and thus to estimate how many power door locks and mirrors were installed
in cars during that time period. (Id. at 23.) He apparently assumed that
200 series micro-motors were used in all of them. (Id.)
As already mentioned, this exercise is wholly irrelevant because
Johnson's micro-motors were never used in automobiles. And everything
that Johnson did during the damage period was done outside the United
States, so that any effect that those activities might have had on the
market for micro-motors used in automobiles is not cognizable under
United States law.
Dubin used information provided from the Toy Manufacturers of America
and Appliance Magazine in order to "estimate the number of hair
dryers, electric toothbrushes, juicers, and electric trains/cars shipped
into the United States." (Id. at 25.) Dubin also collected information on
"the percentage of small household appliance units imported into the
United States from specific countries and the percentage of total small
household appliance production, by specific country, that was exported to
the United States." (Id. at 25.) In order to determine what percentage of
Hong Kong exports containing 100 series micro-motors are sold in the
United States, Dubin assumed that all 110/120 volt products marked with
the Underwriters Laboratory stamp were exported to the United States.
However, a product's certification for export to the United States does
not make export to the United States a certainty. Many of those products
may have been shipped to other counties where the UL stamp, if noticed at
all, could be recognized as merely a certificate of quality, like a Good
Housekeeping seal of approval. Moreover, Dubin's estimation of the number
of small household appliances shipped into the United States does not
provide the Court with any reliable information concerning how many
contained Johnson micro-motors. Dubin's conclusions are suspect for these
C. Dubin's Assumptions as to Market Erosion
Dubin's report makes several unsupported assumptions as to market
erosion. First, Dubin assumed that Johnson would not have made sales in
the micro-motor market until March 1989, when it developed a
non-infringing alternative. (Dubin Rept. at 40.) However, Johnson has
been manufacturing and selling motors since the early 1960's. (Defs.Mem.
at 3.) Hair dryers, automatic door locks, and electric toothbrushes were
all in wide use before Mabuchi developed the micro-motor of the '215
patent and micro-motors were used in all of them. Although the two-piece
brushgear taught by the '215 patent apparently improved micro-motor
technology, certainly other non-infringing micro-motors were available
for purchase by the customers of Johnson and Mabuchi both before and
after that invention. Thus it is unrealistic to assume that, without
copying Mabuchi's micro-motor, Johnson could not have competed at all for
the business of small household appliance manufacturers.
It is an even farther stretch to assume that every sale Mabuchi made
would have been made by Mabuchi. The record does not even show whether
Mabuchi sold micro-motors in every country that Johnson did. For these
further reasons, Dubin's conclusions are unreliable.
D. Market Reconstruction
Mabuchi argues that Dubin's report analyzes damages that Panduit Corp.
v. Stahlin Bros. Fibre Works, 575 F.2d 1152 (6th Cir. 1978), and Grain
Processing Corp. v. American-Maize Prods. Co., 185 F.3d 1341 (Fed.Cir.
1999), direct the Court to consider. In determining the amount of damages
in a patent infringement case, the fact-finder must consider "had the
Infringer not infringed what would Patent Holder . . . have made." Aro
Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476, 507, 84 S.Ct.
1526, 12 L.Ed.2d 457 (1964) (internal quotations omitted).
In Panduit, the Sixth Circuit, in an opinion by former Federal Circuit
Chief Judge Markey, sitting by designation, identified four tests for
determining whether a lost-profits analysis is proper: (1) whether demand
existed for the patented product; (2) whether acceptable noninfringing
substitute products were available to satisfy the demand; (3) whether the
patent owner possessed the manufacturing and marketing capability to meet
the demand; and (4) whether lost profits can be reasonably calculated.
See Panduit, 575 F.2d at 1156. In this case Mabuchi has not even
attempted to satisfy the second and third of these tests. Most
importantly, Dubin did not discuss, and apparently never considered, the
commercial acceptability of non-infringing substitutes.
