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Emblaze Ltd. v. Apple Inc.

United States District Court, N.D. California, San Jose Division

June 25, 2014

EMBLAZE LTD., Plaintiff,
v.
APPLE INC., Defendant

Page 950

(Re: Docket Nos. 428 and 430).

For Emblaze Ltd., Plaintiff: Andrew P. Nemiroff, LEAD ATTORNEY, PRO HAC VICE, Lisa A. Ferrari, Marilyn Neiman, PRO HAC VICE, Martin Brian Pavane, Cozen O'Connor, New York, NY; Mark V. Isola, Rehon & Roberts, San Jose, CA; Martin L. Fineman, Davis Wright Tremaine LLP, San Francisco, CA; Nathan Dooley, Los Angeles, CA.

For Apple Inc., Defendant: James Joseph DeCarlo, LEAD ATTORNEY, Greenberg Traurig LLP(Sta Monica), New York, NY; Mark Fowler, LEAD ATTORNEY, Krista Anne Celentano, Robert Buergi, DLA Piper LLP (U.S.), East Palo Alto, CA; Stephen M. Ullmer, LEAD ATTORNEY, Sarah Elizabeth Barrows, Greenberg Traurig LLP, San Francisco, CA; Eduardo J Blanco, DLA Piper LLP, Palo Alto, CA; Erin Paige Gibson, Jacob Daniel Anderson, John Allcock, Robert Chen Williams, DLA Piper LLP (U.S.), San Diego, CA; Julie Pamela Bookbinder, Greenberg Traurig, LLP (NYC), New York, NY; Kenneth L. Steinthal, King & Spalding, San Francisco, CA; Michael A. Nicodema, PRO HAC VICE, Scott J Bornstein, Greenberg Traurig LLP, New York, NY; William Sloan Coats, III, Greenberg Traurig, LLP, East Palo Alto, CA.

For Microsoft Corporation, Interested Party: Eric Lance Wesenberg, LEAD ATTORNEY, Perkins Coie LLP, Palo Alto, CA.

For Akamai Technologies, Inc., Miscellaneous: David H. Judson, LEAD ATTORNEY, Law Office of David H. Judson, Dallas, TX.

For Apple Inc., Counter-claimant: James Joseph DeCarlo, LEAD ATTORNEY, Greenberg Traurig LLP(Sta Monica), New York, NY; Kenneth L. Steinthal, LEAD ATTORNEY, King & Spalding, San Francisco, CA; Scott J Bornstein, LEAD ATTORNEY, Greenberg Traurig LLP, New York, NY; Erin Paige Gibson, DLA Piper LLP (U.S.), San Diego, CA; Julie Pamela Bookbinder, Greenberg Traurig, LLP (NYC), New York, NY; Mark Fowler, Robert Buergi, DLA Piper LLP (U.S.), East Palo Alto, CA; Michael A. Nicodema, PRO HAC VICE, Greenberg Traurig LLP, Florham Park, NJ; Sarah Elizabeth Barrows, Stephen M. Ullmer, Greenberg Traurig LLP, San Francisco, CA; William Sloan Coats, III, Greenberg Traurig, LLP, East Palo Alto, CA.

For Emblaze Ltd., Counter-defendant: Lisa A. Ferrari, Marilyn Neiman, PRO HAC VICE, Martin Brian Pavane, Cozen O'Connor, New York, NY; Mark V. Isola, Rehon & Roberts, San Jose, CA; Martin L. Fineman, Davis Wright Tremaine LLP, San Francisco, CA; Nathan Dooley, Los Angeles, CA.

Page 951

ORDER RE: APPLE'S MOTIONS TO EXCLUDE EMBLAZE'S DAMAGES EXPERTS

PAUL S. GREWAL, United States Magistrate Judge.

Before the court are a pair of Daubert

Page 952

motions filed by Apple in this patent case.[1] The motions seek to exclude the opinions of Emblaze damages experts Catharine Lawton and David Teece. After considering the parties' respective arguments, in both the papers and at the hearing, the court holds that Lawton and Teese may testify at trial, subject to the restrictions laid out below.

I. BACKGROUND

A. Lawton's Damages Analysis

Lawton's report analyzed the accused Apple products using the so-called " income approach" method.[2] The income approach

is a method used to value intellectual property assets based on the present value of the future income stream generated by an asset. There are three major inputs to the income approach: (1) expected future cash flows from the asset; (2) economic life of the asset; and (3) business risk associated with the realization of the cash flow stream. The key goal is to estimate the present value of incremental profits generated by the asset over its economic life, taking into account the risk associated with generating those profits. Once the present value of the incremental profits is determined, these profits are split in some manner between the licensor and licensee, typically in the form of a royalty. (citations omitted).[3]

Using the income approach, Lawton calculated the additional gross profit margin on each of the accused products from the date Apple's http live-streaming (" HLS" ) was included. This calculation served as a " high end" starting point for the reconstruction of the hypothetical royalty rate,[4] because the accused products include non-patented features.[5]

Lawton's rate analysis then turned to the Georgia-Pacific factors.[6] Lawton concluded that factor 2 -- the rate paid for comparable patents -- supported minimum royalty rates in the range of $.10 to $3.10 per accused product unit. The other factors were either neutral (factors 1, 3-6 and 12-13) or supported an increased hypothetically negotiated royalty rate (factors 7-11).[7] Lawton concluded that the facts of this case supported a $2.00 per unit royalty for hardware and a 1% royalty for software and application revenue.[8]

Page 953

B. Teece's Expert Opinion on Digital Convergence and Network Effects

Teece was retained by Emblaze " to address three topics: the convergence between computing and communications, network effects in software, and the implications of digital convergence and network effects for ...


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