Expert Survives Challenge to Methodology Where Report Contained Opinions That Plaintiff's Licenses Would Raise Prices by Excluding Competitors

November 7, 2011

Sandisk Corp. ("Sandisk") filed a patent infringement action against Kingston Technology Co., Inc. ("Kingston"). Prior to trial, Sandisk moved to exclude defendant's expert witness on damages because the expert's methodology was unreliable and because the supplemental report contained untimely opinions.

In terms of reliability, Sandisk asserted that the expert used an incorrect legal standard for defining the relevant geographic market and the expert's definition did not fit the facts of the case. The expert defined the market to include "all manufacturers, regardless of where located, with the legal right to sell flash memory products in the United States." Plaintiff asserted that this was the wrong market because the expert defined the market in terms of the location of sales instead of by the region where consumers are able and willing to purchase substitutes. The district court disagreed, finding that "[c]ontrary to plaintiff's assertions, this definition does not exclude foreign competitors who may divert products into the United States or competitors without a license from plaintiff."

Sandisk also asserted that the expert's opinions that Sandisk's worldwide royalties and its field of use are anticompetitive should be excluded because the opinions were conclusory and lacked economic analysis. The district court determined that this may be appropriate for cross-examination but was not a basis to exclude the testimony. The expert "does reach a legal conclusion when he says that plaintiff's fields of use impose a 'double-royalty' but he also says that the licenses charge twice their value. He bases the latter conclusion on the relative cost of the technology and on the form of plaintiff's past licenses."

The district court also declined to exclude the expert's opinion that Sandisk has market power and that consumer prices will increase if Sandisk excludes aggregators or raises their prices. The district court found that these were factual disputes that were not resolved on summary judgment and that it was necessary to take this evidence into consideration. "If he did not take into consideration evidence about what the cost, output or price of USB flash drives would be in a world without aggregators, then plaintiff may use this failing to challenge his conclusions at trial."

Finally, the district court addressed whether certain opinions in the supplemental report should be excluded as untimely. The supplemental report was served after defendants completed two depositions that the defense expert used to support his opinions. Plaintiff argued that the defendants should have taken the depositions earlier, prior to the initial expert report due date. Although the district court concluded that the discovery should have been completed earlier, it declined to exclude the supplemental report because Sandisk had not shown any harm from the late disclosure. "The supplemental report does not supply new evidence, arguments or theories; it identifies only witness testimony that should be otherwise available at trial. Plaintiff cannot claim to be surprised by the testimony, as plaintiff was present at the depositions. Plaintiff's expert had ample time to evaluate this testimony for its rebuttal report, and more than a month remained for additional discovery."

Accordingly, the district court denied the motion to exclude.

Sandisk Corp. v. Kingston Technology Co., Inc., Case No. 10-cv-243-bbc (W.D. Wisc. Oct. 27, 2011)

The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. We represent inventors, patent owners and technology companies in patent licensing and litigation. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.