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)
