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Carucel Investments, L.P. v. Novatel Wireless, Inc.

United States District Court, S.D. California

April 3, 2017

CARUCEL INVESTMENTS, L.P., a Delaware limited partnership, Plaintiff,
v.
NOVATEL WIRELESS, INC., a Delaware corporation; VERIZON COMMUNICATIONS, INC., a Delaware corporation; and CELLCO PARTNERSHIP d/b/a/VERIZON WIRELESS, a Delaware general partnership, Defendants.

         ORDER: (1) GRANTING IN PART AND DENYING IN PART PLAINTIFF'S DAUBERT MOTIONS; [DOC. NOS. 163, 210.] (2) DENYING WITHOUT PREJUDICE DEFENDANTS' DAUBERT MOTIONS; [DOC. NOS. 154, 207.] (3) DENYING WITHOUT PREJUDICE PLAINTIFF'S MOTIONS IN LIMINE; AND [DOC. NOS. 232, 233, 234, 235.] (4) GRANTING IN PART AND DENYING PART DEFENDANTS' MOTIONS IN LIMINE [DOC. NOS. 238, 239, 240, 241, 242, 287.]

          MARILYN L. HUFF, District Judge

         On January 27 and February 24, 2017, the parties each filed Daubert motion to exclude portions of the testimony and opinions of the opposing party's damages expert. (Doc. Nos. 154, 163, 207, 210.) On March 20, 2017, the parties filed their respective oppositions to the Daubert motions. (Doc. Nos. 248, 249, 256, 257.) On March 27, 2017, the parties filed their respective replies. (Doc. Nos. 267, 274, 279, 280.)

         On March 13, 2017, the parties each filed their respective motions in limine. (Doc. Nos. 232, 233, 234, 235, 238, 239, 240, 241, 242.) On March 20, 2017, the parties filed their respective oppositions to the motions in limine. (Doc. Nos. 252, 253, 254, 255, 258, 259, 260, 261, 262.) On March 27, 2017, the parties filed their respective replies. (Doc. Nos. 268, 269, 270, 271, 272, 281, 282, 283, 284.)

         The Court held a hearing on the matter on April 3, 2017. Robert F. Ruyak, Robert M. Harkins, Jr., and Michael K. Lindsey appeared for Plaintiff. Amardeep L. Thakur, David M. Grable, Joshua L. Sohn, and Viola Trebicka appeared for Defendants. For the reasons below, the Court: (1) grants in part and denies in part without prejudice Plaintiff's Daubert motions; (2) denies without prejudice Defendants' Daubert motions; (3) denies without prejudice Plaintiff's motions in limine; and grants in part and denies in part without prejudice Defendants' motions in limine.

         Background

         On May 27, 2015, Plaintiff Carucel Investments, L.P. filed a complaint for patent infringement in the United States District Court for the Southern District of Florida against Defendants Novatel Wireless, Inc., AT&T Mobility LLC, Verizon Communications, Inc., and TigerDirect, Inc., alleging infringement of U.S. Patent No. 7, 221, 904, U.S. Patent No. 7, 848, 701, U.S. Patent No. 7, 979, 023, U.S. Patent No. 8, 463, 177, U.S. Patent No. 8, 718, 543, and U.S. Patent No. 8, 849, 191.[1] (Doc. No. 1, Compl.) Specifically, Plaintiff alleges that Defendants' mobile broadband hotspot devices, their MiFi devices, infringe the patents-in-suit. (Id. ¶¶ 28-29.)

         On September 15, 2015, Carucel dismissed its claims against Defendant TigerDirect, Inc. with prejudice. (Doc. No. 11.) On December 16, 2015, Carucel filed a first amended complaint alleging infringement of the same six patents and adding as a new Defendant Cellco Partnership d/b/a Verizon Wireless. (Doc. No. 58.)

         On January 15, 2016, the action was transferred to the Southern District of California. (Doc. Nos. 69-70.) On September 19, 2016, the Court issued a claim construction order construing the disputed terms in the patents-in-suit. (Doc. No. 131.) On December 9, 2016, the Court dismissed Defendant AT&T with prejudice. (Doc. No. 139.) On March 2, 2017, the Court denied Defendants' motion for summary judgment. (Doc. No. 226.)

