Inc., 317 F.3d at 1392) (holding that defendant's concerns with regard to the expert's testimony go to the weight and not its admissibility).
Like Illinois Tool Works, Mr. Gemini makes assumptions based on Vertical's evidence. Unsurprisingly, Interwoven disagrees with these facts. However, Interwoven's disagreement with Mr. Gemini's conclusions does not support precluding Mr. Gemini's testimony. Accordingly Mr. Gemini bases his lost profit analysis on sound principles and methodology, and thus is admissible.
C. Mr. Gemini's Reasonable Royalty Analysis is Proper
Mr. Gemini's report includes a calculation of a reasonable royalty, which is the minimum basis for damages guaranteed to a patentee under 35 U.S.C. § 284. Mr. Gemini's reasonable royalty analysis follows a well-accepted methodology for determining a reasonable royalty, namely applying the Georgia Pacific factors to the facts of this case in a hypothetical negotiation at the time infringement began.
The Federal Circuit has held that "[t]he amount of damages based on a reasonable royalty is an issue of fact." Micro Chem., Inc. v. Lextron, Inc., 317 F.3d at 1394. "The correct measure of damages is a highly case specific and fact-specific analysis." Hebert v. Lisle Corp., 99 F.3d 1108, 1119 (Fed. Cir. 1996). The Federal Circuit has also stated that a reasonable royalty may be measured as a percentage of a variety of different numbers. See, e.g., Fromson, 853 F.2d 1568, 1578 (Fed. Cir. 1988) ("The royalty may, for example, be measured as a percentage of Western's gross or net profit dollars, or as a set amount per infringing plate sold, or as a percentage of the gross or net price received for each infringing plate"). "The hypothetical negotiation tries, as best as possible, to recreate the ex ante licensing negotiations scenario and to describe the resulting agreement. In other words, if infringement had not occurred, willing parties would have executed a license agreement specifying a certain royalty payment scheme." Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir. 2009). The hypothetical negotiation "necessarily involves an element of approximation and uncertainty." Id. at 1326.
The Federal Circuit has consistently approved of an experts use of a hypothetical negotiation utilizing the Georgia Pacific factors to estimate a reasonably royalty. See, e.g., Micro Chem., Inc., 317 F.3d at 1393. Mr. Gemini has addressed each of these factors in his report. Like its arguments concerning Mr. Gemini's lost profit analysis, Interwoven again challenges Mr. Gemini's conclusions. However, these conclusions do not undermine Mr. Gemini's well-reasoned methodology and relate to the weight or Mr. Gemini's testimony, not its admissibility. Interwoven may challenge his conclusions at trial and present contrary evidence through its own experts. Ultimately, Interwoven's arguments rest on a fundamental misunderstanding of the analysis performed by Mr. Gemini.
1. Mr. Gemini's Royalty Base was Proper Because the TeamSite Platform and LiveSite Products use the Patented Technology
Interwoven argues that Mr. Gemini uses an improper royalty base under LaserDynamics, Inc. v. Quanta Comp., Inc., 694 F.3d 51, 67-68 (Fed. Cir. 2012), because Mr. Gemini has not identified the smallest salable patent practicing unit and has thus failed to apportion the damages to that part of the TeamSite and LiveSite products that use the patented technology. However,
the entire market value rule does not apply in this scenario and, even if it does, the patented technology drives the demand for the Teamsite and LiveSite products.
As stated above, the Federal Circuit has stated that the reasonable royalty may be measured as a percentage of any variety of different numbers, including the gross or net price from each infringing product. See Fromson, 853 F.2d at 1578-1579. The entire market value rule is a "narrow exception to the general rule that royalties are awarded based on the smallest salable patent-practicing unit." Versita 2013 U.S. App. LEXIS 8838, at *31-32 (citing LaserDynamics, Inc., 94 F.3d at 67). It applies if an infringer sells a patented product, but the patent only relates to a part of the product sold. Id. If this is the case, a patent owner can only claim damages on the entire market value of the product sold, if "the patent-related feature is the basis for customer demand.'" Lucent Techs., Inc., 580 F.3d at 1336 (citing Rite-Hite, 56 F.3d at 1549).
Here, Mr. Gemini did not apply the entire market value theory. The whole of Interwoven's Teamsite and LiveSite products use the patented technology, and Mr. Gemini has cited advertising materials that support this conclusion. (Valdetaro Decl., Exhibit 6 ¶ 10; Gemini Decl., Exhibit 7, ¶¶ 33, 53, 62-64). Thus, contrary to Interwoven's arguments, Mr. Gemini has identified the "smallest salable practicing unit." Therefore, Mr. Gemini need not have apportioned damages.
However, even though Mr. Gemini has not applied the entire market value theory in his calculations, he has assumed that the patented technology drives the demand for TeamSite and LiveSite. (Gemini Decl., Exhibit 7, ¶¶ 32-33, 53). This assumption is supported by the facts and data in this case. (Valdetaro Decl., Exhibit 7, ¶ 10).
As Interwoven duly noted in its motion, Mr. Gemini's testimony was similarly challenged in Dataquill Ltd. v. High Tech Comp. Corp., 887 F.Supp 2d 999, 1027-28 (S.D. Cal. 2011). Case3:10-cv-04645-RS Document177 Filed06/03/13
There, the defendant argued that the entire market value rule was not sufficiently addressed in Mr. Gemini's report because Mr. Gemini did not tie the patented feature to the basis for customer demand. Id. The court found that Mr. Gemini cited articles showing that the patented feature was important to the defendant's ability to compete in the market, and this was sufficient evidence from which a jury could find that the entire market value rule had been satisfied. Id. Therefore, the court declined to exclude his testimony using the total revenue of the accused products as the royalty base. Id. Here, Mr. Gemini has done just that. As provided above, he has based his testimony on the importance of the patented features to customer demand for the accused products.
Interwoven also cites IP Innovation LLC v. Red Hat, Inc., 705 F. Supp. 2d 687 (E.D. Tex. 2010) to attack Mr. Gemini's analysis. Judge Rader, Chief Judge of the Federal Circuit and sitting by designation as the presiding judge, preliminarily excluded opinions that applied the entire market rule because he found the supporting evidence to be insufficient. Id. at 689-90. However, the court invited additional evidence and a revised report. Id. at 691. Eventually, Mr. Gemini did testify at trial, so Interwoven's citation does little to discredit Mr. Gemini's report.
For these reasons, Mr. Gemini's use of the total revenue from TeamSite and LiveSite sales is proper and admissible.
D. The Basix Agreement is the Most Relevant and Comparable License
"Comparable license agreements are those that are 'clearly linked to the economic demand for the claimed technology'" and that "provide relevant information about the value of the license to the patent-in-suit." Calouri v. One World Techs., Inc., US Dist. LEXIS 25508, at *11 (C.D. Cal. Feb. 27, 2012). The Basix Agreement is clearly comparable because, as Mr. Gemini provided in his report, it involved a license to technology that practices the patents-in-suit. (Gemini Decl., Exhibit 7, ¶¶ 44-48). In addition, the Basix Agreement is dated September 8, 2004, around the time Interwoven's infringement began. Rite-Hite, 56 F.3d at 1554 ("The hypothetical negotiation requires the court to envision the terms of a licensing agreement reached as the result of a supposed meeting between the patentee and the infringer at the time infringement began.") Mr. Gemini has also provided a number of factors he used in comparing the Basix Agreement to the hypothetical negotiation between Vertical and Interwoven. (Id. at 17-18). Given this factual foundation, Mr. Gemini determined that the Basix Agreement is the most relevant license available.
Interwoven's argument that Mr. Gemini's testimony should be precluded because the Basix Agreement is not comparable, while unsurprising, directly contravenes Federal Circuit precedent. The degree of comparability between an existing license and a hypothetical license is an issue to be measured through cross-examination, not by preclusion. ActiveVideo Networks v. Verizon Communications, 694 F.3d 1312, 1333 (Fed. Cir. 2012). Similar to the present case, in ActiveVideo the defendant challenged plaintiff's expert's reliance on two agreements as royalty benchmarks, including one agreement that did not involve the patents-in-suit or any of the technologies at issue in the case. Id. The ActiveVideo court rejected defendant's 702 challenges, finding that the degree of comparability of these agreements was a factual issue "best addressed by cross examination and not by exclusion." Id.; see also Calouri, 2012 U.S. Dist. LEXIS 25508, at *12.
Similarly, Interwoven may challenge the comparability of the Basix Agreements on cross-examination. Carnegie Mellon Univ. v. Marvell Tech. Grp., Ltd., 2012 U.S. Dist. LEXIS 159794, at *12 (W.D. Pa. Nov. 7, 2012) ("[D]ifferences in features between the Intel Agreement and the hypothetical license [including the fact that it pertained to only one of the patents-in-suit] are 'more appropriately addressed by way of cross-examination than through exclusion.'); Calouri, 2012 U.S. Dist. LEXIS 25508, at *14 ("[T]he Court is unpersuaded that Heath's reliance Case3:10-cv-04645-RS Document177 Filed06/03/13
on the Bosch Agreement is not reliable simply because it includes licensing rights to two patents not at issue in this case.").
The majority of Interwoven's cited case law addresses damages awarded after a jury or bench trial and are therefore inapposite. See, e.g., LaserDyamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51 (Fed. Cir. 2012); ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860 (Fed. Cir. 2010); Minks v. Polaris Indus., Inc., 546 F.3d 1364 (Fed. Cir. 2008). The other cases are similarly inapplicable. In AVM Technologies, for example, the court declined to preclude the expert's opinion without hearing live testimony. AVM Techs., LLC v. Intel Corp., 2013 U.S. Dist. LEXIS 1163, at *10 (D. Del. Jan. 4, 2013). Additionally, in both AVM Techs. and DataQuill, the expert reports contained no explanation or analysis as to how the licenses at issue were comparable and relevant to the reasonable royalty analysis. AVM Techs., 2013 U.S. Dist. LEXIS 1165, at *9-10; DataQuill 2012 U.S. Dist. LEXIS 53164, at *14.
Here, Mr. Gemini has explained his factual bases for using the Basix Agreement as part of his analysis:
Q. Why do you choose to use [the Basix] agreement as part of your analyses?
A. Because it's a license that I considered as of the time the hypothetical negotiation related to the SiteFlash product.
Q. How is it related to the SiteFlash product?
A. My understanding is that what was being licensed to Basix related to the SiteFlash product, used the technology of SiteFlash in it is my understanding.
