United States District Court, N.D. California, San Jose Division
ORDER GRANTING DEFENDANT'S MOTION TO EXCLUDE OPINIONS AND TESTIMONY OF KARL J. SCHULZE (RE: DKT NO. 299)
PAUL S. GREWAL, Magistrate Judge.
Karl Schulze is a damages expert. He has been designated as such in over four hundred matters, and has testified at trial or deposition over one hundred fifty times. In this case, Schulze has been tendered by Plaintiff Golden Bridge Technology Inc. for his opinion regarding the proper measure of damages adequate to compensate GBT for Defendant Apple Inc.'s infringement of claims 5, 6 or 7 of United States Patent No. 6, 075, 793.
Apple does not challenge Schulze's expertise, but rather, his methodology in calculating both the royalty base and the royalty rate that would have resulted from a hypothetical license negotiation between the parties in June 2010. Schulz opines that as compensation for Apple's right to practice the 793 patent, a patent GBT deems essential to the "3GPP" or "WCDMA" standard, Apple and GBT would have agreed to a fair, reasonable and nondiscriminatory ("FRAND") royalty of between 0.05 and 0.07% of the sales price of each and every infringing iPhone 4, 4S and 5 and iPad 2nd generation, without any cap or upper limit on total royalties owed.
Because the court agrees with Apple that Schulze's methodology as to both base and rate violate the standards of Fed.R.Evid. 702 and 703 and Daubert v. Merrell Dow Pharms, Inc.,  the court GRANTS Apple's motion. Schulze's testimony must be excluded.
The 793 patent describes "a multichannel spread-spectrum system for communicating a plurality of data-sequence signals from a plurality of data channels using parallel chip-sequence signals in which few than all of the channels include header information." The 793 patent was filed on February 6, 1998 by Donald Schilling and Joseph Garodnick, issued on June 13, 2000 and was assigned to GBT.
With the assumption that Apple infringed at least one asserted claim of the 793 patent, that the 793 patent is essential to the 3GPP standard, and that each such claim is "not invalid, " Schulze initially considered the appropriate means for measuring GBT's damages. Recognizing GBT does not manufacture any products that compete with Apple's accused products, Schulze dismissed the idea of calculating any lost GBT profits. He then embraced a theory of reasonable royalties calculated using the well-worn Georgia-Pacific factors.
With respect to royalty base, Schulze determined "the hypothetical negotiation in this case yields a reasonable royalty that would necessarily have involved a discussion of a rate to be paid per handset (terminal) unit." Schulze chose the handset as the base even though the accused High Speed Uplink Packet Access ("HUSPA") protocol of the Universal Mobile Telecommunications System Release 6 is just one of many features of the baseband processor of the accused products. Schulze noted that Apple in the business of selling handsets, not baseband processors and certainly not implementations of HUSPA. Schulze did not further apportion the royalty base to account for the non-patented features of the accused products.
Schulze then turned to calculating the royalty rate, which comprised the vast majority of his analysis. Regarding Georgia-Pacific factor 1, he observed that going back to 1996 GBT has extended multiple licenses to multiple parties, and where it has licensed the 793 patent, it did so simultaneously with all its other standard-essential patents. A few of these portfolio licenses were licensed outside the context of settling litigation; most were not.
Regarding factor 2, Schulze found none of Apple's patent license agreements "informative" for his rate calculation. Apple's licenses were dismissed either largely because they cover broad portfolios, included cross-licenses, or did not relate to the WCDMA standard.
Regarding factor 3, Schulze opined that the license would be non-exclusive and within the United States, with no restrictions on sub-territory or buyers of the final product.
Schulze dismissed factors 4 and 5, because in December 1998 GBT committed to license on FRAND terms. This meant that GBT could not exercise its right to exclude, and was contractually obligated to license the 793 patent on fair, reasonable and non-discriminatory basis.
Regarding factor 6, Schulze affirmed his royalty base as all sales of the infringing products, but disclaimed any derivative or convoyed sales.
Regarding factor 7, Schulze found "little influence" from the term of the patent because of the significant time between the issuance of the patent ...