sprint communications co. v. comcast ip holdings, llc, et al., c.a. no. 12-1013-rga (d. del. jan....

8/9/2019 Sprint Communications Co. v. Comcast IP Holdings, LLC, et al., C.A. No. 12-1013-RGA (D. Del. Jan. 29, 2015), (D.

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IN THE UNITED STATES DISTRICT COURTFOR THE DISTRICT OF DEL W RE

SPRINT COMMUNICATIONS COMPANYL.P.

Plaintiff,Civil Action No. 12-1013-RGA

v.

COMCAST IP HOLDINGS, LLC, et al.,

Defendants.

MEMORANDUM ORDER

Presently before the Court is Comcast s Motion to Exclude the damages opinions of

Sprint s experts, Dr. Arthur Brody and Dr. Debra Aron. (D.I. 170). This Motion was included in

Comcast s Motion for Summary Judgment filed on October 6, 2014, but is addressed separately

here. Id.). The matter has been fully briefed (D.I. 171, 196 220), and the parties appeared for

oral argument on January 8 2015 (D.I. 239). The parties appeared for a Daubert hearing on this

specific issue on January 16, 2015. (D.I. 229). Dr. Brody testif ied at the hearing. IT IS

HEREBY ORDERED that Comcast s Motion to Exclude is GRANTED

Federal Rule of Evidence 702 sets out the requirements for expert witness testimony,

stating that:

A witness who is qualified as an expert by knowledge, skill,experience, training, or education may testify in the form of anopinion or otherwise if: (a) the expert s scientific, technical, or other

specialized knowledge will help the trier of fact to understand theevidence or to determine a fact in issue; (b) the testimony is basedon sufficient facts or data; ( c) the testimony is the product of reliableprinciples and methods; and (d) the expert has reliably applied theprinciples and methods to the facts of the case.

Fed. R. Evid. 702. The Third Circuit has explained:

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Rule 702 embodies a trilogy of restrictions on expert testimony:qualification, reliability and fit. Qualification refers to therequirement that the witness possess specialized expertise. We haveinterpreted this requirement liberally, holding that a broad range ofknowledge, skills, and training qualify an expert. Secondly, the

testimony must be reliable; it must be based on the 'methods andprocedures of science' rather than on 'subjective belief orunsupported speculation'; the expert must have ' good grounds' forhis o[ r] her belief. In sum, Daubert holds that an inquiry into thereliability of scientific evidence under Rule 702 requires adetermination as to its scientific validity. Finally, Rule 702requires that the expert testimony must fit the issues in the case. Inother words, the expert's testimony must be relevant for thepurposes of the case and must assist the trier of fact. The SupremeCourt explained in Daubert that Rule 702' s 'helpfulness' standardrequires a valid scientific connection to the pertinent inquiry as a

precondition to admissibility.

By means of a so-called Daubert hearing, the district court acts asa gatekeeper, preventing opinion testimony that does not meet therequirements of qualification, reliability and fit from reaching thejury. See Daubert ( Faced with a proffer of expert scientifictestimony, then, the trial judge must determine at the outset,pursuant to Rule 104(a) [of the Federal Rules of Evidence] whetherthe expert is proposing to testify to 1) scientific knowledge that (2)will assist the trier of fact to understand or determine a fact inissue. ).

Schneider ex rel Estate o Schneider v Fried, 320 F.3d 396, 404-05 (3d Cir. 2003) (footnote

and internal citations omitted). 1

Comcast argues that Dr. Brody's opinion should be excluded because it does not meet the

requirements of Federal Rule of Civil Procedure 26 and Federal Rule of Evidence 702, and that

Dr. Aron's opinion should be excluded because it is based on the erroneous conclusions made by

Dr. Brody in his report. (D.I. 7 at 21-24). During direct examination, Dr. Brody explained

that he analyzed Comcast's Technical Requirements Document (TRD) for the IP Multimedia

Subsystem (IMS), and provided two opinions: (1) a requirements opinion if 228); and (2) a

1 The Court of Appeals wrote under an earlier version of Rule 702, but the recent amendments to the rule were notintended to make any substantive change.