(Gemini Dep., Exhibit 9 at p. 119:15-25; see also Gemini Decl., Exhibit 7, ¶¶ 44-50.) Because the Basix Agreement that Mr. Gemini relied upon in his report is sufficiently comparable to the license that the parties would have negotiated in a hypothetical negotiation, his reliance on it is proper. While Interwoven may argue otherwise in its cross-examination of Mr. Gemini, its arguments are insufficient to preclude Mr. Gemini's entire testimony.
CONCLUSION
For the reasons stated above, Vertical respectfully requests that the Court deny Interwoven's motion.
Respectfully submitted,
/s/ Vasilios D. Dossas
VASILIOS D. DOSSAS (Pro Hac Vice) dossas@nshn.com NIRO, HALLER &NIRO 181 West Madison, Suite 4600 Chicago, IL 60602-4515 Telephone: (312) 236-0733 Facsimile: (312) 236-3137 MARK V. ISOLA (SBN 154614) misola@rehonroberts.com REHON &ROBERTS, APC 830 The Alameda San Jose, CA 95126 Telephone: (408) 494-0900 Facsimile: (408) 494-0909 Attorneys for Vertical Computer Systems, Inc.
Pacer Update from SF CA. Courtesy of JonnyQwan Raging bull# 369942:
This is a lenghty Document(may take a while to digest) but highlights vertical's case against Interwoven.
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
INTERWOVEN, INC.,
PLAINTIFF,
V.
VERTICAL COMPUTER SYSTEMS, INC.,
DEFENDANT.
CASE NO. 3:10-CV-04645-RS
VERTICAL COMPUTER SYSTEMS, INC.'S OPPOSITION TO INTERWOVEN INC.'S MOTION FOR SUMMARY JUDGMENT
DATE: JUNE 20, 2013 TIME: 1:30 P.M.
DEPT: COURTROOM 3 JUDGE: HON. RICHARD SEEBORG
Case3:10-cv-04645-RS Document175 Filed06/03/13 Page1 of 31
VERTICAL'S OPPOSITION TO INTERWOVEN'S MOTION FOR SUMMARY JUDGMENT
CASE NO. 3:10-CV-04645-RS
TABLE OF CONTENTS
Page
I. INTRODUCTION .............................................................................................................. 1
II. ISSUES PRESENTED........................................................................................................ 2
III. STATEMENT OF FACTS ................................................................................................. 3
A. Subject Matter of the Litigation.............................................................................. 3
B. Aubrey McAuley Disclosed His Invention to Individuals that Implemented it in the Infringing Product at Interwoven ........................................ 5
C. Proof of Infringement ............................................................................................. 6
D. Infringement Using the New Claim Construction Advanced by Interwoven......... 7
E. This Court's Construction of "Arbitrary Object" .................................................... 8
F. Reexamination Prosecution Histories of the Patents-In-Suit.................................. 8
1. Reexamination of the '744 Patent ............................................................... 9
2. Reexamination of the '629 Patent ............................................................. 11
G. Interwoven Cited These Same Statements in the Past but did not Seek the New Proposed Construction....................................................... 13
H. Proof of Damages ................................................................................................. 14
IV. ARGUMENT.................................................................................................................... 17
A. The Standards for Summary Judgment................................................................. 17
B. Standards for Patent Infringement ........................................................................ 17
C. The Meaning of "Arbitrary Objects" Does Not Require "Clarification" .............. 18
D. Interwoven's Argument Here Does not Greatly Depart from its Arguments During Claim Construction .................................................. 19
E. Interwoven's TeamSite Products Infringe The Asserted Claims Even Under the New Construction Proposed by Interwoven ............................... 20
F. Vertical Has Provided Overwhelming Proof of Lost Profits and Reasonable Royalty Damages........................................................................ 22
G. Vertical Can Prove its Damage Claim Even Without its Expert .......................... 22 Case3:10-cv-04645-RS Document175 Filed06/03/13 Page2 of 31
VERTICAL'S OPPOSITION TO INTERWOVEN'S MOTION FOR SUMMARY JUDGMENT
CASE NO. 3:10-CV-04645-RS
H. The Evidence Supports Damages Based on Vertical's Lost Profits...................... 23
I. Vertical is Statutorily Entitled to a Reasonable Royalty, at a Minimum.............. 24
V. CONCLUSION................................................................................................................. 25 Case3:10-cv-04645-RS Document175 Filed06/03/13 Page3 of 31
VERTICAL'S OPPOSITION TO INTERWOVEN'S MOTION FOR SUMMARY JUDGMENT
CASE NO. 3:10-CV-04645-RS
iii
TABLE OF AUTHORITIES
Page(s)
FEDERAL CASES
Anderson v. Liberty Lobby, 477 U.S. 242 (1986).................................................................................................................17
Bai v. L & L Wings, Inc., 160 F.3d 1350 (Fed. Cir. 1998)................................................................................................18
Calouri v. One World Techs., Inc., 2012 WL 630346 (C.D. Cal. Feb. 27, 2012)............................................................................25
Dow Chem. Co. v. Mee Indus., Inc., 341 F.3d 1370 (Fed. Cir. 2003)..........................................................................................23, 24
Gen. Mills, Inc. v. Hunt-Wesson, Inc., 103 F.3d. 978 (Fed. Cir. 1997).................................................................................................18
Gentry Gallery, Inc. v. Berkline Corp., 134 F.3d 1473 (Fed. Cir. 1998)..........................................................................................17, 18
Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F.Supp. 1116 (S.D. N.Y. 1970).............................................................................16, 22, 23
Howes v. Med. Components, Inc., 814 F.2d 638 (Fed. Cir. 1987)..................................................................................................17
IMS Technology, Inc. v. Haas Automation, Inc., 206 F.3d 1422 (Fed. Cir. 2000)................................................................................................17
LaserDynamics, Inc. v. Quanta Comp., Inc., 694 F.3d 51 (Fed. Cir. 2012)....................................................................................................24
Omega Engineering, Inc. v. Raytek Corp., 334 F.3d 1314 (Fed. Cir. 2003)................................................................................................17
Panduit Corp. v. Stalin Bros. Fibre Works, Inc., 575 F.2d 1152 (6th Cir. 1978) ......................................................................................22, 23, 24
Rite-Hite Corp. v. Kelley Co., Inc., 56 F.3d 1538 (Fed. Cir. 1995) (en banc) .....................................................................23, 24, 25
Seiko Epson Corp. v. Coretronic Corp., 2009 U.S. Dist. LEXIS 44064 (N.D. Ca. May 26, 2009) ........................................................20
Semiconductor Energy Laboratory Co., Ltd. v. Chi Mei Optoelectronics Corp., 2006 U.S. Dist. LEXIS 52597 (N.D. Ca. July 28, 2006).........................................................20
Case3:10-cv-04645-RS Document175 Filed06/03/13 Page4 of 31
VERTICAL'S OPPOSITION TO INTERWOVEN'S MOTION FOR SUMMARY JUDGMENT
CASE NO. 3:10-CV-04645-RS
iv
As shown below, even with its new proposed construction, Interwoven cannot avoid liability. It infringes under either construction. The accused TeamSite and LiveSite products infringe regardless; and infringement is a question of fact for jury determination.
In yet another "hail Mary" type of attempt, Interwoven moves for summary judgment on the issue of compensatory damages, arguing that Vertical does not have any proof on this issue. To the contrary, Vertical has a mountain of evidence which it has submitted with this Opposition to prove damages on a lost profit or a reasonable royalty basis. Even if it did not have this evidence, Vertical, to avoid summary judgment, could at the very least rely on the testimony of Interwoven's damage expert and on the fact that it seeks a permanent injunction.
Therefore, for the reasons further detailed below, Vertical respectfully requests that the Court deny Interwoven's Motion for Summary Judgment.
II. ISSUES PRESENTED
The issues presented by the present Motion for Summary Judgment include the following:
A. Has Interwoven properly asked for reconsideration or "clarification" of this Court's Claim Construction Order under the Local Rules of this Court?
B. Do Interwoven's arguments in support of its request to clarify the claim construction greatly depart from the arguments that it already advanced through claim construction briefing and, if not, does Interwoven's attempt at clarification fail on that fact alone?
C. Does the patentee of the patents-in-suit suggest anywhere in those patents, their original prosecution histories or in their reexamination prosecution histories that swapping or interchangeability of different types of objects is necessary for its patents?
D. Do the accused products still infringe even under Interwoven's new proposed construction for "arbitrary objects," and is this a question of fact for the jury?
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E. Is the quantity and quality of evidence used to support a damages award properly the subject of a motion for summary judgment, and has Vertical produced sufficient evidence to support a compensatory damage award?
F. Does the fact that Vertical has the option of relying on Interwoven's Damage Report to support its damages claims or the fact that Vertical is seeking a permanent injunction against Interwoven compel denial of Interwoven's motion for summary judgment on damages?
III. STATEMENT OF FACTS
A. Subject Matter of the Litigation
This Court aptly summarized the factual background of this litigation on pages 2 through 4 of its December 30, 2011 Claim Construction Order [Dkt. No. 83]:
The technology in this dispute involves a system for generating software applications in an 'arbitrary object framework.' Specifically, it presents a method for separating the form, content and functionality of computer applications so that each component may be independently modified. The invention purports to simplify the work of computer programmers by providing a more efficient way of creating and modifying software through the use of 'arbitrary objects.'
Typically, software developers rely on standard object-oriented programming to create complex computer programs such as websites. Utilizing such traditional programming, developers construct each piece of the program separately. These pieces are referred to as 'objects.' Once all the objects are complete, a master developer can fit them together to formulate a complete program.
Over the years, many tools have been created to streamline this process so that developers can more easily work together to build software through the sharing and connecting of objects. For example, programmers can now develop reusable formatting templates and distribute them over the internet. Other programmers may then adopt these templates for use in their own websites.
The patents-in-suit purport to invent a new method for connecting objects and streamlining software development. To distinguish the objects used in these two patents from the 'classic objects' in other software tools, Aubrey McAuley, the named inventor of both patents, coined the term 'arbitrary object.' Vertical asserts that McAuley, acting as a lexicographer, did not ascribe any significance to the word 'arbitrary'; he simply wished to differentiate the objects in his invention from the 'classic objects' of traditional programming tools.
