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Tinnus Enterprises, LLC v. Telebrands Corp.

United States District Court, E.D. Texas, Tyler Division

April 3, 2019

TINNUS ENTERPRISES, LLC, ZURU LTD., ZURU, INC., ZURU, LLC, ZURU PTY LTD., ZURU UK LTD., Plaintiffs,
v.
TELEBRANDS CORPORATION, BED BATH & BEYOND INC., BULBHEAD.COM, LLC, Defendants.

          REDACTED MEMORANDUM OPINION AND ORDER

          JOHN D LOVE, UNITED STATES MAGISTRATE JUDGE

         Before the Court is Defendants' Telebrands Corporation (“Telebrands”), Bed Bath & Beyond Inc. (“Bed Bath”), and Bulbhead.com LLC (“Bulbhead”) (collectively “Defendants”) Motion to Exclude Plaintiffs' expert Alan Ratliff's Opinion on Damages. (Doc. No. 419.) Plaintiffs Tinnus Enterprises, ZURU Ltd., ZURU Inc., ZURU LLC, ZURU PTY Ltd., and ZURU UK Ltd. (collectively “Plaintiffs”) filed a response (Doc. No. 434), to which Defendants filed a reply (Doc. No. 452). For the reasons stated herein, Defendants' Motion (Doc. No. 419) is DENIED.

         BACKGROUND

         On June 9, 2015, Plaintiffs ZURU Ltd. and Tinnus filed the instant action against Defendants Telebrands and Bed Bath[1] (collectively “Defendants”) alleging infringement of U.S. Patent No. 9, 051, 066 (“the '066 Patent”). Shortly after the filing of this case, the Court issued an injunction preventing Telebrands from selling its accused water balloon products-Balloon Bonanza. (Doc. Nos. 66, 84, 91.) This case then proceeded through claim construction, numerous discovery disputes, contempt proceedings, and up to dispositive motions and pretrial. At that point in time, concurrent proceedings at the Patent Trial and Appeal Board (“PTAB”) concluded and the PTAB issued a final written decision holding that the asserted claims of the '066 Patent were invalid as indefinite. The decision of the PTAB was appealed to the Federal Circuit and Defendants asked the Court to stay the case. This Court ultimately stayed this case on January 24, 2017, pending appeal of the PTAB's decision. (Doc. No. 308.) On June 7, 2018, the parties filed notices informing the Court of the Federal Circuit's decision reversing and remanding the PTAB's final written decision. (Doc. Nos. 332, 333.) The Court therefore lifted the stay in this case and held a status conference to discuss resuming this action. (Doc. No. 334.) At the status conference, the parties raised issues that needed to be resolved before proceeding to trial, including claim construction, estoppel, venue, and standing.

         This case has since been proceeding on an expedited schedule for trial. (Doc. No. 382.) On March 5, 2019, the parties filed their dispositive and/or Daubert motions. (Doc. Nos. 394, 395, 396, 397, 398, 399, 400, 401, 402, and 403.) The Court denied the motions, directing the parties to meet and confer and re-file the remaining motions by March 15, 2019. (Doc. No. 411.) The Court instructed the parties that each re-filed motion should begin with “a paragraph explaining why the motion is timely, which issues the Court has previously resolved, and what specific issues remain for the Court to resolve prior to trial.” Id. at 4. Accordingly, Defendants re-filed the instant motion. (Doc. No. 419.)

         LEGAL STANDARD

         Rule 702 provides that an expert witness may offer opinion testimony if: (a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case. Fed.R.Evid. 702.

         The Rules also “assign to the trial judge the task of ensuring that an expert's testimony both rests on a reliable foundation and is relevant to the task at hand.” Daubert v. Merrell Dow Pharms. Inc., 509 U.S. 579, 594, 597 (1993). “The relevance prong [of Daubert] requires the proponent [of the expert testimony] to demonstrate that the expert's ‘reasoning or methodology can be properly applied to the facts in issue.'” Johnson v. Arkema, Inc., 685 F.3d 452, 459 (5th Cir. 2012) (quoting Curtis v. M & S Petroleum, Inc., 174 F.3d 661, 668 (5th Cir. 1999)). “The reliability prong [of Daubert] mandates that expert opinion ‘be grounded in the methods and procedures of science and . . . be more than unsupported speculation or subjective belief.'” Johnson, 685 F.3d at 459 (quoting Curtis, 174 F.3d at 668).