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components opinion ii 229). (D.I. 229 at 10:7-11: 10). For his requirements opinion, Dr Brody

found that 258 (7%) of the approximately 3,685 MUST requirements relate to the

functionality claimed by the '853 patent. (D.I. 172-15 at 6-7 ii 228). For his components

opinion, Dr Brody found that 7 (38.8%) of the 18 functional components in Comcast's IMS

network were implicated by the '853 patent, and that 7 (16. 7%) of the 42 enumerated functions

of the implicated components were related to the '853 patent. Id. at 8 ii 229). Thus, Dr Brody

concluded that 16.7% of the functionality of the 38.8% of the IMS system-6.5% of the system

as a whole- relate to the '853 patent. Id.). Based on these two data points, Dr. Brody

concluded that from 6.5 to 7% of Comcast's IMS network infringed the asserted claims of the

'853 patent. (D.I. 229 at 10:12-18 11:3-8).

Comcast argues that Dr Brody's report does not meet the requirements of Federal Rule of

Civil Procedure 26(a)(2)(B)(i) because his report does not provide the basis and reasons for his

opinions. (D.I. 171 at 21). Rule 26(a)(2)(B)(i) requires an expert witness to provide a report

containing: a complete statement of all opinions the witness will express and the basis and

reasons for them. Fed. R Civ. P 26. Comcast argues that Dr Brody's report does not disclose

how he determined whether a requirement or component was implicated by the '853 patent.

(D.I. 171 at 21 24). Sprint, on the other hand, argues that Dr Brody's report explains that he

analyzed Comcast's TRD, and based on his experience in the field, identified the functionalities

that he believed to be related to the '853 patent. (D.I. 196 at 22-23). Dr. Brody concluded that

6.5 to 7% of Comcast's IMS network related to the patented subject matter, but provided no basis

for how he determined which features related to the patent. This determination provides the

entire basis for Dr Brody's opinion, and thus requires at least some explanation. Without such,

Dr Brody's report does not meet the requirements set forth in Rule 26.

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Additionally, Comcast argues that Dr. Brody's apportionment methodology was not

reliable because he did not measure the value attributable to the '853 patent. (D.I. 171 at 23).

The Federal Circuit has made clear that a patentee must in every case give evidence tending to

separate or apportion the defendant's profits and the patentee's damages between the patented

feature and the unpatented features. VirnetX Inc. v Cisco Sys. Inc. 767 F.3d 1308, 1326 (Fed.

Cir. 2014) (quoting Garretson 111 U.S. at 120). Further, the patentee must show in what

particulars his improvement has added to the usefulness of the machine or contrivance. Id

(quoting Garretson 111 U.S. at 121). Comcast contends that Dr. Brody 's analysis measures the

portion of the IMS network that is made up by the entire billing functionality, rather than the

incremental improvement added by the '853 patent. (D.I. 171 at 23). The '853 patent does not

purport to cover billing functionality generally, but instead claims to increase flexibility in

billing by eliminating the cumbersome arrangement between the interexchange carrier (IXC)

and the vendor, and to create substantial efficiencies by eliminating the need to transmit billing

information back to the originating switch. (D.I. 47-1 at 5, 1 53-2:61). Dr. Brody's report does

not mention the improvements added to Comcast's IMS network by the '853 patent, and

provides no explanation for how requirements and components were found to relate to the

claimed subject matter. Therefore, Dr. Brody's analysis is not tied to the improvements

attributable to the patented invention, and his opinion is unreliable for purposes of Rule 702.

Sprint attempts to salvage Dr. Aron's opinion by claiming that she took additional steps

to determine a reasonable royalty, including applying the Georgia-Pacific factors. D .I. 196 at

24). According to the Federal Circuit, a reasonable royalty analysis requires a court to

carefully tie proof of damages to the claimed invention's footprint in the market place. VirnetX

767 F.3d at 1327 (alterations in original). Dr. Aron begins her analysis with the projected

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savings that Comcast would generate by implementing the IMS network. (D.I. 172-21 at 3 i

162). Dr Aron, however, does not address what, if any, impact the '853 patent had on generating

these savings. Dr Aron makes clear that her understanding of the '853 patent as it relates to the

IMS network is based solely on Dr. Brody's report Id. i 161 nn.282-84), and her entire analysis

is based on the two data points provided by Dr Brody. Id. at 4 5 i i 165-67). I have seen no

evidence that ties Comcast's savings to the claimed invention. 2

I think an analogy may be helpful. Let's assume there is a company that uses a local area

network computer system. t costs $1,000,000 per year to operate. The company decides to

upgrade. t gets a new local area network computer system. The new network system has

upgraded routers. The upgrades to the routers are protected by a patent. A technical expert

concludes that the new network system performs 5000 different functions. The technical expert

also concludes that the routers perform 250 different functions. (Or that the upgrades to the

routers perform 250 different functions. The point will be the same.). After the new system is in

use, the company calculates that it now only costs $800,000 per year to operate the local area

network system. What is the contribution of the routers (or the upgrades to the routers) to that

$200,000 per year that is being saved? There is insufficient information to make a reasonable

estimate. Saying that the new routers (or the upgrades to the routers) are responsible for

25 15 (or 5%) of the savings is not based on science. t is not a reasonable estimate. t is

simply a guess.