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For purposes of clarification, the specification describes the differences between classic and arbitrary objects: When using classic objects, a serial approach is required to integrate the form, function, and content of complex software applications. Figure 1 demonstrates one embodiment of such an approach. In Figure 1 a complex program is generated through the integration of either newly-made or reusable classic objects. First, content is created or chosen. Then form is developed for the presentation of the content. Finally, function is generated using code. The specification notes that while different industries may perform these steps in a different order than presented in Figure 1, the concept is the same and, most importantly, when using classic objects, the different software components—the form, content, and function—are always somewhat interdependent. Consequently, if a programmer wants to change the content of a website composed of classic objects, the form is necessarily affected. The programmer would be required to generate the entire website anew in order to retain the original form while manipulating the existing content. The patents-in-suit allegedly serve to make this process more efficient by creating a new way of interfacing program units. They allow developers, for example, to alter the content or form of a website easily without affecting the function, or any other component; developers, therefore, do not need to rewrite a program simply to implement a minor alteration. The invention so simplifies the process by separating the form, functionality, and content of a program into discrete components and facilitating the interface between objects. Such separation is achieved through the use of arbitrary objects. The purported invention is a method which creates these arbitrary objects, manages the arbitrary objects in an object library, and deploys the arbitrary objects into a design framework for use in a computer program.
As an illustration of the patents, the specification considers the web site of a large newspaper. Traditionally, if a marketing department wished to alter the appearance of a header on one page of the site, depending on the browser used, a programmer may need to manipulate thousands of pages of the website to make the desired change without affecting the rest of the website. With the development of arbitrary objects, this process is much easier: the programmer can simply retrieve the arbitrary object which controls the appearance of the header and manipulate it accordingly, without affecting the remaining form, content, or function of the website. Vertical concedes that prior art solutions have succeeded in separating content from form or content from functionality. It asserts, however, that none have purported to separate all three, thereby, allowing programmers to make independent changes to any part of a complex program without generating unwanted upstream revisions.
Both the '744 patent and the '629 patent assert this new method of object interfacing. The '629 patent is merely a continuation of the '744 patent. Aside from a few typographical changes in the '629 patent, its specification is essentially identical to that of the '744 patent. The parties have jointly presented ten terms found in the claims of the patents for construction by the Court. Despite this presentation, Vertical insists that only the term 'arbitrary objects' requires Case3:10-cv-04645-RS Document175 Filed06/03/13 Page9 of 31
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interpretation; the remaining terms should be read according to their plain and ordinary meaning. In the alternative, Vertical provides simple constructions for each of these terms which closely align with the respective ordinary meanings.
B. Aubrey McAuley Disclosed His Invention to Individuals that Implemented it in the Infringing Product at Interwoven
After filing the application for the '744 patent, Aubrey McAuley, the inventor of the patents-in-suit, implemented the inventions of his patents in a product that his company, Adhesive Software, Inc., called "SiteFlash." He made a number of technical presentations of the inventions and the product, including presentations to two individuals who ultimately became employees of Interwoven. (See McAuley Decl., Exhibit 3, ¶ 3). Those two individuals, Mr. Frank Livaudais and Mr. Eben Miller, helped implement arbitrary objects throughout the accused TeamSite and LiveSite products. After talking to Mr. McAuley, Messrs. Livaudais and Miller formed Thirteen Colonies, which they sold to Interwoven in 2004. They then went to work for Interwoven and helped develop the infringing TeamSite and LiveSite products. Their names appear throughout the documents produced by Interwoven in this litigation. (See the deposition transcript of Rajib Sengupta, Interwoven's 30(b)(6) designee, Exhibit 10 at pp. 14-20). After Adhesive dissolved and Vertical acquired the rights to the patents-in-suit, Mr. McAuley went to work for Vertical and assisted Vertical in refining the SiteFlash product and bringing the refined product to market. The SiteFlash product was an instant success in the marketplace when Adhesive introduced it and when Vertical re-introduced it as its product in 2002. It won the prestigious Crossroads A-List award in both of its first two years on the market. (From 1995 to 2005, the Crossroads program, a rigorous process of research and validation, drew on in-depth interviews with business executives to identify: (a) key business priorities for IT investment, and (b) products that made the strongest contribution to those priorities.) Even after the dot-com bust and without much advertising, Vertical was able to sell the SiteFlash product Case3:10-cv-04645-RS Document175 Filed06/03/13 Page10 of 31
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until Interwoven began using the patented technology in its SiteFlash product. (See McAuley Decl., Exhibit 3, ¶ 3).
C. Proof of Infringement
Vertical learned of the infringing TeamSite product through a 537-page book titled The Definitive Guide to Interwoven TeamSite, ("The Definitive Guide") authored by Messrs. Brian Hastings and Justin McNeal, two employees of Federal Express, a purchaser of the TeamSite product. (Cover pages and Introduction pages of the book are attached as Exhibit 11.) Vertical deposed Mr. Hastings and confirmed that Mr. Tom Shell, an enterprise services executive for Interwoven, was the technical reviewer of the book (see Exhibit 11, p. xxix); that Mr. Russell Nakano, co-founder and former principle consultant of Interwoven, wrote the forward to the book; and that Mr. Sunil Menon, senior product manager of web content management at Interwoven, greatly assisted the two authors (see Exhibit 11, p. xxxi). (Mr. Hastings' deposition transcript attached as Exhibit 12).
Mr. Luiz Valdetaro, chief technical officer of Vertical, reviewed the Definitive Guide; and with the help of Mr. John Maly, the expert retained by Vertical for this action, conducted a detailed analysis of infringement. They produced claim charts memorializing that infringement of the patents-in-suit by the Interwoven TeamSite products.1 (See Valdetaro Decl, Exhibit 6, ¶ 9; claim charts attached as Exhibit 13). The claim charts include an element-by-element infringement analysis of the accused claims of the patents-in-suit.
On September 21, 2012, Dr. Clifford Kraft, a technical consultant employed by counsel for Vertical, visited the offices of Interwoven's counsel, inspected the TeamSite products, and confirmed that the information provided in the Definitive Guide was correct. He further
1 By using the term "TeamSite products," Vertical includes the TeamSite tool and LiveSite which operates with the TeamSite tool.
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confirmed that TeamSite did not materially change from the time of the book to the time of his inspection. He reported all this information and the elements and functionality of the TeamSite products to Mr. Maly. (See Kraft Decl., Exhibit 4, ¶ 5; See the deposition testimony of Interwoven's other 30(b)(6) designee, Mr. Mazumdar, Exhibit 14 at pp. 14:24 – 15:7) the information discovered by Dr. Kraft appears in Mr. Maly's Declaration, Exhibit 5).
Mr. Maly reviewed all this information and the technical documents produced by Interwoven, prepared his expert report, and expressed his opinions on infringement. His Declaration (Exhibit 5) is his initial report with additional paragraphs that provide proof that even under Vertical's new proposed claim construction for arbitrary objects, the TeamSite product infringes the asserted claims of the patents in suit.
D. Infringement Using the New Claim Construction Advanced by Interwoven
Paragraphs 91 to 97 of Mr. Maly's Declaration do indeed show how Interwoven's TeamSite, LiveSite and related products still infringe the asserted claims of the patents-in-suit even if the Court changes its claim construction in response to Interwoven's urging. Mr. Maly provides four examples of such infringement, but many, many more are possible. First, Mr. Maly explains that there are seven types of arbitrary objects based on all possible combinations of form, content and function. Then, using the infringing TeamSite product, Mr. Maly shows that it is possible to generate TeamSite buttons (which belong to the TeamSite class known as Components) that have different arbitrary object types. He shows that TeamSite allows swapping or interchanging of the buttons that are different types of arbitrary objects by allowing their calling solely by name.
One of Mr. Maly's examples is the interchange of a button that is an arbitrary object of type 6 (form and functionality) with an arbitrary object of type 7 (form, functionality and Case3:10-cv-04645-RS Document175 Filed06/03/13 Page12 of 31
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content). Mr. Maly gives further examples of interchanging other kinds of buttons, interchanging TeamSite skins, and interchanging TeamSite components that are not buttons, all of which are different types of arbitrary objects. This presentation proves that modifying the Court's claim construction of "arbitrary objects" according to Interwoven's request does not dispose of this case. Even if the Court allows such a modification (which Vertical has shown is clearly improper), a jury can still find infringement under the new construction.
E. This Court's Construction of "Arbitrary Object"
Pursuant to the Local Patent Rules of this Court, the parties carefully selected ten terms for construction and briefed their positions on the proposed definitions. On December 30, 2011, this Court issued its Claim Construction Order [Dkt. No. 83]. And, the most important term construed by the Court is "arbitrary objects" – the parties so confirmed in their briefings. The Court defined an "arbitrary object" as an:
object that can be created independently by individual preference, [that] are [sic] interchangeable and that may be, but need not be, accessed solely by name, the object being an entity that can have form, content, or functionality or any combination of form, content and functionality.
Interwoven did not ask for reconsideration of this Order or for "clarification" of the Court's construction. It did not do so at the time of the Order; and it did not do so after the Patent Office reexamined the patents-in-suit. It waited until the present summary judgment motion which the Court will more than likely decide a month before the scheduled August 12, 2013 trial.
F. Reexamination Prosecution Histories of the Patents-In-Suit
Instead of filing a motion for reconsideration or clarification after the Court's Order, what Interwoven did, seven days after this Court issued its Claim Construction Order, was to file petitions for reexamination of both the patents-in-suit. The Patent Office granted these petitions and reexamined both patents. As shown below, the reexamination prosecutions of the patents-in-
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suit mirrored the original prosecutions of the patents and simply did not provide any basis for the new construction for "arbitrary objects" proposed by Interwoven.
1. Reexamination of the '744 Patent
In the first Office Action of the reexamination for the '744 patent dated April 18, 2012 (attached as Exhibit 15), the Examiner identified claims 1-11, 18, 19, 21-33, 40, 41 and 45-53 of the '744 patent as those subject to reexamination; he confirmed the patentability of claims 6, 18, 19, 30, 32, 41, 50 and 51; and he rejected claims 1-5, 7, 9-11, 18, 21-29, 31, 33, 40, 44-49, 52 and 53. Vertical has asserted a number of claims of the '744 patent, including claims whose patentability the reexamination Examiner confirmed as a threshold matter without any further prosecution and with the broadest reasonable interpretation for the claims, consistent with the specification much broader than the claim scope assigned by this Court in the Claim Construction Order. Also, with respect to claims 22 and 44 (the claims dealing with swapping arbitrary objects of one type with arbitrary objects of another type), the Examiner concluded that a Borland prior art reference disclosed such swapping or interchangings.
