As the battle over Android heads into trial, the district court appointed an expert on damages because the damages presented were complex and widely divergent. After the court-appointed expert submitted its report, Google moved to exclude portions of the expert report on patent damages.
After reviewing the standards for expert reports and the district court's gate keeping role, the district court addressed Google's motion to exclude the court-appointed expert's opinion that the value of the intellectual property in suit would have been the value of the entire Java mobile IP portfolio. As explained by the district court, the court-appointed expert calculated the reasonable royalty by beginning "with the 2006 negotiations between the parties. He then considers the relationship between the value of the IP in suit (two patents and API copyrights) and Sun's entire Java mobile edition intellectual property portfolio in 2006, which would have included licenses to many patents and copyrights in addition to the IP in suit (Kearl Rpt. ¶¶ 97-105). Before conducting an apportionment analysis, Dr. Kearl opines that, as a matter of economics, there are good reasons to not apportion and explains why the value of the IP in suit is equal to the value for the entire portfolio."
The court-appointed expert then offered three reasons for why no apportionment was appropriate. First, the parties knew that the IP at issue in the litigation would be the most relevant for Android and would have driven the negotiations. Second, if the parties did not know in 2006 what subset of the IP portfolio would be the most useful, then Google would have acquired an option to use any subset. Third, the court-appointed expert "opines that if Google was interested in writing its own operating system but decided that it needed to be written in Java and based on Java mobile-like technology, then Google would have gotten a license to Sun's entire mobile portfolio as 'insurance against litigation if it happened that Google' later infringed unintentionally."
The district court next noted that the prior court orders "held that the hypothetical license must be 'tailored to the amount and type of infringement that actually occurred' and that 'the reasonable royalty must compensate for the infringing features, but not for non-infringing ones' (Dkt. No. 230 at 8). In so holding, the order relied on the Federal Circuit decision of ResQNet, which held that '[a]t all times, the damages inquiry must concentrate on compensation for the economic harm caused by infringement of the claimed invention.' ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 869 (Fed. Cir. 2010)."
Based on this reasoning, the court then explained that the court-appointed expert's second and third explanations were inappropriate would be excluded. " Dr. Kearl's second and third explanations for equating the value of the IP in suit to the entire Java ME IP portfolio are inappropriate for the hypothetical negotiation scenario. Significantly, Dr. Kearl fails to take into account that at the end of the hypothetical negotiation, Google gets a license to the IP in suit, nothing more. Google would not have a license to the entire portfolio, an option to choose any subset of Java IP to license at a later date, nor insurance against future litigation. Nor can we presume that Google would have made good use of the licensed IP. If Google was liable for the value of the entire IP portfolio each time a single IP in that portfolio was asserted in an infringement action, then Oracle would be overcompensated."
Finally, with respect to the first explanation, the district court found that this explanation "does not run into the problems discussed above because this explanation appropriately presumes that Google would receive only a license for the alleged infringement in the hypothetical negotiation (Rpt. ¶ 100). Google has failed to show that this opinion is inappropriate as a matter of law. However, because Dr. Kearl frames his opinion as a conditional, it is unclear whether he actually opines that the IP in suit was understood in 2006 to be the most relevant to the 2006 negotiations."
Accordingly, the district court granted part of Google's motion and denied it, without prejudice, with respect to paragraph 100 of the court-appointed expert's report.
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.