DrAron relies almost exclusively on

DrBrody's report, which fails to provide any

scientific methodology that can be relied upon for determining how the patented features add

value to the IMS network. Therefore, Dr Aron's analysis, even with the Georgia-Pacific factors,

2 Dr. Aron stated in her report that she requested documents from Comcast providing additional detail behindComcast's incremental savings from its IMS-CDV implementation, but no such information has been provided.

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does not tie proof of damages to the claimed invention's footprint. t follows that Dr. Aron's

methodology for determining a reasonable royalty is unreliable, and her opinion based on such

methodology should be excluded.

For the reasons set forth above, T S HEREBY ORDERED that Comcast's Motion to

Exclude the damages opinions of Dr. Brody and Dr. Aron is GRANTED

Entered this ir day of January, 2015.

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IN THE UNITED STATES DISTRICT COURTFOR THE DISTRICT OF DELAWARE

SPRINT COMMUNICATIONS COMPANYL.P.

Plaintiff,

V.

COMCAST IP HOLDINGS, LLC, et al.,

Defendants.

Civil Action No. 12-1013-RGA

MEMORANDUM ORDER

Before the Court is Sprint's Motion in Limine 3. (D.I. 235-1 at 237). Sprint moves to

preclude Comcast from offering into evidence, referencing, or eliciting testimony about

settlement and license agreements entered into by Comcast relating to comparable technology.

Id.). T IS HEREBY ORDERED that Sprint's Motion in Limine 3 is GRANTED

This motion implicates the second Georgia-Pacific factor, which looks at [t]he rates

paid by the licensee for the use of other patents comparable to the patent in suit. Georgia-

Pacific Corp. v. US. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970). This factor

examines whether the licenses relied on by the patentee in proving damages are sufficiently

comparable to the hypothetical license at issue. Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d

1301, 1325 (Fed. Cir. 2009). [T]here must be a basis in fact to associate the royalty rates used

in prior licenses to the particular hypothetical negotiation at issue. Uniloc USA Inc. v.

Microsoft Corp., 632 F.3d 1292, 1317 (Fed. Cir. 2011). A patentee cannot rely on license

agreements that are radically different from the hypothetical agreement under consideration.

Id. at 1316. [C]omparisons of past patent licenses to the infringement must account for the

'technological and economic differences' between them. Wordtech Sys., Inc. v. Integrated


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Network Solutions Inc. 609 F.3d 1308, 1320 (Fed. Cir. 2010). When relying on licenses to

prove a reasonable royalty, alleging a loose or vague comparability between different

technologies or licenses does not suffice. Las r Dynamics Inc. v Quanta Computer Inc. 694

F.3d 51, 79 (Fed. Cir. 2012).

Comcast's damages expert, Ms. Julie Davis, relies on four Comcast license agreements to

support her reasonable royalty analysis: (1) September 2010 covenant not to sue and settlement

agreement with Rates Technology Inc. (RTI); (2) August 2012 license agreement with Jefferson

Valley, LLC; (3) August 2013 settlement agreement with TR Labs; and (4) October 2014

settlement and license agreement with GlobeTec Trust LLC. (D.I. 236-3 at 129-35).1

Sprint

argues that there are substantial economic and technological differences between the four

licenses at issue and the hypothetical negotiations. (D.I. 235-1 at 238). Sprint points out that

none of the licenses include the patents in suit, three of the four licenses are with non-practicing

entities, and all four licenses grant rights to additional patents and include international rights.

Additionally, three of the four licenses occurred a number of years after the hypothetical

negotiation dates. Finally, three of the four licenses resulted from the settlement oflitigation,

and thus do not represent the behavior of two willing licensors, as would be the case in the

hypothetical negotiations between Comcast and Sprint.