Vertical (on behalf of Aubrey McAuley) filed an amendment in response to the first Office Action on May 31, 2012 (attached as Exhibit 16). It added independent claims 54 and 55 which essentially placed claims 22 and 44 in independent form. Vertical also submitted a copy of this Court's December 30, 2011 Claim Construction Order and argued that the Patent Office should apply the construction of "arbitrary objects" determined by this Court. With respect to interchangeability, Vertical argued the following:
Because, according to principles of the '744 Patent, arbitrary objects may be called by name only, arbitrary objects of any type can also be readily replaced with another arbitrary object of another type, i.e., arbitrary objects are interchangeable, or swappable, with each other, regardless of type. This understanding of arbitrary objects in independent Claims 1 and 26 is supported in the specification at, e.g., col. 3, line 58 - col. 4, line 6, col. 4, lines 39-2, and col. 6, lines 13-20. Furthermore, in a Markman Order (copy appended herewith) Case3:10-cv-04645-RS Document175 Filed06/03/13 Page14 of 31
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concerning the interpretation of an arbitrary object, U.S. District Judge Richard Seeborg held that "Arbitrary objects, therefore, must be interchangeable ..." (page 15, line 15; see also, page l7 line 25 – page 18, line 2). The swappability of arbitrary objects regardless of type is still more explicitly recited in dependent Claims 22 and 44.
In clear contrast to the interchangeability or swappability of arbitrary objects, because prior art object-oriented systems, such as Borland and Morgan utilize "classic" objects which cannot be called by name only, and require the passing of parameters and knowing what to expect in return, objects are not interchangeable or swappable with other objects of different types. Rather, Borland replaces one object type in a project with another object of the same type. Form objects, function objects, and content objects are all "swapped" (i.e., added or removed) to and from a project, but that is not the same as, e.g., swapping a form object for a content object or a function object. Morgan does not cure this deficiency of Borland, but is rather similar to Borland in that it also integrates different types of objects into a given application to provide functionality. That is, a form object or content object can be used in functionality, but again, that is not the same as swapping content object of form object for a functional object.
The emphasized phrases appear in the original.
Interwoven quoted this section as the basis for its estoppel argument in the present motion, but it highlighted portions inconsistent with those highlighted by the patentee. Interwoven also eliminated portions repeating the "regardless of type" language. A close review of the quoted section shows that Vertical emphasized interchangeability regardless of type – not interchangeability of different types. It shows that Vertical directed its arguments to two types of claims – those that included the interchangeability of different types of objects and those that generally recited interchangeability of any type. Interwoven's presentation is misleading.
After reviewing this amendment and arguments, the Patent Office issued a second, final Office Action on June 21, 2012 (attached as Exhibit 17), reminding the patentee that during reexamination "claims are given their broadest reasonable interpretation consistent with the specification and limitations in the specification are not read into the claims" (Exhibit 17, p. 6), defining "arbitrary objects" as "any combination of application logic and data desired by a Case3:10-cv-04645-RS Document175 Filed06/03/13 Page15 of 31
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developer," and concluding that the Borland reference teaches such objects (Page 8). Regarding the interchangeability or swapping of objects of different types, the Examiner insisted that Borland also teaches such a feature (Exhibit 17, p. 9).
Vertical filed another Amendment on August 21, 2012 (Exhibit 18), reintroducing claims 54 and 55 and adding claims 56 and 57, which are essentially claims 1 and 26, respectively, but with this Court's definition of "arbitrary objects" embedded in them. The result was that claims 54 and 55 did not include this Court's definition of "arbitrary objects," but they did have swapping of different types of objects, while claims 56 and 57 only had this Court's definition of "arbitrary objects" without the swapping.
Vertical made the same exact arguments quoted above for patentability of the rejected claims over the cited reference. The Examiner issued a Notice of Intent to Issue Ex Parte Reexamination Certificate in which he allowed claims 54 through 57, but maintained his rejection of the other previously rejected claims and only allowed the rejected dependent claims when their dependency changed from claims 1 or 26 to 56 or 57. The Patent Office cancelled claims 1 and 26 (Reexamination Certificate attached as Exhibit 19).
2. Reexamination of the '629 Patent
The Patent Office issued the first Office Action in the reexamination of the '629 patent on June 21, 2012. (Office Action attached as Exhibit 20) In that action, the Patent Office identified claims 1-6, 8-17, 19-26 and 28-32 as those subject to reexamination, confirmed the patentability of claims 6, 17, 21-26 and 28-32, and rejected claims 1-5, 8-16, 19 and 20 based primarily on the Borland reference. Thus, the Patent Office confirmed 13 claims, many of which Vertical asserts in this case, without any further argument or prosecution. The Office also acknowledged that independent claim 21 which had this Court's definition of arbitrary object embedded in it (from Case3:10-cv-04645-RS Document175 Filed06/03/13 Page16 of 31
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the time of the original prosecution) was patentable and that dependent claim 29 which includes the interchangeability of different types was also patentable.
On August 21, 2012, Vertical responded with an amendment (attached as Exhibit 21), submitting the December 30, 2011 Claim Construction Order, embedding this Court's definition of arbitrary objects in independent claims 1 and 13 and correcting a typographical error in claims 8, 11 and 28. Vertical also made the exact same argument (quoted above) regarding interchangeability as it did for the reexamination of the '744 patent.
In his Notice of Intent to Issue a Reexamination Certificate (attached as Exhibit 22) the Examiner allowed the rejected claims because the patentee included this Court's definition of arbitrary objects in the claims. With respect to the initially confirmed claims, he states that:
Borland teaches objects with corresponding arbitrary names including content, form and function objects. However, Borland's objects are not callable by name only. Instead, Borland's objects require the passing of parameters (see Borland at 12-12 through 12-4; 13-1 through 13-12). According, the references cited by the Request fail to anticipate or render obvious claims 1-6, 8-17, 19-26, and 28-32. (Emphasis in original.)
Thus, in this reexamination the Examiner acknowledges that he confirmed the patentability of the recited claims, as a threshold matter without further prosecution without regard to interchangeability or swappability of different types of objects. (Reexamination Certificate attached as Exhibit 23).
In summary, the reexamination prosecutions do not in any way show a disavowal of any claim scope to obtain allowance. The only dispute with respect to claim scope was whether the Patent Office should use this Court's claim construction or apply the broadest reasonable interpretation consistent with the specification. And, the Patent Office did not change its position as a result of any argument made by the patentee. Further, as shown below, the Case3:10-cv-04645-RS Document175 Filed06/03/13 Page17 of 31
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patentee's arguments in reexamination were the same as those made during the original prosecution.
G. Interwoven Cited These Same Statements in the Past but did not Seek the New Proposed Construction
On pages 19-20 of its responsive claim construction brief dated November 14, 2011, [Dkt. No. 76] Interwoven summarized the specifications and the prosecutions of the patents-in-suit and made the following arguments:
Moreover, a fundamental characteristic of 'arbitrary objects' is that arbitrary objects of different types must be 'interchangeable':
'The present invention allows different object types to be interchangeable.' '744 patent col.6 l. 13-14.
'In the method of the present invention, since all that exists within the framework is an arbitrary object, the arbitrary object can be swapped for another object that pulls the current piece content in question.' Id. at col.4 l. 2-6 (emphasis added).
'One arbitrary object can be easily replaced with another arbitrary object of another type.' Id. at col.4 l. 40-41 (emphasis added).
During the prosecution of the '629 patent, Vertical also stressed this notion that arbitrary objects must be interchangeable. Exh. 3 (Dec. 30, 2009 Amend. and Resp.) at 14. Under a heading titled 'Arbitrary Objects Called by Name Only and Are Interchangeable,' Vertical attempted to distinguish its invention over a cited reference by arguing that:
'[A]rbitrary objects . . . of any type can be readily replaced with another arbitrary object of another type, i.e., arbitrary objects are interchangeable with each other, regardless of type . . . .' Exh. 3 (Dec. 30, 2009 Amend. and Resp.) at 14.
'In clear contrast to arbitrary objects, prior art object-oriented systems, such as Leshem, utilize 'classic' objects which . . . are not interchangeable with other objects of different types . . . .' Id. at 15 (emphasis in original).
'[In Leshem] HTML codes ('form' object) is [sic] not interchangeable with a Java program ('function' object) or with a GIF image file ('content' object) without making changes in each object.' Id. at 15 (emphasis in original).
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Thus, 'arbitrary objects' must be interchangeable. Otherwise, the inability to interchange the form, function, and content objects of the Leshem prior art could not have distinguished it from Vertical's invention. See id. Vertical's proposed construction completely ignores this fundamental characteristic of 'arbitrary objects.' [Emphasis in original].
But, Interwoven did not assert interchangeability of different types – just interchangeability. It did not overreach as it does here because the language does not permit it. The specification "allows" different object types to be interchangeable; it does not mandate it. Arbitrary objects "can be replaced" with different arbitrary objects – they need not be replaced. The original prosecution of the '744 patent mentioned interchangeability regardless of type. The language in that original prosecution of the '744 patent, quoted above, is essentially the same as that of the reexamination prosecution that Interwoven relies upon here. Thus, the proposed basis for a new claim construction is contrived; it has absolutely nothing to do with reexamination; it does not add anything that the Court has not already considered.
H. Proof of Damages
Interwoven has taken the unusual step of moving for summary judgment on the issue of damages, arguing that Vertical does not have any evidence on this issue. The evidence, however, is much more than adequate to prove Vertical's damage claim. Mr. Gemini, Vertical's damage expert, in his two reports which are now incorporated into his Declaration (Exhibit 7), summarizes all the evidence on lost profits and reasonable royalty, analyzes that evidence in accordance with widely accepted methodology, and renders his opinions. (See also Vertical's Opposition to Interwoven's Motion to Exclude the Testimony of Joseph Gemini, filed concurrently with this Opposition). The Valdetaro Declaration (Exhibit 6) also provides factual support for Vertical's damage claims. Regarding Vertical's lost profit claim, Mr. Valdetaro states in ¶ 11 of his Declaration (Exhibit 6) that the products at issue here, i.e., Interwoven's TeamSite products and Vertical's SiteFlash products, provide unique functionality. They are tools that
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create very large and complex websites to customers who constantly change them. (Valdetaro Decl., Exhibit 6, ¶ 11). No one provides such functionality except the parties. (Id., ¶ 11).