Further, Mabuchi points to Grain Processing as support for Dubin's
reconstruction of the micro-motor market in order to prove damages. The
Grain Processing court stated:
. . . The "but for" inquiry therefore requires a
reconstruction of the market, as it would have
developed absent the infringing product, to determine
what the patentee "would . . . have made." See Grain
Processing Corp. v. American Maize Prods. Co.,
979 F. Supp. 1233, 1236 (N.D.Ind. 1997) ("Grain
Processing VIII"). Reconstructing the market, by
definition a hypothetical enterprise, requires the
patentee to project economic results that did not
occur. To prevent the hypothetical from lapsing into
pure speculation, this court requires sound economic
proof of the nature of the market and likely outcomes
with infringement factored out of the economic
picture. See Oiness it Walgreen Co., 88 F.3d 1025,
1029-30, 39 USPQ2d 1304, 1307 (Fed.Cir. 1996); Water
Technologies Corp. v. Calco, Ltd., 850 F.2d 660, 673,
7 USPQ2d 1097, 1107-08 (Fed.Cir. 1988). Within this
framework, trial courts, with this court's approval,
consistently permit patentees to present market
reconstruction theories showing all of the ways in
which they would have been better off in the "but for
world," and accordingly to recover lost profits in a
wide variety of forms. See, e.g., King Instruments
[Corp. v. Perego], 65 F.3d [941,] at 953 (upholding
award for lost sales of patentee's unpatented goods
that compete with the infringing goods); Rite-Hite
[Corp. v. Kelly Co. Inc.], 56 F.3d [1538,] at 1550
(holding that a patentee may recover lost profits on
components that have a functional relationship with
the patented invention); Brooktree Corp. [v. Advanced
Micro Devices, Inc.], 977 F.2d [1555,] at 1580
(upholding award for price erosion due to infringer's
marketing activities); Minnesota Mining & Mfg. Co. v.
Johnson & Johnson Orthopaedics, Inc., 976 F.2d 1559,
1579, 24 USPQ2d 1321, 1337 (Fed.Cir. 1992) (upholding
award for price erosion due to infringing sales);
State Indus., [Inc. it Mor-Flo Indus., Inc.], 883 F.2d
[1573,] at 1580 (upholding award of lost profits in
proportion to patentee's market share of the relevant
market including acceptable noninfringing
substitutes); Paper Converting Mach. Co. v.
Magna-Graphics Corp., 745 F.2d 11, 22, 223 USPQ 591,
599 (Fed.Cir. 1984) (upholding award compensating the
patentee for its decreasing marginal cost of producing
the good, i.e., its increasing marginal profit, as its
volume of production would have increased); Lam,
[Inc. v. Johns-Manville Corp.], 718 F.2d [1056,] at
1065 (upholding lost profits award for future lost
sales, and for the patentee's increased promotional
expenses); BIC Leisure Products, Inc. .v Windsurfing
Int'l, Inc., 687 F. Supp. 134, 137-38, 9 USPQ2d 1152,
1154 (S.D.N Y 1988), rev'd in part on other grounds,
1 F.3d 1214, 27 USPQ2d 1671 (Fed.Cir. 1993)
(permitting recovery for future depressed prices,
i.e., "projected price erosion", and for accelerated
market reentry by the infringer). In sum, courts have
given patentees significant latitude to prove and
recover lost profits for a
wide variety of foreseeable economic effects of the
Grain Processing, 185 F.3d at 1350.
Johnson argues that Mabuchi's reliance on Panduit and Grain Processing
is misplaced because these cases require that Mabuchi's damages analysis
be based upon actual sales in the United States by Johnson's customers.
Johnson points out that in Panduit, the economic analysis was based upon
the infringer's actual sales and not upon hypothetical sales of products
containing the infringing device. Further, Johnson argues that the Grain
Processing Court recognized that speculative economic analysis must be
rejected. Grain Processing, 185 F.3d at 1350 ("To prevent the
hypothetical from lapsing into pure speculation, this court requires
sound economic proof of the nature of the market and likely outcomes with
infringement factored out of the economic picture").