         The patents-in-suit are all entitled “Mobile Communication System with Moving Base Station” and share an essentially identical specification. (See Doc. No. 1, Compl. Exs. A-C, E-F.) The invention disclosed in the patents-in-suit “relates to cellular telephone systems in which a mobile unit communicates by wireless communication to a base station connection to the wire telephone network and more particularly to cellular telephone systems adapted for use with fast-moving mobile units.” '904 Patent at 1:16-19. The specification details the problems that prior art telecommunications systems have with fast-moving mobile units, particularly the problem of dealing with transfers of fast-moving mobile units between stationary cell sites as the mobile units move through the cellular network. See id. at 1:22-2:61. The specification provides the following summary of the invention:

These and other problems of the prior art are overcome in accordance with this invention by means of a moving base station which is interposed between a moving mobile telephone unit and a fixed base station. In accordance with this invention, a movable base station moves with the traffic at a rate of speed which is comparable to the speed of the traffic and communicates with a moving mobile telephone unit via standard mobile radio transmission. The movable base station further communicates by radio signals with a plurality of fixed antennas spaced along the path of travel of the mobile base station. The several fixed antennas are connected to a telephone wire line network via a telephone gateway office in a standard fashion. In accordance with this invention, the fixed radio ports are synchronized and the interface between the moving base station and the fixed radio ports is a time division multiplexed (TDM)-direct-sequence, spread-spectrum CDMA.

Id. at 3:18-34. Figure 1 of the '904 patent displays an embodiment of the claimed system:

         As an example of the claimed invention, Claim 22 of the '904 Patent provides:

         (IMAGE OMITTED)

An apparatus adapted to move in accordance with a movement of a mobile unit moving relative to a plurality of fixed radio ports, the apparatus comprising:
a receiver adapted to receive a plurality of signals, each of the plurality of signals transmitted from each of the plurality of fixed radio ports within a frequency band having a lower limit greater than 300 megahertz;
a transmitter adapted to transmit, within the frequency band, a resultant signal to the mobile unit in accordance with at least one of the plurality of signals; and
a processor adapted to maximize an amount of transferred information to the mobile unit by evaluating a quality of each of the plurality of signals transmitted from the plurality of fixed radio ports.

Id. at 12:65-13:11. Currently, Plaintiff asserts that Defendants' accused products (the MiFi 5510L, MiFi 6620, MiFi 4510L, MiFi 4620, and MiFi 2200) literally infringe claims 22 and 30 of the '904 patent; claims 10 and 15 of the '701 patent; claims 11 and 23 of the '023 patent; and claim 10 of the '543 patent. (Doc. No. 198; Doc. No. 277 at 5-6.) By the present motions, the parties move to exclude certain opinions, arguments, testimony and evidence from the trial.

         Discussion

         I. Daubert Motions

         A. Legal Standards for Daubert Motions

         A district court's decision to admit expert testimony under Daubert in a patent case is governed by the law of the regional circuit. Summit 6, LLC v. Samsung Elecs. Co., 802 F.3d 1283, 1294 (Fed. Cir. 2015). When considering expert testimony offered pursuant to Rule 702, the trial court acts as a “gatekeeper” by “making a preliminary determination of whether the expert's testimony is reliable.” Elsayed Mukhtar v. Cal. State Univ., Hayward, 299 F.3d 1053, 1063 (9th Cir. 2002); see Kumho Tire Co. v. Carmichael, 526 U.S. 137, 150 (1999); Daubert, 509 U.S. at 597. Under Rule 702 of the Federal Rules of Evidence, a court may permit opinion testimony from an expert only if “(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case.”

         The test for reliability of expert testimony is flexible and depends on the particular circumstances of the case. Alaska Rent-A-Car, Inc. v. Avis Budget Grp., Inc., 738 F.3d 960, 969 (9th Cir. 2013). “To aid courts in exercising [their] gatekeeping role, the Supreme Court has suggested a non-exclusive and flexible list of factors that a court may consider when determining the reliability of expert testimony, including: (1) whether a theory or technique can be tested; (2) whether it has been subjected to peer review and publication; (3) the known or potential error rate of the theory or technique; and (4) whether the theory or technique enjoys general acceptance within the relevant scientific community.” Messick v. Novartis Pharm. Corp., 747 F.3d 1193, 1197 (9th Cir. 2014); Estate of Barabin v. AstenJohnson, Inc., 740 F.3d 457, 463 (9th Cir. 2014) (en banc). The Ninth Circuit has stressed that this list of factors is meant to be helpful, not definitive. Alaska Rent-A-Car, 738 F.3d at 969.