Mr. Valdetaro also states that Vertical has the capacity to sell and service the SiteFlash product. (Valdetaro Decl. Exhibit 6, ¶ 12). This merely requires the hiring of more staff with an increase in customers. The fact that Vertical has not sold SiteFlash for some time does not change the competitive landscape or Vertical's abilities. Vertical sells its other products to many large corporations and non-profit entities without a problem. (Id., ¶ 12).
Interwoven trumpets the fact that Vertical has not sold its SiteFlash system since 2004, arguing that this shows the unavailability of lost profits. On the contrary, this fact is powerful circumstantial evidence in favor of lost profits. It supports the conclusion that Vertical could not make any sales after 2004 because that is when Interwoven entered the market with the infringing TeamSite products. It supports a conclusion that the market in which Interwoven and Vertical compete is essentially a two-supplier market – Vertical and the infringers. Thus, Vertical would indeed have made the sales that Interwoven made over the years.
Vertical sued Microsoft Corp. for infringement by its .NET and SharePoint products. The parties settled that litigation with Microsoft receiving a license under the patents-in-suit. The only product that could possibly be a competitor to the TeamSite and SiteFlash product of the parties is Microsoft's SharePoint. But, as Mr. Valdetaro points out in his Declaration, that product does not have the functionality and does not compete with the parties' products. (See also the deposition transcript of Mr. Rajib Sengupta, Exhibit 10 at p. 134:1-19).
Under 35 U.S.C. § 284, "pon finding for the claimant, the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty . . . ." One important element of Vertical's proofs of a reasonable royalty is an Case3:10-cv-04645-RS Document175 Filed06/03/13 Page20 of 31
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Agreement dated September 8, 2004 between Vertical and a company called Basix1, Inc. ("Basix1"). (9-8-04 Agreement attached as Exhibit 24). This Agreement, despite Interwoven's protestations, is an arms-length transaction that occurred at the same time that Interwoven's infringement began, the time of the hypothetical negotiation under Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F.Supp. 1116, (S.D. N.Y. 1970). (See Gemini Decl., Exhibit 7).
Interwoven attacks the Basix1 Agreement, arguing that Vertical has not received any payments under the agreement and suggesting it was preferential. Whether Vertical received any compensation after entering into the agreement does not in any way diminish the fact that a willing licensor (Vertical) and a willing licensee (Basix1) entered into such an agreement at the time the infringement began. Further, the agreement could not be anything less than an arms-length agreement because the President of Basix1 was a Director of a subsidiary of Vertical, a publicly traded company. Agreements with such individuals are held to a higher standard and cannot be preferential (Valdetaro Decl., Exhibit 6, ¶ 14).
The licensed products under the Basix1 Agreement are "forums and calendar applications of SiteFlash," the Vertical product covered by the patents-in-suit. And, the royalty rate is 10%. What happened later does not diminish these facts. The parties negotiated the license fully expecting that Basix1 would obtain funding and that it would introduce the Enterprise Knowledge Gateway (EKG) product that it intended to market.
Interwoven asserts that Vertical has not made any attempt to apportion the damages to that part of the TeamSite and LiveSite products that uses the patented technology. But, the whole of these products uses the patented technology; and Interwoven uses the patented features to sell the TeamSite product and related components. Copies of the Autonomy website show just that. Vertical has attached those as Exhibit 25; and the Declaration of Mr. Valdetaro identifies Case3:10-cv-04645-RS Document175 Filed06/03/13 Page21 of 31
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the language on this Exhibit which promotes the patented features. (Valdetaro Decl., Exhibit 6, ¶ 10). If anything, Vertical is entitled to application of the entire market value rule to obtain damages for convoyed sales associated with the TeamSite product.
As noted above, Vertical relies on the Declaration of Mr. Gemini (Exhibit 7), its damages expert. But, even without that Declaration, Vertical can, at the very least, rely on the expert report and testimony of Interwoven's expert, should it choose to do so. And, Vertical also seeks a permanent injunction which Interwoven's motion does not even address. On these two additional bases alone, the Interwoven motion on the damage issue completely fails.
IV. ARGUMENT
A. The Standards for Summary Judgment
Summary judgment is appropriate only if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). Summary judgment should not be granted unless it is clear that a trial is unnecessary. Anderson v. Liberty Lobby, 477 U.S. 242, 255 (1986). All reasonable factual inferences must be resolved in favor of Vertical (see IMS Technology, Inc. v. Haas Automation, Inc., 206 F.3d 1422, 1429 (Fed. Cir. 2000)) and "any doubt as to the existence of any issue of material fact requires denial of the motion." Omega Engineering, Inc. v. Raytek Corp., 334 F.3d 1314, 1320 (Fed. Cir. 2003). Even doubts about the presence or absence of a factual issue must require denial. Howes v. Med. Components, Inc., 814 F.2d 638, 643 (Fed. Cir. 1987).
B. Standards for Patent Infringement
A determination of infringement requires a two-step analysis. See, e.g., Gentry Gallery, Inc. v. Berkline Corp., 134 F.3d 1473, 1476 (Fed. Cir. 1998). First, the Court must properly construe the claims to determine their scope and meaning. Id. Second, the claim as properly Case3:10-cv-04645-RS Document175 Filed06/03/13 Page22 of 31
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construed, must be compared to the accused device or process. Id. "Literal infringement requires that every limitation of the patent claim be found in the accused device." Gen. Mills, Inc. v. Hunt-Wesson, Inc., 103 F.3d. 978, 981 (Fed. Cir. 1997). Determination of infringement, whether literal or under the doctrine of equivalents, is a question of fact. Bai v. L & L Wings, Inc., 160 F.3d 1350, 1353 (Fed. Cir. 1998).
C. The Meaning of "Arbitrary Objects" Does Not Require "Clarification"
In construing the terms "form," "content" and functionality," this Court reviewed the doctrine of prosecution disclaimer in its Claim Construction Order. That analysis is very instructive with respect to the present dispute regarding interchangeability:
The doctrine of prosecution disclaimer restricts the interpretation of claims in order to exclude any interpretations that have been expressly disavowed by the patentee during prosecution. Omega Eng'g, Inc., 334 F.3d at 1324 (adopting the doctrine as a 'fundamental precept' in claim construction). Importantly, the doctrine should not be applied 'where the alleged avowal of claim scope is ambiguous . . . [and fails] to show reasonable clarity and deliberateness.' Id. at 1324-25 (citing N. Telecom Ltd. v. Samsung Elec. Co., 215 F.3d 1281, 1293-95 (Fed. Cir. 2000)). When a patentee disclaims prior art within a patent prosecution, such a disclaimer is, therefore, only controlling for purposes of claim construction if its scope is clear and precise. Pall Corp. v. PTI Techs, Inc., 259 F.3d 1383, 1393-94 (Fed. Cir. 2001) (determining that the scope of disclaimer over prior art was too ambiguous to affect claim construction), vacated on other grounds, 535 U.S. 1109 (2002). Here, the patentee indeed makes numerous references to the separation of form, functionality, and content within the patent prosecution. In doing so, the patentee distinguishes its patent from prior art: During the prosecution for the '744 patent, Vertical asserted that its technology was different from that of the Johnson patent because 'the Johnson catalog class includes both form and content.' (Pl's. Resp. Claim Construction Brief at 7). Vertical further argued that '[o]ne such advantage [of its invention] is that when content, form, and functionality are genuinely separated in the generation of a software application, changes in one do not affect the other.' (Pl's. Resp. Claim Construction Brief at 8).
The prosecution history of the '629 patent contains similar language. In describing the claimed patent, Vertical explains that 'the arbitrary objects are used in generating content, defining form, and executing functionality.' (Pl's. Resp. Claim Construction Brief at 8). Vertical also instructs that the Leshem prior art is distinct from its invention because 'Leshem fails to teach or suggest arbitrary objects Case3:10-cv-04645-RS Document175 Filed06/03/13 Page23 of 31
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comprising separate content, form, and function objects that can be independently modified or changed.' (Pl's. Resp. Claim Construction Brief at 9).
As evidenced throughout the prosecution history, Interwoven is correct in asserting that Vertical repeatedly underscores the invention's ability to separate form, content, and functionality. Nowhere in the prosecution history, however, does Vertical suggest that such separation is necessary for purposes of its patents. There is no indication that form, content, and functionality must be distinct, rather, the components may be distinct. What distinguishes this patent from prior art is not the absolute separation of form, content, and functionality, but the user's ability to separate out either one, two, or all three of these components; prior art only permitted a user to separate out one or two at a time. This reading of the prosecution history is consistent with the remainder of the intrinsic record. The patent language emphasizes that the significance of the invention is the flexibility of being able to separate out the three components, not the necessity of so doing under every circumstance.
Interwoven's inference derived from the specification and prosecution history, that Vertical's patent requires the complete separation of form, content, and functionality is unfounded and cannot overcome the plain meaning of these terms. N. Telecom Ltd., 215 F.3d at 1295 ('[I]nference cannot overcome an ordinary meaning of a claim term.'); see Johnson Worldwide Assocs., Inc. v. Zebco Corp., 175 F.3d 985, 990-91 (Fed. Cir. 1999). Accordingly, form, content, and functionality will each be defined by its ordinary meaning as understood by a person skilled in the art. [Emphasis in original].
With respect to interchangeability, the patentee did indeed make numerous references to the interchangeability of different types of objects, but nowhere in the presentation does the patentee suggest that swapping of different types of objects is necessary for its patents. Interwove, thus, cannot show any clear disavowal.
D. Interwoven's Argument Here Does not Greatly Depart from its Arguments During Claim Construction
Interwoven seeks to circumvent this Court's local rules, including Civil Local Rule 7-9(b)(2), by interjecting its new definition of arbitrary objects, less than three months before trial. It did not seek reconsideration of this Court's claim construction order in a timely manner, either immediately after the order or immediately after the reexaminations. As shown above, it has not Case3:10-cv-04645-RS Document175 Filed06/03/13 Page24 of 31
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even departed from the presentation it made during claim construction briefing. This Court has routinely denied such attempts to "clarify" the claim construction.
