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Mass Engineered Design, Inc. v. Planar Systems, Inc.

United States District Court, D. Oregon

November 19, 2018


          John J. Edmonds, Stephen F. Schlather, Shea N. Palavan, and Brandon G. Moore, COLLINS, EDMONDS, SCHLATHER & TOWER, PLLC, John Mansfield, HARRIS BRICKEN, Of Attorneys for Plaintiff.

          Andrew T. Oliver, AMIN, TUROCY & WATSON, LLP, Jacob S. Gill, STOLL STOLL BERNE LOKTING & SHLACHTER, PC, Jenny W. Chen, CHEN IP LAW GROUP, 7F, N0. 1, Alley 30, Lane 358, Taiwan (R.O.C.). Of Attorneys for Defendant.


          Michael H. Simon, United States District Judge.

         Before the Court is a request for an ongoing post-verdict royalty by Plaintiff, Mass. Engineered Design, Inc. (“Mass”), and a motion to strike an expert declaration filed in support of that request filed by Defendant, Planar Systems, Inc. (“Planar”). For the reasons that follow, the Court denies Planar's motion to strike and sets the post-verdict royalty at 3.5 percent of sales of infringing products.

         A. Motion to Strike

         Planar moves to strike the expert declaration of Walter Bratic filed on September 28, 2018. Planar argues that: (1) Mr. Bratic's declaration is untimely because it contains opinions not disclosed in his expert reports produced during expert discovery or discussed at trial; (2) Mr. Bratic's opinions are unreliable and otherwise problematic under Rule 702 of the Federal Rules of Evidence and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 595 (1993); and (3) Mr. Bratic's opinions should be stricken because he failed to apportion damages as required under patent law.

         1. Timeliness

         In 2014, Mass. disclosed in its damages disclosure that it was going to request a post-judgment royalty. Mass. also stated in its trial brief filed July 2017 that it may be owed a post-verdict royalty. Planar argues that these disclosures obligated Mass. to submit with its expert opinions relating to damages sought at trial any expert opinion supporting a post-verdict royalty, and that Mass. should have presented the post-verdict royalty evidence to the jury. Planar also argues that it should have been permitted the opportunity to cross-examine Mass's expert at trial on his post-verdict royalty opinions. Planar is essentially arguing that Mass. should have had the jury determine Mass's post-verdict royalty. That, however, is not what occurred at trial and Mass. was not required to have the jury make such a determination, nor is there a Seventh Amendment right to a jury trial on post-verdict royalties. See Paice LLC v. Toyota Motor Corp., 504 F.3d 1293, 1316 (Fed. Cir. 2007) (“As such, the fact that monetary relief is at issue in this case does not, standing alone, warrant a jury trial. Accordingly, Paice's argument falls far short of demonstrating that there was any Seventh Amendment violation in the proceedings below.”).

         As the Court has already noted, post-verdict royalties can be an equitable determination made by the Court after a jury verdict, in lieu of an injunction under § 283. See, e.g., ECF 413 at 11 (quoting Paice, 504 F.3d at 1314); see also XY, LLC v. Trans Ova Genetics, 890 F.3d 1282, 1289 (Fed. Cir. 2018) (noting that the post-verdict royalty was awarded by the district court “as an equitable remedy for Trans Ova's future infringement”); Whitserve, LLC v. Comput. Packages, Inc., 694 F.3d 10, 35 (Fed. Cir. 2012) (“There are several types of relief for ongoing infringement that a court can consider: (1) it can grant an injunction; (2) it can order the parties to attempt to negotiate terms for future use of the invention; (3) it can grant an ongoing royalty; or (4) it can exercise its discretion to conclude that no forward-looking relief is appropriate in the circumstances.”). The Court declined to enter an injunction and held that Mass. was entitled to an ongoing royalty. Thus, Mass. was not required to have its expert testify regarding post-verdict royalty at trial. Indeed, it would have confused the jury had Mr. Bratic done so because the jury was not making any determination relating to a post-verdict royalty. It is an equitable remedy that Mass. is seeking from the Court.

         After the Court determined that Mass. was entitled to a post-verdict royalty, the Court requested that the parties submit briefs on the amount of a reasonable ongoing royalty. Mass. filed an expert declaration in support of its brief relating to the post-verdict royalty. This is not uncommon in issues handled by a court post-verdict, including motions for attorney's fees, which are generally accompanied by expert declarations supporting the motion from experts not disclosed during pretrial expert discovery. Additionally, in determining a post-verdict royalty rate, the Court must focus on the changed circumstances post-verdict. See XY, LLC, 890 F.3d at 1297. Planar offers no compelling argument why expert testimony regarding the Georgia-Pacific[1] factors cannot be supplemented post-trial to discuss changed circumstances. Requiring this expert disclosure during pretrial expert discovery or even at trial would contradict the Federal Circuit's requirement to consider the Georgia-Pacific factors in light of the post-verdict changed circumstances. Moreover, the Federal Circuit has expressly noted that the process of calculating the post-verdict royalty will include the court taking evidence, and there is no reason why expert evidence would not be part of this process. See, e.g., ActiveVideo Networks, Inc. v. Verizon Commc'ns, Inc., 694 F.3d 1312, 1343 (Fed. Cir. 2012) (“The district court, on remand, should determine an appropriate ongoing royalty, an inquiry that is much the same as its sunset royalty analysis. The district court may wish to consider on remand additional evidence of changes in the parties' bargaining positions and other economic circumstances that may be of value in determining an appropriate ongoing royalty.” (emphasis added)); Paice, 504 F.3d at 1315 n.15 (“This process will also, presumably, allow the parties the opportunity to present evidence regarding an appropriate royalty rate to compensate Paice and the opportunity to negotiate their own rate prior to the imposition of one by the court . . . .”).

