U.S. Judge Nixes GPNE’s Damages Expert Witness in Apple Patent Suit

Case:

GPNE Corp. v. Apple, Inc., No.: 12–CV–02885–LHK, U.S. District Court for the Northern District of California; August 6, 2014

Background:

GPNE Corp. sued Apple, Inc. alleging its iPads and iPhones infringe three patents GPNE holds on data transmission. GPNE filed similar claims against other device makers and retailers, but the cases were separated.

In April, Judge Lucy H. Koh for the U.S. District Court for the Northern District of California granted Apple’s motion for summary judgment as to indirect infringement. However, it denied its motion related to direct infringement. The judge then granted Apple’s motion to exclude GPNE’s expert, Michael Dansky.

Damages Expert Witness:

GPNE subsequently submitted a new expert report from Dansky in which he analyzed reasonable royalty damages using the Georgia-Pacific factors (Georgia–Pacific Corp. v. U.S. Plywood Corp., 318 F.Supp. 1116, 1120 [S.D.N.Y.1970]). The factors are used in the “hypothetical negotiation” approach. A reasonable royalty is based on what the parties would agree to, had they successfully negotiated an agreement before infringement began. The new methodology arrived at the same royalty rate as the previously excluded methodology.

Apple moved to exclude Dansky’s analysis of Apple’s convoyed sales and his alternative calculation based on a smallest salable patent-practicing unit other than the baseband processor.

Admissibility of Damages Expert Witness:

Judge Koh denied as moot the motion regarding convoyed sales because of a prior stipulation allowing Dansky’s testimony about convoyed sales as relevant to Georgia Pacific factor No. 6, including his opinion that the follow on sales of other Apple products results in a higher royalty rate for Apple as compared to other GPNE licensees.

The court declined to exclude Dansky’s presentation of the amount Apple charges for its iPad 2 models and his $86 average net incremental profit figure. Apple has had ample prior opportunity but failed to object to this aspect of Dansky’s testimony, the judge said.

“By waiting to move to exclude this testimony until after two rounds of Daubert motions, the pretrial conference, and rulings on all but one motion in limine, Apple has waived its argument,” the judge held.

Even if considered, Apple’s argument is unmeritorious, the judge said. While Apple argues that Dansky failed to isolate the value of the alleged invention as compared to unclaimed technologies, the judge said Dansky’s new methodology is the same as that used by Apple’s expert. The experts simply disagree on the number of standard-essential patent families to use as the denominator for the apportionment calculation.

Therefore, the judge denied Apple’s motion to preclude Dansky from testifying about the amount Apple charges for the iPad 2 WiFi only model compared to the iPad2 WiFi and cellular model.

However, the judge found three independent bases to exclude Dansky’s second methodology for calculating a reasonable royalty. First, she said it directly contravenes the court’s holding in its previous Daubert order that the baseband processor is the smallest salable patent-practicing unit. That ruling was made as a matter of law, given that no facts underlying the smallest salable patent-practicing unit inquiry were in dispute. Second, Dansky’s new identification of a smallest salable patent-practicing unit relies on technical testimony outside the scope of his expertise, the judge said. Finally, his theory unjustifiably assumes that any component only present in a cellular-capable iPad aids in practicing the claims of the patents–in–suit. The judge said Dansky did not clearly identify which components of the accused devices constitute his proposed smallest salable patent-practicing unit.