In Semiconductor Energy Laboratory Co., Ltd. v. Chi Mei Optoelectronics Corp., No. C 04-04675 MHP, 2006 U.S. Dist. LEXIS 52597 at *2-3 (N.D. Ca. July 28, 2006), the Court, in denying a motion for clarification, held that:
The court agrees with plaintiff that defendants' motion does not depart greatly from the arguments already advanced through claim construction briefing and argument and can be denied on that basis alone.
In Seiko Epson Corp. v. Coretronic Corp., No. C 06-06946 MHP, 2009 U.S. Dist. LEXIS 44064 at *3-4 (N.D. Ca. May 26, 2009), the Court denied a defendant's request for leave to file a motion for reconsideration of the claim construction order, holding that:
There are multiple reasons why leave will not be granted. First, this is not the 'emergence of new material facts . . . occurring after the time of [the] order,' per Civil Local Rule 7-9(b)(2). The supposedly erroneous language at issue is found in Coretronic's own patent application. The application was filed in 2001; Coretronic has had possession of it for the better part of a decade. Even if material, the purported error in claim 5 cannot be said to have emerged after the claim construction order issued. For similar reasons, subparagraph (b)(l) of the local rule does not apply. Under that provision, the party requesting leave must show that 'in the exercise of reasonable diligence' it did not know the fact that the time of the interlocutory order.
Interwoven has less of a basis than the movants in the motions outlined above; and for the reasons stated above, Vertical respectfully requests that the Court deny the motion to "clarify."
E. Interwoven's TeamSite Products Infringe The Asserted Claims Even Under the New Construction Proposed by Interwoven
As explained in Mr. Maly's Declaration, Paragraphs 91 to 97, Exhibit 5, there are seven possible and different types of arbitrary objects, namely, type 1 (content only), type 2 (form only), type 3 (functionality only), type 4 (content and form), type 5 (content and functionality), type 6 (form and functionality), and type 7 (content, form and functionality). The specifications of the patents-in-suit support those definitions. For example, col. 3, lns. 14-19 of the '744 patent Case3:10-cv-04645-RS Document175 Filed06/03/13 Page25 of 31
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specification states that "[t]he present invention provides a system and method for using a hierarchical, arbitrary object framework for generating software applications. The method separates content, form, and functionality of the software application so that each can be accessed or modified independently." The specification continues in col. 3, lns. 58-61, stating that 'ecause the object pointers are not tied in any way to the functionality of the object, an object of one type can be easily replaced with another object of another type."
Interwoven's TeamSite allows the user to create what Interwoven calls "components." Interwoven also supplies a library of canned components. The library contains a component called a "basic button." Mr. Maly shows that it is possible, using Interwoven's instructions, to create a "basic button" that is an arbitrary object of type 6 (form and functionality). This arbitrary object does not have content; and Mr. Maly calls this "button #1." Mr. Maly goes on to show that one can create a second "basic button" that is an arbitrary object of type 7 (form, functionality and content). He calls this second arbitrary object "button #2." He then shows that the TeamSite product allows either arbitrary object to be called solely by name, and that "button #1" can be interchanged with "button #2" simply by calling it a different name.
The above example, and Mr. Maly's other examples, clearly shows the interchange of arbitrary objects of different types. Interwoven's argument that they do not have arbitrary objects because, according to them, arbitrary objects have to be interchangeable with other arbitrary objects of a different type simply fails because they clearly have arbitrary objects (buttons of type 6) that are interchangeable with arbitrary objects of a different type (buttons of type 7) as well as numerous other examples. Also, the name or label that Interwoven uses in association with a certain object or certain groups of objects does not determine the "type" of an object. Therefore, since a fact finder could determine that Interwoven's TeamSite product allows Case3:10-cv-04645-RS Document175 Filed06/03/13 Page26 of 31
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arbitrary objects of different types to be interchangeable, as well as callable solely by name, Interwoven's proposed modification to this Court's construction for "arbitrary objects" is not dispositive and does not change the outcome. Under either construction, a jury can find infringement; and thus under either construction a question of fact remains for the jury.
F. Vertical Has Provided Overwhelming Proof of Lost Profits and Reasonable Royalty Damages
Interwoven argues that Vertical is not entitled to damages as a matter of law. Vertical's damages expert, Mr. Gemini, has used widely accepted methodology to calculate damages based on lost profits or a reasonable royalty, namely the Panduit test, (Panduit Corp. v. Stalin Bros. Fibre Works, Inc., 575 F.2d 1152 (6th Cir. 1978)) and Georgia-Pacific factors, (Georgia Pacific Corp. v. United States Plywood Corp., 318 F.Supp. 1116 (S.D. N.Y. (1970)) respectively. Unsurprisingly, Interwoven disagrees with Mr. Gemini's conclusions, even though his methodology is reliable and admissible and grounded in the facts in evidence.2 However, Interwoven's disagreement does not warrant summary judgment on damages.
Even without all the evidence supporting Vertical's claims and even without its expert's testimony, Vertical may use Interwoven's expert to prove compensatory damages. It may also rely on its claim to a permanent injunction against Interwoven.
G. Vertical Can Prove its Damage Claim Even Without its Expert
35 U.S.C. § 284 provides the statutory floor for damages for infringement: a court "shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty. . . ." Therefore, Interwoven cannot preclude Vertical from recovering
2 Interwoven has filed a Motion to Exclude the Testimony of Mr. Gemini [Dkt. No. 168-3], including similar arguments regarding damages as those presented in its motion for summary judgment. As such, Vertical incorporates its Response to Vertical’s Motion to Exclude the Testimony of Mr. Gemini herein, filed concurrently with this Opposition.
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any damages even if Vertical's damages approach fails. Vertical is entitled, at a minimum, to a reasonable royalty. Even if the Court were to exclude Vertical's damages expert, Vertical would still be entitled to reasonable royalties under § 284. See Dow Chem. Co. v. Mee Indus., Inc., 341 F.3d 1370, 1381-82 (Fed. Cir. 2003) (finding that the district court erred in determining that the patentee could not prove damages without expert testimony, instructing the court to "consider the so-called Georgia-Pacific factors in detail, and award such reasonably royalties as the record evidence will support").
In fact, Interwoven's expert calculated the reasonable royalty to which Vertical would be entitled. Therefore, Vertical could at least recover the amount calculated by Interwoven's expert. But, Vertical would not even be limited to this amount if the Court precludes Mr. Gemini's testimony. Vertical can prove its damages through cross-examination of Interwoven's damages expert. In Versata Software, for example, the district court precluded the patentee's damages expert from testifying. Versata Software, Inc. v. SAP America, Inc., 2013 U.S. App. LEXIS 8838, at *9 (Fed. Cir. May 1, 2013). Through cross-examination of the defendant's expert, the patent owner proffered evidence that it was entitled to $170 million in damages as opposed to the $2 million calculated by defendant's expert. Id. at *30. Although the jury ultimately awarded $140 million, the Federal Circuit affirmed the award as supported by substantial evidence, namely the defendant's expert's testimony. Id. at *33. Vertical could do the same here.
H. The Evidence Supports Damages Based on Vertical's Lost Profits
Interwoven avers that Vertical is not entitled to lost profits as a matter of law. The Panduit test, endorsed by the Court of Appeals for the Federal Circuit in Rite-Hite Corp. v. Kelley Co., Inc., 56 F.3d 1538, 1544 (Fed. Cir. 1995) (en banc) requires proof of: (1) the demand for the patented product, (2) the absence of acceptable non-infringing alternative, (3) the manufacturing and marketing capacity to exploit the demand, and (4) the amount of profit the Case3:10-cv-04645-RS Document175 Filed06/03/13 Page28 of 31
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patentee would have made. Rite-Hite, 56 F.3d at 1545. Once a patentee satisfies the Panduit test, the burden "shifts to the infringer to show the inference is unreasonable for some or all of the lost sales." Id. Curiously, Interwoven does not address the Panduit test in its summary judgment motion. However, Vertical can prove it is entitled to lost profits under the Panduit test, as provided in Mr. Gemini's Declaration (Exhibit 7).
I. Vertical is Statutorily Entitled to a Reasonable Royalty, at a Minimum
Interwoven also argues that it is entitled to summary judgment on damages because Mr. Gemini's reasonable royalty analysis is flawed. In essence, Interwoven's novel argument is that, if the court excludes Mr. Gemini's testimony, Vertical is not entitled to damages in the form of a reasonable royalty as a matter of law. This proposition is fatally flawed because Vertical is statutorily entitled to a reasonable royalty, at a minimum. 35 U.S.C. § 284; see also Dow Chem. Co., 341 F.3d at 1381-82.
Interwoven argues that Mr. Gemini uses an improper royalty base under LaserDynamics, Inc. v. Quanta Comp., Inc., 694 F.3d 51, 67-68 (Fed. Cir. 2012), because Mr. Gemini has not identified the smallest salable patent practicing unit and has thus failed to apportion the damages to that part of the TeamSite products and LiveSite products that use the patented technology. But, the whole of Interwoven's TeamSite and LiveSite products use the patented technology, and Mr. Gemini has cited to advertising materials that support this conclusion. (See Gemini Decl., Exhibit 7, ¶¶ 28-33; Valdetaro Decl., Exhibit 6, ¶¶ 10-11). Thus, contrary to Interwoven's arguments, Mr. Gemini has identified the "smallest salable practicing unit." Therefore, Mr. Gemini was not required to apportion damages.
Vertical used a comparable license agreement in its analysis. Comparable license agreements are those that are "clearly linked to the economic demand for the claimed technology'" and that "provide relevant information about the value of the license to the patent-
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in-suit." Calouri v. One World Techs., Inc., 2012 WL 630346, at *5 (C.D. Cal. Feb. 27, 2012). "[A] perfectly comparable agreement is rarely available." Synthes USA, LLC v. Spinal Kinetics, Inc., 2011 U.S. Dist. LEXIS 93093, at *29 (N.D. Cal. Aug. 19, 2011)(finding that the comparability of an agreement goes to the weight of the evidence and not to admissibility.).
Interwoven's argument that Vertical is not entitled to a reasonable royalty because the Basix1 Agreement is not comparable is without merit. The Basix1 Agreement is clearly comparable because, as Mr. Gemini has provided in his report, it involved an arms-length license to technology of the patents-in-suit. In addition, the Basix1 Agreement is dated September 8, 2004, the time Interwoven's infringement began. Rite-Hite, 56 F.3d at 1554 ("The hypothetical negotiation requires the court to envision the terms of a licensing agreement reached as the result of a supposed meeting between the patentee and the infringer at the time infringement began.").