         “Under Daubert, the district judge is ‘a gatekeeper, not a fact finder.' When an expert meets the threshold established by Rule 702 as explained in Daubert, the expert may testify and the jury decides how much weight to give that testimony.” Primiano v. Cook, 598 F.3d 558, 564-65 (9th Cir. 2010). “‘[T]he test under Daubert is not the correctness of the expert's conclusions but the soundness of his methodology.'” Primiano, 598 F.3d at 564. “Shaky but admissible evidence is to be attacked by cross examination, contrary evidence, and attention to the burden of proof, not exclusion.” Id. (citing Daubert, 509 U.S. at 594, 596); accord Summit 6, 802 F.3d at 1296. “Basically, the judge is supposed to screen the jury from unreliable nonsense opinions, but not exclude opinions merely because they are impeachable.” Alaska Rent-A-Car, 738 F.3d at 969. Further, the Ninth Circuit has explained that “Rule 702 should be applied with a ‘liberal thrust' favoring admission.” Messick, 747 F.3d at 1196.

         Whether to admit or exclude expert testimony lies within the trial court's discretion. Gen. Elec. Co. v. Joiner, 522 U.S. 136, 141-42 (1997); United States v. Verduzco, 373 F.3d 1022, 1032 (9th Cir. 2004) (“We . . . have stressed that the ‘trial court has broad discretion to admit or exclude expert testimony'.”). The Ninth Circuit has explained that “[a] trial court not only has broad latitude in determining whether an expert's testimony is reliable, but also in deciding how to determine the testimony's reliability.” Ellis v. Costco Wholesale Corp., 657 F.3d 970, 982 (9th Cir. 2011).

         B. Plaintiff's Daubert Motions

         In its two Daubert motions, Plaintiff moves to exclude certain opinions contained in Defendants' damages expert Dr. McDuff's rebuttal expert report and his supplemental rebuttal expert report for various reasons. (Doc. Nos. 167, 210-1.) The Court addresses each of these challenges in turn below.

         i. Apportionment

         In his expert report, Dr. McDuff applies a two-step apportionment to the relevant royalty base to determine the reasonable royalty in this case. (Doc. No. 168-1, McDuff Report at 43.) First, Dr. McDuff reduces the royalty base according to survey data regarding the use of the MiFi that occurs while the user and device are in transit - what Defendants refer to as a “relevant use apportionment.” (Id. at 21, 43, 52-55.) Second, Dr. McDuff reduced the royalty base by comparing the price of later models of the accused products to the original MiFi 2200 in order to account for the value of non-infringing features - what Defendants refer to as a “price-based apportionment.” (Id. at 43, 53.) Plaintiff argues that Dr. McDuff's apportionment opinions should be excluded. (Doc. No. 167 at 3-14.)

         a. Double Apportionment

         As an initial matter, Plaintiff argues that Dr. McDuff's analysis is inappropriate because he engages in a double apportionment. (Doc. No. 167 at 6.) In response, Defendants argue that Plaintiff's challenge to Dr. McDuff's two-step apportionment is not supported by any authority and this his two-step apportionment was proper. (Doc. No. 268 at 10.)

         The Court agrees with Defendants. Plaintiff has failed to provide the Court with any authority holding that it is improper for a damages expert to engage in a two-step apportionment. To the contrary, the Federal Circuit has sanctioned multi-step apportionments in appropriate circumstances. See, e.g., Summit 6, 802 F.3d at 1296-97 (approving the damages expert's multi-step apportionment). Accordingly, the Court declines to exclude Dr. McDuff's analysis on the basis that he utilizes a two-step apportionment.

         b. Use Apportionment

         Plaintiff argues that the Court should exclude Dr. McDuff's use apportionment because it is based on the incorrect assumption that the accused products have non-infringing uses. (Doc. No. 167 at 3-7.) Plaintiff explains that the claims at issue are apparatus claims, not method claims, and, under patent law, unlike with a method claim, a device that directly infringes an apparatus claim always infringes. (Id. at 5.) Plaintiff argues, therefore, that it was improper for Dr. McDuff to restrict the economic value of the patents-in-suit to the period in which the accused devices are used at high speeds. (Id.)

