United States District Court, E.D. Texas, Marshall Division
ALFONSO CIOFFIETA, et al. Plaintiffs,
GOOGLE, INC., Defendant
MEMORANDUM OPINION AND ORDER
PAVNE UNITED STATES MAGISTRATE JUDGE
currently allege that Google's Chrome web browser
infringes seven claims- claims 43 and 70 of U.S. Patent No.
RE 43, 500, claims 5 and 67 of U.S. Patent No. RE 43, 528,
and claims 30, 38, and 49 of U.S. Patent No. RE 43, 529, all
of which relate to computer program products and methods for
managing malware downloaded from a network. See Dkt.
180. Google moves to exclude the opinions of Plaintiffs'
damages expert, Mr. Walter Bratic, under Federal Rule of
Evidence 702 and Daubert. Dkt. 151. Google contends
that Bratic's opinions are unreliable for three reasons:
Bratic (1) multiplies a royalty rate by an unrelated royalty
base; (2) relies on un-accused ad revenue in calculating the
royalty rate; and (3) improperly apportions damages to the
allegedly-infringing feature of Google Chrome. Google's
motion is GRANTED-IN-PART to the limited extent explained
below but otherwise DENIED.
evaluating a party's challenge to an opponent's
expert witness, the Court assumes the role of gatekeeper to
ensure the reliability and relevance of the expert's
testimony. Daubert v. Merrell Dow Pharm., Inc., 509
U.S. 579, 597 (1993); Kumho Tire Co. v. Carmichael,
526 U.S. 137, 150 (1999). Rule 702 guides the inquiry,
providing that a qualified expert may testify as long as his
opinion will aid the fact finder and is reliable, i.e., the
opinion must stand on sufficient data, reliable methods, and
the facts of the case. See Daubert, 509 U.S. at 590;
Fed.R.Evid. 702(a)-(d); see also Micro Chem., Inc. v.
Lextron, Inc., 317 F.3d 1387, 1391 (Fed. Cir. 2003)
(“In 2000, Rule 702 was amended in response to
Daubert and cases applying it.”).
284 of the Patent Act provides that damages for patent
infringement must be “adequate to compensate for the
infringement, but in no event less than a reasonable royalty
for the use made of the invention by the infringer.” 35
U.S.C. § 284. “The statute contemplates that when
a patentee is unable to prove entitlement to lost profits or
an established royalty rate, it is entitled to
‘reasonable royalty' damages based upon a
hypothetical negotiation between the patentee and the
infringer when the infringement began.” Unisplay,
S.A. v. Am. Elec. Sign Co., 69 F.3d 512, 517 (Fed. Cir.
1995). While the analysis “necessarily involves an
element of approximation and uncertainty, a trier of fact
must have some factual basis for a determination of a
reasonable royalty.” Id.
parties in this case have confined their damages dispute to a
reasonable royalty that the parties would have hypothetically
negotiated just before infringement began. Dkt. 151 at 3.
Accordingly, both parties must necessarily accept that
approximating a reasonable royalty involves an element of
uncertainty. See Lucent Techs., Inc. v. Gateway,
Inc., 580 F.3d 1301, 1325 (Fed. Cir. 2009).
“[E]stimating a reasonable royalty is not an exact
science.” Summit 6, LLC v. Samsung Elecs. Co.,
802 F.3d 1283, 1296 (Fed. Cir. 2015). With this backdrop in
mind, the Court considers Google's three bases for
excluding Bratic's damages opinion.
Bratic's Royalty Rate and Base
royalties have at least two variables: the royalty base and
the royalty rate. See, e.g., Lucent Techs.,
580 F.3d at 1339. Bratic calculates a royalty rate by
estimating Google's incremental revenue for each new
Chrome user per year and then multiplies the incremental
revenue by both an estimated profit margin and an
apportionment figure derived from the estimated value of the
patented invention. See Dkt. 151-1 ¶¶
127-136. To determine the royalty base, Bratic relies on
Google's estimate of the number of users that access
Chrome in a 7-day period. Id. ¶ 133. Bratic
then multiplies the rate by the base to determine reasonable
royalty damages. Id. ¶ 142.
argues that Bratic's calculation is unreliable because
Bratic's royalty rate relies on an estimate of
incremental revenue derived from new Chrome users, whereas
his royalty base relies on the total number of Chrome users,
which may be new or existing users. Dkt. 151 at 6-7. Google
characterizes Bratic's calculation as multiplying
“apples with oranges.” Dkt. 151 at 7.
Court sees it differently. It is not at all clear what
difference there is, if any, between incremental revenue
derived from a new Chrome user and incremental revenue
derived from an existing Chrome user. As Plaintiffs explain,
Bratic only accounts for Chrome users that Google itself
considers frequent users. See Dkt. 151-1
¶¶ 127-141. Google repeats the conclusion that new
and existing user data are “unrelated” and
insists that it is not Google's burden to demonstrate
that Bratic's reasoning is unsound. See Dkt. 178
at 2. But Bratic's reasoning appears sound, and absent a
reasoned explanation suggesting otherwise, the Court will not
second-guess it. Finally, Google's arguments regarding
the supposedly-inflated amount of Chrome users are not
persuasive. To the extent Bratic's “credibility,
data, or factual assumptions have flaws, these flaws go to
the weight of the evidence, not to its admissibility.”
See Summit 6, 802 F.3d at 1299.
Reliance on Advertisement Revenue
incremental revenue per user, i.e., the revenue value Bratic
uses to determine the royalty rate, is based on a model
estimating Google's revenue from a new user of Chrome.
The revenue is not derived from sales of Chrome itself
because Chrome is offered to users for free. See
Dkt. 170 at 10-11. Rather, revenue attributable to Chrome is
generated when a user clicks on an ad that appears alongside
Google search results within the Chrome browser. Dkt. 151-4
argues that Bratic's reliance on ad revenue is improper
because ads appearing in search results are “unpatented
components” which can only factor into damages if the
ads and the patented features are together “considered
to be components of a single assembly . . . of a complete
machine, or they together constitute[ ] a functional
unit.” See Dkt. 151 at 8 (quoting
Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1550
(Fed. Cir. 1995)).
Court does not agree. Google downplays the relationship
between ad revenue and the Chrome browser. Bratic's
incremental revenue assumption, based on one of Google's
own models for estimating Chrome's incremental value over
other browsers, see Dkt. 151-4 at 163:16-25,
properly takes into account the fact that Google generates
more ad revenue when a user clicks an ad in Chrome versus
when a user clicks an ad in another browser such as Internet
Explorer or Firefox, see Dkt. 170-3 ¶ 41.
Bratic does not improperly include revenue from an unpatented
product into his calculation. Rather, Bratic is estimating
the revenue-albeit not traditional sales revenue-derived from
the Chrome browser. To the extent Bratic is overestimating,