V. CONCLUSION
In view of the foregoing, Vertical respectfully requests that the Court deny Interwoven's motion in its entirety.
Respectfully submitted, /s/ Vasilios D. Dossas
MARK V. ISOLA (SBN 154614)
misola@rehonroberts.com
REHON &ROBERTS, APC
830 The Alameda
San Jose, CA 95126
Telephone: (408) 494-0900
Facsimile: (408) 494-0909
VASILIOS D. DOSSAS (Pro Hac Vice)
dossas@nshn.com
NIRO, HALLER &NIRO
181 West Madison, Suite 4600
Chicago, IL 60602-4515
Telephone: (312) 236-0733
Facsimile: (312) 236-3137
Attorneys for Vertical Computer Systems, Inc.
Case3:10-cv-04645-RS Document175 Filed06/03/13 Page30 of 31
VERTICAL'S OPPOSITION TO INTERWOVEN'S MOTION FOR SUMMARY JUDGMENT
CASE NO. 3:10-CV-04645-RS
CERTIFICATE OF SERVICE
The undersigned hereby certifies that on June 3, 2013 the foregoing
Vertical Computer Systems, Inc.'s Opposition to Interwoven Inc.'s Motion for Summary Judgment
was filed with the Clerk of Court using the CM/ECF system, which will then send a notification of such filing to the following counsel of record.
BIJAL V. VAKIL (Cal. Bar No. 192878)
bvakil@whitecase.com
NOAH A. BRUMFIELD (Cal. Bar No. 203653)
nbrumfield@whitecase.com
JENNIFER P. GOSSAIN (Cal. Bar No. 254174)
jgossain@whitecase.com
THOMAS C. FLYNN (Cal. Bar. No. 257945)
tflynn@whitecase.com
WHITE &CASE LLP
3000 El Camino Real
5 Palo Alto Square, 9th Floor
Palo Alto, CA 94306
Telephone: (650) 213-0300
Facsimile: (650) 213-8158
Jack O. Lever jlever@whitecase.com WHITE &CASE LLP 701 Thirteenth Street, NW Washington, DC 20005-3807
Telephone: (202) 626-3600
Facsimile: (202) 639 9355
Edward G. Poplawski (Cal. Bar No. 113590) epoplawski@wsgr.com Olivia M. Kim (Cal. Bar No. 22832) okim@wsgr.com WILSON SONSINI GOODRICH & ROSATI
650 Page Mill Road Palo Alto, CA 94304-1050 Telephone: (650) 493-9300 Facsimile: (650) 493-6811
Attorneys for Plaintiff, Interwoven, Inc.
I certify that all parties in this case are represented by counsel who are CM/ECF participants.
/s/ Vasilios D. Dossas
Attorneys for Vertical Computer Systems, Inc.
NIRO, HALLER & NIRO
Case3:10-cv-04645-RS Document175 Filed06/03/13 Page31 of 31
Courtesy of Vertical 17 Raging Bull #369267:
Patent # 09/888,329 Method and system for providing a framework for processing markup language documents
Transaction History
Date Transaction Description
05-31-2013 Reasons for Allowance
08-08-2012 Date Forwarded to Examiner
08-06-2012 Request for Continued Examination (RCE)
08-08-2012 Disposal for a RCE / CPA / R129
08-06-2012 Request for Extension of Time - Granted
08-06-2012 Workflow - Request for RCE - Begin
07-24-2012 Email Notification
07-24-2012 Mail Applicant Initiated Interview Summary
07-18-2012 Interview Summary- Applicant Initiated
03-05-2012 Electronic Review
03-05-2012 Email Notification
03-05-2012 Mail Final Rejection (PTOL - 326)
02-27-2012 Final Rejection
12-20-2011 Date Forwarded to Examiner
12-09-2011 Response after Non-Final Action
12-09-2011 Request for Extension of Time - Granted
08-01-2011 Case Docketed to Examiner in GAU
06-09-2011 Electronic Review
06-09-2011 Email Notification
06-09-2011 Mail Non-Final Rejection
06-06-2011 Non-Final Rejection
03-31-2010 Date Forwarded to Examiner
03-26-2010 Request for Continued Examination (RCE)
03-31-2010 Disposal for a RCE / CPA / R129
03-26-2010 Request for Extension of Time - Granted
03-26-2010 Workflow - Request for RCE - Begin
09-28-2009 Electronic Review
09-28-2009 Email Notification
09-28-2009 Mail Final Rejection (PTOL - 326)
09-24-2009 Final Rejection
09-14-2009 Date Forwarded to Examiner
07-17-2009 Response after Non-Final Action
07-17-2009 Request for Extension of Time - Granted
03-17-2009 Mail Non-Final Rejection
03-16-2009 Non-Final Rejection
01-29-2009 Information Disclosure Statement considered
01-29-2009 Information Disclosure Statement (IDS) Filed
01-29-2009 Electronic Information Disclosure Statement
01-30-2009 Date Forwarded to Examiner
01-30-2009 Date Forwarded to Examiner
01-26-2009 Request for Continued Examination (RCE)
01-30-2009 Disposal for a RCE / CPA / R129
01-26-2009 Workflow - Request for RCE - Begin
10-24-2008 Change in Power of Attorney (May Include Associate POA)
10-22-2008 Correspondence Address Change
10-10-2008 Mail-Petition Decision - Granted
10-10-2008 Petition Decision - Granted
10-10-2008 Correspondence Address Change
07-28-2008 Petition Entered
07-24-2008 Mail Final Rejection (PTOL - 326)
07-21-2008 Final Rejection
05-19-2008 Date Forwarded to Examiner
03-20-2008 Response after Non-Final Action
03-20-2008 Request for Extension of Time - Granted
01-14-2008 Change in Power of Attorney (May Include Associate POA)
01-11-2008 Correspondence Address Change
12-31-2007 Change in Power of Attorney (May Include Associate POA)
09-20-2007 Mail Non-Final Rejection
09-17-2007 Non-Final Rejection
07-15-2007 Date Forwarded to Examiner
07-15-2007 Date Forwarded to Examiner
07-11-2007 Request for Continued Examination (RCE)
07-15-2007 Disposal for a RCE / CPA / R129
07-11-2007 Request for Extension of Time - Granted
07-11-2007 Workflow - Request for RCE - Begin
01-11-2007 Mail Final Rejection (PTOL - 326)
01-08-2007 Final Rejection
10-24-2006 Date Forwarded to Examiner
10-13-2006 Response after Non-Final Action
10-13-2006 Request for Extension of Time - Granted
04-18-2006 Mail Non-Final Rejection
04-17-2006 Non-Final Rejection
03-17-2006 Date Forwarded to Examiner
03-17-2006 Date Forwarded to Examiner
03-09-2006 Request for Continued Examination (RCE)
03-17-2006 Disposal for a RCE / CPA / R129
03-09-2006 Request for Extension of Time - Granted
03-09-2006 Workflow - Request for RCE - Begin
09-09-2005 Mail Final Rejection (PTOL - 326)
09-06-2005 Final Rejection
06-29-2005 Date Forwarded to Examiner
06-20-2005 Response after Non-Final Action
06-20-2005 Request for Extension of Time - Granted
12-17-2004 Mail Non-Final Rejection
12-13-2004 Non-Final Rejection
07-08-2004 Correspondence Address Change
07-01-2004 Case Docketed to Examiner in GAU
05-26-2004 IFW TSS Processing by Tech Center Complete
11-06-2003 Mail-Record Petition Decision of Granted Related to Attorney
03-12-2002 Petition Entered
10-20-2003 Case Docketed to Examiner in GAU
02-06-2003 Correspondence Address Change
10-02-2002 Case Docketed to Examiner in GAU
09-06-2002 Transfer Inquiry to GAU
08-26-2002 Application Dispatched from OIPE
08-20-2002 Application Is Now Complete
07-16-2002 Payment of additional filing fee/Preexam
07-16-2002 A statement by one or more inventors satisfying the requirement under 35 USC 115, Oath of the Applic
03-13-2002 Correspondence Address Change
03-14-2002 Change in Power of Attorney (May Include Associate POA)
02-11-2002 Notice Mailed--Application Incomplete--Filing Date Assigned
08-20-2001 Correspondence Address Change
07-03-2001 IFW Scan & PACR Auto Security Review
06-22-2001 Initial Exam Team nn
I donot know, but there is some very big inside buying going on. I would assume something will be released soon.
Dr. Frost bought 2,000,000 shares on 4/8/2013.
http://www.marketwatch.com/investing/stock/NIMU/insideractions
It looks like CT orders are not that unusual:
http://marketbrief.com/filing-ctorder
New Pacer entry today in SF....
Interwoven has brought in two new attorneys. One appears to be a "big gun" and the other looks to be his assistant. This thing is looking more and more likely to be going to trial, and it sure doesn't seem to be about "peanuts" as Mirror has predicted!
Edward G Poplawski:
http://www.aipla.org/learningcenter/library/papers/SM/2010-Spring-Meeting-Speaker-Materials/Documents/ED_2010_SM_Poplawski_BIO.pdf
Olivia M Kim:
http://www.pli.edu/Content/Faculty/Olivia_M_Kim/_/N-4oZ1z1329s?ID=PE611063
yes I think so
lot of inside buying here on 3/20 and 3/21
http://www.marketwatch.com/investing/stock/LTS/insideractions
Courtesy of JonnyQwan Raging bull #361713:
New PACER entries from SF....
SAN FRANCISCO DIVISION
INTERWOVEN, INC.,
Plaintiff,
vs.
VERTICAL COMPUTER SYSTEMS, INC.,
Defendant.
Civil Case No. 3:10-cv-04645 RS
JOINT STIPULATED REQUST FOR
EXTENSION OF TIME AND TO SET
HEARING DATE FOR PRETRIAL
MOTIONS AND [PROPOSED] ORDER
HON. RICHARD SEEBORG
Case3:10-cv-04645-RS Document160 Filed03/21/13 Page1 of 5
WHITE & CASE LLP
ATTORNEYS AT LAW
PALOALTO 145780 (2K)
2 JOINT STIPULATED REQUEST
FOR EXTENSION AND TO SET HEARING DATE
CASE NO. 3:10-CV-04645 RS
Pursuant to Local Rules 6-2 and 7-12 of the Civil Local Rules for the Northern District of
California, Plaintiff, Interwoven, Inc., (“Interwovenâ€) and Defendant, Vertical Computer
Systems, Inc. (“Verticalâ€), by and through their respective counsel, jointly request the Court
extend the deadline for pretrial motion hearings, and set a hearing date on or after June 17, 2013
for pretrial motions.