         In response, Defendants argue that Dr. McDuff does not improperly assume that the accused products only infringe when used at high speeds. (Doc. No. 288 at 7-8.) Defendants argue that Dr. McDuff properly utilizes data showing how often MiFi users actually utilize the claimed inventions technology to determine the actual economic value of the patents-in-suit. (Id. at 3-4, 8-9.)

         The Court recognizes that system and apparatus claims do not require the performance of any method steps and can be infringed by a device that is merely capable of operating in the relevant infringing mode even if it even though it may also be capable of noninfringing modes of operation. Finjan, Inc. v. Secure Computing Corp., 626 F.3d 1197, 1204 (Fed. Cir. 2010). Nevertheless, how often a user of an accused device actually uses the relevant infringing technology can be relevant to the reasonable royalty determination. The Federal Circuit has “has sanctioned the use of the Georgia-Pacific factors to frame the reasonable royalty inquiry.” Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1317 (Fed. Cir. 2011). Georgia-Pacific factor 10 considers “‘the nature of the patented invention, its character in the commercial embodiment owned and produced by the licensor, and the benefits to those who used it.'” AstraZeneca AB v. Apotex Corp., 782 F.3d 1324, 1338 (Fed. Cir. 2015). How often a user of an accused product actually utilizes the infringing technology is relevant to an analysis of how the claimed invention benefits the user, regardless of whether the claimed invention involves system/apparatus or method claims. Cf. Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1327 (Fed. Cir. 2009) (“the more frequently most inventions are used, the more valuable they generally are”).[2]

         The Court's role is not to make credibility decisions in deciding a Daubert issue. See Primiano, 598 F.3d at 564-65. The patent's benefit to the user is a recognized factor under Georgia-Pacific. As a result, the proper apportionment, if any, based on use goes to the weight of the damages expert's testimony, not its admissibility.[3] See Finjan, Inc. v. Blue Coat Sys., Inc., No. 13-CV-03999-BLF, 2015 WL 4272870, at *6 (N.D. Cal. July 14, 2015). The Ninth Circuit has explained that “[s]haky but admissible evidence is to be attacked by cross examination, contrary evidence, and attention to the burden of proof, not exclusion.” Primiano, 598 F.3d at 564; accord Summit 6, 802 F.3d at 1296. Accordingly, the Court declines to exclude Dr. McDuff's use apportionment at this time.

         c. Usage Data

         Plaintiff also challenges the usage data relied on by Dr. McDuff to perform his use apportionment. (Doc. No. 167 at 7-12.) Plaintiff argues that Dr. McDuff cannot rely on the Verizon “Use Survey” and the “American Time Use Survey” because the surveys are heavily flawed and contain incomplete and speculative data. (Id.)

         In response, Defendants argue that Dr. McDuff's reliance on these usage statistics is reasonable and reliable. (Doc. No. 288 at 11-14.) Defendants argue that any flaws contained in the surveys are matters for cross-examination, not exclusion. (Id. at 12.)

         In his expert report to perform his use apportionment, Dr. McDuff relies on data Verizon collected from users of the accused products during two 24-hour periods in two cities. (Doc. No. 168-1, McDuff Report at 21-22, Attachment D-2.) In addition, Dr. McDuff relies on an “American Time Use Survey, ” which is based on a Bureau of Labor Statistics 2015 survey of “American Time Use, ” and a Department of Transportation 2001 National Household Travel Study. (Id. at 22-23, Attachment D-3.)

         The Ninth Circuit has “long held that survey evidence should be admitted ‘as long as [it is] conducted according to accepted principles and [is] relevant.'” Fortune Dynamic, Inc. v. Victoria's Secret Stores Brand Mgmt., Inc., 618 F.3d 1025, 1036 (9th Cir. 2010).