This Court agrees that speculative economic analysis must be rejected.
It can be appropriate to utilize market reconstruction to prove damages,
particularly in patent cases. However, if Mabuchi wishes to reconstruct
the micro-motor market, that reconstruction must be grounded on the most
relevant and reliable data available.
Although Mabuchi argues that Johnson and its customers resisted
discovery, it is not clear why the data that Johnson and Mabuchi provided
Dubin were insufficient to permit an estimation of damages. Mabuchi fails
to point to any specific transactions in which Johnson sold micro-motors
to customers outside of the United States which were later incorporated
into products imported into the United States. Johnson provided Mabuchi
with invoices for all of its customers who purchased allegedly infringing
motors. (Weiss Reply Aff. ¶ 7.) Mabuchi obtained letters rogatory in
order to take the deposition of D. Rödgelein GmbH, Johnson's
customer in Germany, but never filed or served the letters rogatory.
(Id. at ¶ 9.)
Instead of pursuing formal discovery with Johnson's customers, Mabuchi
sent letters to the customers requesting voluntary disclosure. (Id. at
¶ 11, Ex. C.) At least one customer provided Mabuchi with copies of
the documents requested. (Id. at ¶¶ 13-14, Exs. D, E.) Although we are
cognizant of the difficulties inherent in obtaining discovery from
foreign corporations, direct evidence of how the micro-motors were used
by even a few of Johnson's customers would have been helpful to the trier
of fact in determining the damages Mabuchi suffered.
In assessing the reliability of an expert opinion, a resort to common
sense is not inappropriate. Dr. Dubin's opinion, despite its dazzling
sheen of erudition and meticulous methodology, reaches a result which any
average person could readily recognize as preposterous.
Consider these figures: The period for which Mabuchi can collect
damages extended only nine months, from July 15, 1988 to March 1989.
During those three quarters, Johnson's worldwide sales of both series 100
and series 200 micro-motors totaled less than 2 million units. (Dubin
Rept., Ex. 12.) Dr. Dubin stated that 14% of the motors sold outside the
United States were incorporated in products that were imported into the
United States. (Id. at 37.) If that is correct, less than 280,000 of
these Johnson micro-motors were used in the United States. On the sale of
these micro-motors, Johnson grossed less than $200,000. Even assuming
that but for Johnson's infringement, Mabuchi would have sold every one of
these motors, and further assuming, as Dr. Dubin did, that Mabuchi could
have sold them at prices 15% higher than the competitive market prices,
it would have made less than $230,000 in additional sales. There is no
evidence as to the profit Mabuchi would have made on those sales, but it
seems safe to assume that its profit would have been substantially less
It is hard to perceive how Johnson's sales during the damage period
injured Mabuchi in an amount greater than the sum of those potential lost
Yet, after a dauntingly complex process involving the seemingly
unnecessary construction of obviously unrealistic market models
incorporating many irrelevant factors, Dr. Dubin arrives at the startling
conclusion that Johnson's infringement entitles Mabuchi to $5.2 million
in damages plus $1.4 million in pre-judgment interest for a total of $6.6
million. Thus, for every dollar of profit that Mabuchi arguably lost
because of Johnson's legally cognizable infringement, Dr. Dubin would
award Mabuchi damages of over $50 plus interest. This would make Mabuchi
not merely "whole," but at least $5 million dollars richer than it would
have been if Johnson had neither made nor sold any infringing
micro-motors during the damage period.
The Court has not the slightest difficulty in concluding that Dr.
Dubin's opinion fails to satisfy Rule 702's requirement that it assist
the trier of fact in understanding the evidence of determining factual
issues in the case.
For the reasons stated above, Johnson's motion in limine to exclude the
testimony of Dr. Dubin is granted.