United States District Court, S.D. New York
ORDER DENYING MOTION TO EXCLUDE EXPERT
K HELLERSTEIN, UNITED STATES DISTRICT JUDGE.
in this patent infringement action moves to exclude certain
testimony of Defendant's expert, Dr. Jeffrey Stec. For
the reasons that follow, Plaintiffs motion is denied.
Michael Kaufman is the holder of U.S. Patent No. 7, 885, 981
(the '"981 Patent"), which concerns an
invention for interacting with relational databases. Kaufman
brought the present action against Defendant Microsoft
Corporation ("Defendant" or "Microsoft")
for direct infringement, inducing infringement, contributory
infringement, and willful infringement in connection with the
finding for the claimant [in a patent infringement action]
the court shall award the claimant damages adequate to
compensate for the infringement, but in no event less than a
reasonable royalty for the use made of the invention by the
infringer, together with interest and costs as fixed by the
court." 35 U.S.C. § 284. Here, both parties have
retained experts to address this "reasonable
royalty" calculation. In response to the opinions of
Plaintiff s damages expert, Microsoft submitted the Rebuttal
Expert Report of Jeffery A. Stec, Ph.D. (the "Stec
Report"). Dr. Stec opines, among other things, that
Microsoft would have made a lump sum royalty payment to
Kaufman of at most $230, 000 if the parties had engaged in a
hypothetical negotiation of a license (the "Hypothetical
License") at the time the '981 Patent
issued. Dr. Stec's opinion relies in part on a
settlement agreement (the "ADI Settlement") in a
lawsuit (the "ADI Litigation") filed against
Microsoft by Advanced Dynamic Interfaces, LLC
("ADI"). In the ADI Litigation, ADI alleged that
Microsoft infringed patents for technology that Dr. Stec
finds is similar to the technology at issue in the present
case. Under the ADI Settlement, Microsoft paid $230, 000 to
be released from liability and to gain a license (the
"ADI License") to use ADI intellectual property.
Stec specifically considers the ADI Settlement in connection
with Factors 2 and 15 of the 15-factor analysis announced in
Georgia-Pacific Corp. v. U.S. Plywood Corp., 318
F.Supp. 1116 (S.D.N.Y. 1970), mod. and aff'd,
446 F.2d 295 (2d Cir. 1971). Georgia-Pacific
provides a list of factors that may be considered in
determining the reasonable royalty for a patent license. 318
F.Supp. 1116 at 1120. Factor 2 is "[t]he rates paid by
the licensee for the use of other patents comparable to the
patent in suit," and Factor 15 is "[t]he amount
that a licensor (such as the patentee) and a licensee (such
as the infringer) would have agreed upon (at the time the
infringement began) if both had been reasonably and
voluntarily trying to reach an agreement."
Georgia-Pacific, 318 F.Supp. at 1120.
moves to exclude Dr. Stec's testimony to the extent it
relies on the ADI Settlement. Plaintiff argues that Dr. Stec
failed to take into account the particular posture of the ADI
Litigation and how that might have affected the ADI
License's comparability to the Hypothetical License.
Thus, Plaintiff says, it is inappropriate for Dr. Stec to use
the value of the ADI License as essentially a cap on the
value of the Hypothetical License.
Dr. Stec explicitly considered why technological similarities
and certain "economic and business considerations"
make the ADI License and Hypothetical License comparable, he
does not comment directly on how the posture of the ADI
Litigation affected the settlement amount or how that might
affect comparability to the Hypothetical License.
See Stec Rpt. at 47-49. Courts have excluded expert
testimony that made similar omissions. See M2M Solutions
LLC v. Enfora, Inc., 167 F.Supp.3d 665, 677-78 (D. Del.
2016) (excluding expert's testimony because, "most
importantly," the analysis "virtually ignores the
fact that. . . licenses resulted from litigation settlements,
providing a drastically different backdrop than the
hypothetical negotiation involving two willing
licensors"); Spring Comms. Co. L.P. v. Comcast IP
Holdings, LLC, No. 12-cv-1013, 2015 WL 456154, at *2 (D.
Del. Jan. 30, 2015) (excluding expert's testimony where
expert "provides no information regarding the nature of
the litigation or the context of the settlements, and thus
there is no reason to believe that the settlements in
question are comparable").
the experts' opinions in those cases suffered from
numerous other infirmities, such as experts' disregard of
more comparable licenses or failure to assess technological
comparability. Here, Dr. Stec sufficiently explained why
"the most reliable license in this record arose out of
litigation" and is a permissible point of comparison.
ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860 (Fed.
Cir. 2010). Plaintiffs challenges to the comparability of the
ADI License and Hypothetical Licensed can be raised more
appropriately on cross-examination. See Open Text S.A. v.
Box, Inc., No. 13-cv-04910, 2015 WL 393858, at *5-6
(N.D. Cal. Jan. 29, 2015) (declining to exclude expert's
testimony about licenses arising from settlement agreements
where opponent "point[ed] to no evidence suggesting that
the royalties associated with the settlement agreements were
depressed because they were entered into in the context of
litigation," "point[ed] to no other licenses that
it claims are more comparable," and would be "free
to grill [expert] at trial about these issues").
foregoing reasons, Defendant's motion to exclude expert
testimony is denied. The Clerk is directed to terminate the
open motion (ECF No. 118).