Vertical Computer Systems Inc (fka VCSY)

[lbman]

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.”) 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.”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.”) 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.”); 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)”). 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.”) 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.”). 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 unit”—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].”) (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.”
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.”).
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 (“EKG”);
• 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.”)
(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 Declaration”) 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.”
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. …”
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.”
Paragraph 14: “In September 204 [sic], a company named Basix1, Inc.
(“Basix1”) entered into an agreement with Vertical. Basix1
obtained a non-exclusive license for SiteFlash and the patents-insuit
which SiteFlash practices. …”
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.”); 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).”).
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)
[e-mail]
BIJAL V. VAKIL (Cal. Bar No. 192878)
[e-mail]
JENNIFER P. GOSSAIN (Cal. Bar No. 254174)
[e-mail]
THOMAS C. FLYNN (Cal. Bar No. 257945)
[e-mail]
WHITE & CASE LLP
3000 El Camino Real
5 Palo Alto Square, 9th Floor
Palo Alto, CA 94306
Telephone: [phone]
Facsimile: 650.213.8158
EDWARD G. POPLAWSKI (Cal. Bar No. 113590)
[e-mail]
OLIVIA M. KIM (Cal. Bar No. 228382)
[e-mail]
WILSON SONSINI GOODRICH & ROSATI
633 West Fifth Street, 15th Floor
Los Angeles, CA 90071
Telephone: [phone]
Facsimile: 866.974.7329
ATTORNEYS FOR PLAINTIFF AND COUNTERCLAIMDEFENDANT
INTERWOVEN, INC.


I say again $200,000,000 LARGE!!!!!!