In this patent infringement action, Apple moved to exclude Masimo’s damage theory on lost profits for failure to disclose during discovery. As explained by the district court, Masimo presented its lost profits theory based on the equation: “Lost profits = Apple Watch units sold x Masimo’s per-unit profit.” Masimo claimed that the equation breaks down and is supported as follows:
- Apple Watch units sold from Q4 2018 to Q1 2023 (i.e., from the first sale of an Apple Watch to present), including Series 4-7
- Masimo’s sensor module price of $100
- Masimo’s gross profit margin (overall as a company) of 65% (or, alternatively, subtracting the cost to build each sensor module from the $100 price)
The district court analyzed whether each of these “building blocks” were adequately disclosed by Masimo.
With respect to the first building block, sold units of Apple Watches, the district court determined “that Plaintiffs did not disclose during fact or expert discovery (1) the subset of Apple Watch models and sales units on which they now intend to rely at trial; or (2) an explanation of why this subset of units properly informs lost profits.” Masimo’s reliance on Apple’s disclosure of total watches sold was insufficient because Massimo was not contending that all watches were part of the lost profits theory. Continue reading