Comcast's agreement with RTI took place in September 2010, which is around the time

of the hypothetical negotiation for the '853 patent. (D.I. 236-3 at 129). Thus, the RTI agreement

has a comparable time frame. In addition, Comcast's technical expert, Mr. Scott Bradner,

concluded that two of the licensed patents were comparable to the '853 patent because they were

1 My memory is that Comcast conceded the motion as to the GlobeTec Trust agreement at the pretrial conference onJanuary 23, 2015, but the transcript of the conference is not on the docket yet.2 Ms. Davis found that the dates for the hypothetical negotiations would be as follows: (I) '605 and 339 patents:2000; (2) '832 patent: 2005; and (3) '853 patent: October 2010. D.1. 236-3 at 124).


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related to telephone billing. Id. at 130). The agreement, however, was the result of a settlement

between Comcast and a non-practicing entity, meaning that there were likely major economic

differences between the negotiating parties. Sprint points out that Ms. Davis addresses the

economic differences not at all. D.1. 235-1 at 238). In response, Comcast points to Ms. Davis's

report and deposition as evidence that she did. Id. at 240). Review o f the cited materials (D.I.

237-6 at 37-40; D.I. 237-6 at 20-24, 108:10-114:16) does not support Comcast's response. 3

Therefore, the RTI license agreement is not shown to be sufficiently comparable to the

hypothetical negotiation.

Comcast's agreement with Jefferson Valley took place in August2012 seven

(7) years

after the hypothetical negotiation for the '832 patent. D.1. 236-3 at 130). The license agreement

included nine (9) U.S. patents along with foreign patents and patent applications, which is quite

different from the one patent that would be at issue in the hypothetical negotiation. Mr. Bradner

concluded that one o f the patents was comparable to the '832 patent because it provided similar

telephony related functionality and operational benefits. Id. at 131 ). Mr. Bradner' s vague

allegations o f comparability, however, are not sufficient, especially where the agreement

occurred seven years after the hypothetical negotiation date. Thus, the Jefferson Valley licensing

agreement is radically different from the hypothetical agreement that would have resulted from

negotiation between Comcast and Sprint.

The agreement between Comcast and TR Labs took place in August 2013 th i r teen (13)

years after the hypothetical negotiation for the '605 and '339 patents. Id. at 132). This is a

considerable temporal difference, and would have a dramatic effect on the economic positions of

3 Ms. Davis had no specific knowledge about what [RTI] is, and assumed it was a non-practicing entity. D.1.237-6 at 21, 109:4-20). She made no adjustments'' notwithstanding that Sprint and RTI are not similarorganizations. Id. at 22, 11 :23-24). Using settlement with a non-practicing entity, involving different patents,without a fuller analysis, does not provide a methodologically sound basis for comparison.

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the negotiating parties. The TR Labs agreement was the result o a litigation settlement, and was

for a fully paid-up, royalty free license. Id.). The GlobeTec license agreement took place in

October 2014---fourteen (14) years after the hypothetical negotiation for the '605 and '339

patents. (Id. at 133). The GlobeTec license was also the result o settlement. Both license

agreements occurred over a decade after the hypothetical negotiation date, and were entered into

with non-practicing entities for purposes o settlement. There is no basis in fact to use these

license agreements as comparisons for the hypothetical negotiation between Comcast and Sprint.

While Ms. Davis's report provides examples o how the four license agreements differ

from the hypothetical agreements, she does not explain how her methodology accounts for these

differences. Id. at 134-35). First, all o the agreements license a number o patents, all o

which are not in suit. Comcast, on the other hand, would only be licensing two patents, at most,

in a single hypothetical negotiation. Second, and most importantly, three out o the four licenses

resulted from litigation settlements with non-practicing entities, who most likely were in

drastically different bargaining positions than Sprint would have been in at the time o

hypothetical negotiation. Ms. Davis provides no information regarding the nature o the

litigation or the context o the settlements, and thus there is no reason to believe that the

settlements in question are comparable. 4 Therefore, the four licenses are not sufficiently

comparable to the hypothetical licenses, and, to the extent the lack o comparability could be

accounted for, Ms. Davis has not attempted to do so. Thus, all four agreements should be

excluded.

4 The Court has some knowledge o the GlobeTec litigation, s it was assigned to me. GlobeTec initiated twentyeight (28) lawsuits in this District, all o which were settled (most quite quickly) with little litigation. None o themreached a Markman hearing.

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For the reasons set forth above, IT IS HEREBY ORDERED that Sprint s Motion in

imine 3 is GRANTED

Enteredt i s ~

dayo

January, 2015.

sprint communications co. v. comcast ip holdings, llc, et al., c.a. no. 12-1013-rga (d. del. jan....

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