District Court Denies Daubert Motion Based on VirnetX as Exceeding the District Court's Role as Gatekeeper

October 29, 2014

In this patent infringement action, Adobe filed a Daubert motion seeking to exclude the plaintiff's damage expert largely based on VirnetX, Inc. v. Cisco Sys., Inc., 2014 WL 4548722 (Fed. Cir. Sept. 16, 2014). As explained by the district court, "Adobe does not seriously challenge Mr. Yurkerwich's qualifications as an economist. Nor does it question the fundamental approach he has taken in arriving at an estimation of the value of the royalties lost to EveryScape as a result of the alleged infringement. The "hypothetical willing buyer-willing seller" model is a standard economic tool that has been used by economists and appraisers for decades in determining the estimated value of lost economic opportunities."

Instead, Adobe challenged that "Mr. Yurkerwich has overvalued the revenue and royalty base apportionable to Vanishing Point by considering Vanishing Point as a whole rather than segregating the incremental value added to Photoshop by the accused Clone Brush (which EveryScape claims as its proprietary invention). Adobe relies specifically on VirnetX, Inc. v. Cisco Sys., Inc., 2014 WL 4548722, at *15-18 (Fed. Cir. Sep. 16, 2014), which holds that a damages expert must attempt to apportion value specifically to the infringing features of the contested product."

In response, the plaintiff, EveryScape argued that the Clone Brush is the integral component of Vanishing Point that gives added market value to its otherwise commonplace tools and features.

The district court found that a Daubert motion was inappropriate to address this issue. "Rhetoric aside, the dispute over the admissibility of Mr. Yurkerwich's testimony is a classic illustration of what Daubert did not intend to do. As stressed in the Advisory Note to the December 1, 2000 amendment to Fed. R. Evid. 702, Daubert 'did not work a 'seachange over federal evidence law,' and 'the trial court's role as a gatekeeper is not intended to serve as a replacement for the adversary system.' The district court further explained that "[h]ere, Mr. Yurkerwich's testimony provides a useful point of departure (or in the eyes of the finder of fact, perhaps a terminus) in a calculation of damages (should liability be found). If Adobe's expert convinces the jury that Mr. Yurkerwich should have given an independent value to features of Vanishing Point other than the Clone Brush, or that he should have discounted the royalty base by a royalty rate, or used a different dates for the accrual of damages, these are simple mathematical adjustments that the jury can make (under expert guidance) without venturing into the realm of uncharted hypothesis. (In fairness to Mr. Yurkerwich, he did consider Adobe's expert's entire market valuation approach and gives his reasons for rejecting it as did Adobe's expert in rejecting Mr. Yurkerwich's method)."

Accordingly, the district court denied the motion to exclude. "In sum, I find the uncertainties raised by Mr. Yurkerwich's opinion no more daunting than those that arise in any case in which lost profits are at issue. See Herbert A. Sullivan, Inc. v. Utica Mut. Ins. Co., 439 Mass. 387, 413 (2003) ('Lost profits are notoriously difficult to prove with precision.')."

EveryScape, Inc. v. Adobe Systems, Case No. 1-10-cv-11597 (D. Mass. Oct. 20, 2014)

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.