         Planar also argues that Mass. could have supplemented its expert testimony during the four months between the jury verdict in May 2018 and the filing of Mass's opening brief relating to the ongoing royalty, to give Planar more time to counter Mr. Bratic's declaration. This argument is unpersuasive. The parties disputed whether a post-verdict ongoing royalty was appropriate in this case. The Court did not decide the issue until September 11, 2018. Mass. filed its opening brief attaching Mr. Bratic's declaration on September 28, 2018, the deadline set by the Court. It would be unreasonable to require Mass. to incur the expense of expert fees to opine on the reasonable amount of a post-verdict ongoing royalty before the issue of whether a post-verdict royalty would be allowed had been determined. If Planar wanted additional time to respond to Mr. Bratic's declaration, or wanted to depose Mr. Bratic relating to his declaration, Planar could have sought leave from the Court. The Court has been generous with the parties in allowing such discovery. Planar did not make any such request, nor did Planar file any rebuttal expert declaration of its own.

         2. Exclusion under Daubert

         Mr. Bratic's challenged opinions are submitted to the Court for its consideration in determining a post-verdict royalty. The challenged opinions are not going to a jury. “‘Daubert is meant to protect juries from being swayed by dubious scientific testimony. When the district court sits as the finder of fact, there is less need for the gatekeeper to keep the gate when the gatekeeper is keeping the gate only for himself.'” United States v. Flores, 901 F.3d 1150, 1165 (9th Cir. 2018) (quoting David E. Watson, P.C. v. United States, 668 F.3d 1008, 1015 (8th Cir. 2012) (emphasis in original); see also Deal v. Hamilton Cty. Bd. of Educ., 392 F.3d 840, 852 (6th Cir. 2004) (“The ‘gatekeeper' doctrine was designed to protect juries and is largely irrelevant in the context of a bench trial.”). “Thus, where the factfinder and the gatekeeper are the same, the court does not err in admitting the evidence subject to the ability later to exclude it or disregard it if it turns out not to meet the standard of reliability established by Rule 702.” Flores, 901 F.3d at 1165.

         The Court acknowledges that some of Mr. Bratic's statements purport to set out what the law holds, and that is improper expert testimony. The Court, however, will not go line-by-line through Mr. Bratic's declaration and strike portions of it that are inappropriate. The Court will disregard the inappropriate statements and only consider proper and reliable expert testimony.

         3. Apportionment of Damages

         Planar asserts that Mr. Bratic did not apportion damages to account for the fact that the '331 Patent only contains some unique features, while the '978 Patent contained many features but has now expired. Mass. responds by pointing out how Mr. Bratic expressly apportioned damages to account for this fact, which is why the '331 Patent royalty is 3.5 percent and the '978 Patent royalty is 5.9 percent. Moreover, when Planar questions why sales after April 2016 (when the '978 Patent expired) are not properly apportioned and accounted-for in Mr. Bratic's expert report, Mass. responds that on the next page of the report from the section quoted by Planar, Mr. Bratic specifically accounts for the post-April 2016 sales and the '331 Patent-only damages. Planar did not respond to any of Mass's arguments relating to apportionment in Planar's reply brief.

         The Court agrees with Mass. that Mr. Bratic did not use the “entire market value rule.” He states as much in his report. Further, Mr. Bratic, relying on the expert testimony of John Akin, did apportion the damages. Mr. Bratic used the relative technical values of the '978 Patent (technical value of 10) and the '331 Patent (technical value of 6) to apportion the damages and conclude that the '331 Patent is 6/10 the value of the ‘978 Patent. This resulted in the royalty rate of 3.5 percent for the '331 Patent, which is 6/10 of the value of the 5.9 percent royalty rate of the '978 Patent. Indeed, Planar's damages expert Mr. Reed noted that “Mr. Bratic uses these technical weighing factors to then apportion his determined 5.9% royalty rate for the '978 patent to the '331 patent at 6/10 resulting in a 3.5% royalty rate.” ECF 417-3 at 34 (emphasis added). Mr. Bratic's expert report does not violate any requirement to apportion damages.

         B. Post-Verdict Royalty

         Mass argues that the post-verdict ongoing royalty should be enhanced to three-times the reasonably royalty rate of 3.5 percent, or 10.5 percent, for the changed circumstance of Planar's purported willful infringement after the jury's verdict. In the alternative, Mass. argues that a reasonable interpretation of the jury's verdict is that it awarded 2.88 percent royalty for the '331 Patent, and the ongoing royalty should be 8.64 percent. Planar argues that the appropriate ongoing royalty is a small fraction of 0.5 percent for all products except triple monitors, for which a small fraction of 1.5 percent is an appropriate royalty. Planar relies primarily on the argument ...

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