In its May 25, 2012 Case Management Scheduling Order (Dkt. No. 117), the Court set a
deadline of May 23, 2013 for hearing pretrial motions. Interwoven intends to file a Motion for
Summary Judgment addressing a number of issues.1
The Court is unavailable from May 13, 2013 through May 17, 2013, as well as on May 23,
2013. These dates on which the Court is unavailable include the last two civil law and motion
calendar days on which pretrial motions could be heard. The parties further understand that the
Court is not available for a pretrial motion hearing on May 21, 2013, a date the parties had
initially proposed to the Court through the Court’s clerk.
Counsel for Interwoven will be in trial in Washington, DC from May 31, 2013 through
June 7, 2013 and expects to be in Washington, DC for this trial from May 22, 2013 through June
8, 2013. Counsel for Vertical has a prior travel engagement from May 3, 2013 to May 13, 2013,
and is unavailable for a pretrial motion hearing in California during that time period.
By prior agreements of the parties, and due the production of additional revenue data by
Interwoven on February 27, 2013, as well as an unexpected illness that led to the cancellation of
his deposition scheduled for February 27, 2013, the parties agreed that Vertical’s damages expert,
Joseph Gemini would serve a supplemental report on March 20, 2013, and will be deposed on March 26, 2013. Counsel for Interwoven expects that the Gemini supplemental report and
deposition will be essential to Interwoven’s planned motions practice. Counsel for Interwoven and counsel for Vertical have conferred, and both are available for a pretrial motion hearing on or after June 17, 2013. The Declaration of Bijal V. Vakil that
accompanies this stipulated request and provides the information required by Civil L.R. 6-2.
1 Vertical does not currently intend to file a Motion for Summary Judgment.
Case3:10-cv-04645-RS Document160 Filed03/21/13 Page2 of 5
WHITE & CASE LLP
ATTORNEYS AT LAW
PALOALTO 145780 (2K)
3 JOINT STIPULATED REQUEST
FOR EXTENSION AND TO SET HEARING DATE
CASE NO. 3:10-CV-04645 RS
The parties therefore stipulate and jointly request that the Court extend the deadline for
pretrial motion hearings and schedule a pretrial motion hearing on or after June 17, 2013.
Pursuant to this stipulated request, briefing will proceed according to Civil L.R. 7-2, and
Civil L.R. 7-3 with motions filed and served 35 days before the hearing date.
Dated: March 21, 2013
Respectfully submitted,
WHITE & CASE LLP
By: /s/ Bijal V. Vakil
BIJAL V. VAKIL
ATTORNEYS FOR PLAINTIFF AND COUNTERCLAIMDEFENDANT
INTERWOVEN, INC.
Dated: March 21, 2013
NIRO, HALLER & NIRO, LTD.
By: /s/ Vasilios D. Dossas
VASILIOS D. DOSSAS
ATTORNEYS FOR DEFENDANT AND
COUNTERCLAIMANT VERTICAL COMPUTER
SYSTEMS, INC.
ATTESTATION CLAUSE
I, Bijal V. Vakil, hereby attest in accordance with Local Rule 5-1(i)(3) that Vasilios D.
Dossas, counsel for Vertical Computer Systems, Inc., has provided his concurrence with the
electronic filing of the foregoing document entitled:
JOINT STIPULATED REQUST FOR EXTENSION OF TIME AND TO SET HEARING
DATE FOR PRETRIAL MOTIONS
Dated: March 21, 2013 By: /s/ Bijal V. Vakil
BIJAL V. VAKIL
Case3:10-cv-04645-RS Document160 Filed03/21/13 Page3 of 5
WHITE & CASE LLP
ATTORNEYS AT LAW
PALOALTO 145780 (2K)
4 JOINT STIPULATED REQUEST
FOR EXTENSION AND TO SET HEARING DATE
CASE NO. 3:10-CV-04645 RS
ORDER
The Court finds that the Stipulated Request for an Order Changing Time is well taken and should
be GRANTED. Pretrial motions in this case will be set for hearing on June [______], 2013 at
[__________].
PURSUANT TO THE STIPULATION, IT IS SO ORDERED.
Dated: _________________________ ______________________________
Honorable Richard Seeborg
United States District Court Judge
Case3:10-cv-04645-RS Document160 Filed03/21/13 Page4 of 5
WHITE & CASE LLP
ATTORNEYS AT LAW
PALOALTO 145780 (2K)
5 CERTIFICATE OF SERVICE
CASE NO. 3:10-CV-4645-RS
CERTIFICATE OF SERVICE
I, Veronica Farias, hereby certify that I am a resident of the State of California and over
the age of eighteen years, and not a party to the within action; my business address is 3000 El
Camino Real, 5 Palo Alto Sq., 9th Floor, Palo Alto, California, 94306. On March 21, 2013, I
caused to be served the within documents:
• JOINT STIPULATED REQUST FOR EXTENSION OF TIME AND TO
SET HEARING DATE FOR PRETRIAL MOTIONS AND [PROPOSED]
ORDER
• DECLARATION OF BIJAL V. VAKIL IN SUPPORT OF JOINT
STIPULATED REQUST FOR EXTENSION OF TIME AND TO SET
HEARING DATE FOR PRETRIAL MOTIONS
 (BY ELECTRONIC TRANSMISSION) by electronically mailing a true and correct
copy through White & Case LLP’s electronic mail system at the e-mail address(es) set
forth below.
COUNSEL FOR VERTICAL COMPUTER SYSTEMS, INC.
Mark V. Isola
misola@rehonroberts.com
Rehon & Roberts
830 The Alameda
San Jose, CA 95126
Telephone: (408) 494-0900
Facsimile: (408) 949-0909
Vasilios D. Dossas [Pro Hac Vice]
dossas@nshn.com
Niro, Haller & Niro, Ltd.
181 West Madison, Suite 4600
Chicago, IL 60602-4515
Telephone: (312) 236-0733
Facsimile: (312) 236-3137
I declare that I am employed in the office of a member of the bar of this court at whose
direction the service was made.
Executed on March 21, 2013, at Palo Alto, California.
Veronica Farias
He said 2 to 3 months at the end of January (for the 4K). I don't see a reason for concern at this time
Quote from Dr. Frost Mad money Dated 1/28/2013
"we also have the 4k score which you remember is more accurate than the and that we're going to be marketing within the next two to three months in the united states. okay."
http://video.cnbc.com/gallery/?video=3000144067&play=1
Frost Nevada Invest. Trust Purchased 28,700 shares on 3/18/2013
OPKO Point-of-Care Technology Demonstrated on Mobile Device with Cloud Connectivity to Diagnose and Track Disease in AfricaFont
8:16 AM ET 3/1/13 | BusinessWire
OPKO Health, Inc. (NYSE: OPK) announced that a study published online in Clinical Chemistry, and to be included in the April 2013 print issue, describes the application of OPKO's point-of-care system to mobile diagnostics, a major advance towards providing people in resource poor settings with laboratory-quality diagnostic services and directly integrating results with cloud-based patient records.
In collaboration with OPKO, Samuel Sia, associate Professor of Biomedical Engineering at Columbia Engineering and cofounder of Claros Diagnostics (now OPKO Diagnostics), has demonstrated that their lab-on-a-chip technology can be used not only to check a patient's infectious disease status anywhere in the world with just a finger prick, but also synchronize the results automatically and instantaneously with central health-care records. The device was field-tested in Rwanda by a collaborative team from Professor Sia's lab and ICAP at Columbia's Mailman School of Public Health.
According to Professor Sia, "We've built a handheld mobile device that can perform laboratory-quality testing in minutes on a finger stick drop of whole blood, and automatically synchronize the test results with patient health records across the globe using both cell phone and satellite networks." The core function of assay operation and real-time synchronization of diagnostic results with patient records in the cloud have all been incorporated onto a handheld mobile device and all powered by a battery.
Working with OPKO, ICAP, and the Ministry of Health, a local hospital, and two health clinics in Rwanda, Professor Sia and his team assessed the device's ability to perform HIV testing and then synchronized results in real time with the patients' electronic health records. They successfully tested serum, plasma, and whole blood samples, all of which were collected in Rwanda. Their research was funded by a $2-million Saving Lives at Birth transition grant (United States Agency for International Development, the Bill & Melinda Gates Foundation, Government of Norway, Grand Challenges Canada, and the World Bank).
"This work not only demonstrates that the OPKO point-of-care technology could be implemented anywhere in the world," said Phillip Frost, M.D., Chairman and CEO of OPKO Health, "it also provides a glimpse into the potential of mobile health by integrating seamlessly and in real time with patient medical records."
Clinical Chemistry has also published an editorial reviewing this work by George Whitesides, Professor of Chemistry at Harvard University, the most cited author in the fields of chemistry and in microfluidics. According to the editorial, entitled "A glimpse into the Future of Diagnostics" the work "represents on brick in what will surely be the foundation of a revolution that will fundamentally change the technical and business structure of diagnostics."
Another 25,000 on 2/19/2013
Another 57,500 shares purchased on 2/15/2013
Thanks I didn't see that.
This is on the same path as
IVAX
TEVA
Whitman Education and
Continue Care
Have you looked at LTS
Dr. Frost bought another 45,000 shares on 2/12/2013
all of those would be great for this stock.
I think BEAM had a good quarter so it could be some bleed over from that
Dr. Frost purchased another 37,500 shares on 2/7/2013
Dr. Frost purchased another 30,000 shares on 2/6/2013
More info on sale 2/1/2013:
Mr. Adam E. Logal is Treasurer, CAO & Vice President-Finance at OPKO Health, Inc.
Mr. Logal was previously employed as Finance Director, Secretary, Treasurer & CAO by eXegenics, Inc. and Chief Financial & Accounting Officer by Nabi Biopharmaceuticals.
http://www.marketwatch.com/investing/stock/OPK/insiders?pid=42572918
CORRECTION post # 1047 was a sell not a buy.
Sorry for the confusion.
Frost has not altered his position since 1/31/2031 (date of last buy)
As far as I can see Dr. Frost has not made any recent purchases.