         The Ninth Circuit has explained that:

Treatment of surveys is a two-step process. First, is the survey admissible? That is, is there a proper foundation for admissibility, and is it relevant and conducted according to accepted principles? This threshold question may be determined by the judge. Once the survey is admitted, however, follow-on issues of methodology, survey design, reliability, the experience and reputation of the expert, critique of conclusions, and the like go to the weight of the survey rather than its admissibility. These are issues for a jury or, in a bench trial, the judge.

Clicks Billiards, Inc. v. Sixshooters, Inc., 251 F.3d 1252, 1263 (9th Cir. 2001); see also Wendt v. Host Int'l, Inc., 125 F.3d 806, 814 (9th Cir. 1997) (“Challenges to survey methodology go to the weight given the survey, not its admissibility.”).

         Here, the usage data relied on by Dr. McDuff is relevant to the reasonable royalty determination in this case, specifically, as explained above, it is relevant to an analysis of at least Georgia-Pacific factor 10. See also Lucent, 580 F.3d at 1327 (explaining that usage data can, under appropriate circumstances, be relevant to the reasonable royalty determination, and that such data may come from surveys and other sources). Plaintiff raises several challenges to the methodologies contained in the surveys and the conclusions Dr. McDuff draws from the surveys. (Doc. No. 167 at 7-12.) But those challenges go to the weight to be given the surveys, not their admissibility. See Clicks Billiards, 251 F.3d at 1263; see also Wendt, 125 F.3d at 814. Thus, the surveys are admissible, and Dr. McDuff may appropriately rely on the data contained in the surveys under Federal Rule of Evidence 703 to form his damages opinions.[4] See i4i Ltd. P'ship v. Microsoft Corp., 598 F.3d 831, 856 (Fed. Cir. 2010) (holding that district court did not abuse its discretion in admitting usage survey into evidence and allowing damages expert to rely on the survey under Rule 703). Accordingly, the Court declines to exclude Dr. McDuff's reliance on the usage statistics in his expert report.[5]

         d. Price-Base Apportionment

         Plaintiff argues that Dr. McDuff's price-based apportionment should be excluded because it violates the entire market value rule. (Doc. No. 167 at 12-14.) Specifically, Plaintiff argues that this apportionment runs afoul of the entire market value rule because Dr. McDuff fails to identify or analyze the components of the accused products to determine what components are infringing and non-infringing. (Id. at 13.)

         In response, Defendants argue that Dr. McDuff's analysis does not violate the entire market value because his reasonable royalty determination is not based on the entire market value of the accused products. (Doc. No. 288 at 14.) Defendants argue that contrary to Plaintiff's assertions, the entire market value rule does not mandate a single correct methodology for performing an apportionment. (Id.)

         The Court rejects Plaintiff's arguments. The Court agrees with Defendants that Dr. McDuff's analysis does not violate the entire market value rule because his reasonable royalty analysis is not based on the entire market value of the accused products. Under the entire market value rule, a party “can rely on the end product's entire market value as the royalty base” only if the party “can prove that the patented invention drives demand for the accused end product.” Commonwealth Sci. & Indus. Research Organisation v. Cisco Sys., Inc., 809 F.3d 1295, 1302 (Fed. Cir. 2015). Here, Dr. McDuff does not attempt to rely on the end product's entire market value as the royalty base in his reasonable royalty determination. (See generally Doc. No. 168-1, McDuff Report.) Thus, his analysis does not run afoul of the entire market value rule.

         Further, the Court rejects Plaintiff's assertion that Dr. McDuff was required to conduct a component analysis of the accused products in order to perform an apportionment. The Federal Circuit has recognizes that “under th[e] apportionment principle, ‘there may be more than one reliable method for estimating a reasonable royalty.'” Commonwealth Sci., 809 F.3d at 1301. In his expert report, Dr. McDuff explains: “For non-infringing functionality, I apportion based on the ratio of the first accused MiFi device (MiFi2200) divided by the observed average sales price over time . . . This allows for removal of non-infringing functionality that has been added to the products over time, which improve the products value but do not relate to the patents-in-suit.” (Doc. No. 168-1, McDuff Report at 43.) Here, Dr. McDuff provides a reasonable explanation for his ...


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