         In assessing the “reliability” of an expert's opinion, the trial court may consider a list of factors including: “whether a theory or technique . . . can be (and has been) tested, ” “whether the theory or technique has been subjected to peer review and publication, ” “the known or potential rate of error, ” “the existence and maintenance of standards, ” and “general acceptance” of a theory in the “relevant scientific community.” Daubert, 509 U.S. at 593-94; see also Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 150 (1999) (“Daubert makes clear that the factors it mentions do not constitute a ‘definitive checklist or test.'”); U.S. v. Valencia, 600 F.3d 389, 424 (5th Cir. 2010). “The proponent need not prove to the judge that the expert's testimony is correct, but she must prove by a preponderance of the evidence that the testimony is reliable.” Johnson, 685 F.3d at 459 (quoting Moore v. Ashland Chem., Inc., 151 F.3d 269, 276 (5th Cir. 1998) (en banc)). At base, "the question of whether the expert is credible or the opinion is correct is generally a question for the fact finder, not the court." Summit 6, LLC v. Samsung Elecs. Co., Ltd., 802 F.3d 1283, 1296 (Fed. Cir. 2015).

         DISCUSSION

         Defendants seek to exclude Dr. Ratliff s opinions regarding Zuru Ltd.'s profit margin as unreliable because they contend it is an improper attempt to seek damages for all Zuru entities and is not based on a true analysis of Zuru Ltd. (Doc. No. 419, at 9.) Specifically, Defendants contend that Mr. Ratliff did not identify costs for Zuru Ltd. and assumed they would be the same as Zuru Inc. which is a fiction because Zuru Inc. manufactured the product, incurred the costs of goods sold, and handled shipping and other costs to fulfill orders. Id. at 9-10. Defendants next challenge Mr. Ratliff s upper boundary of a royalty rate of $ per unit derived from testimony of Plaintiffs' corporate witness, Anna Mowbray. Id. at 11. Defendants argue that "an expert opinion cannot be based on the say so of his client." Id. at 12. Lastly, Defendants argue that Mr. Ratliff cannot present new opinions not in his report. Id. at 13-14.

         Plaintiffs contend that Defendants' arguments go to the weight of Mr. Ratliff s opinions, not then admissibility. (Doc. No. 434, at 7.) Specifically, Plaintiffs contend that assumptions, like the one Mr. Ratliff made with respect to costs, go to the expert's credibility. Id. at 8. Plaintiffs further contend that Mr. Ratliff explained that the Zuru Ltd.'s costs were not independent of Zuru Inc.'s costs because Zuru Inc. was the manufacturing and marketing entity. Id. at 9. Plaintiffs also contend that Defendants misconstrue Mr. Ratliff s royalty opinions as he clearly explained the $∟ royalty discussed at the Tinnus II trial was only an additional basis for his opinion of a ∟% royalty. Id. at 13. Lastly, Plaintiffs contend that Defendants went beyond the scope of Mr. Ratliff's report in questioning him during his deposition and suggest that such cross-examination by Defendants at trial would open the door to Mr. Ratliff's answers. Id. at 15.

         I. Zuru Ltd.'s Costs

         Defendants contend that Mr. Ratliff's opinions are a proxy to recover Zuru Inc.'s profits because his costs for the profit margin are Zuru Inc.'s costs. (Doc. No. 419, at 9.) Defendants contend this proxy is so because Mr. Ratliff's Ltd.-specific incremental profit margin assumes that Zuru Ltd. would have the same costs as Zuru Inc. Id. at 10. Defendants contend that this assumption is an unreliable fiction because there is “no dispute that INC manufactured the product, incurred the costs of goods sold, and handled shipping and other costs to fulfill orders.” Id. Plaintiffs contend that an attack on an expert's assumptions, like Mr. Ratliff's cost assumptions, go to the credibility of the expert's testimony, not the admissibility. (Doc. No. 434, at 8.) Further, Plaintiffs contend that Mr. Ratliff properly calculated the profit margin for Zuru Ltd. by starting with sales to Wal-Mart and subtracting the costs of goods sold. ...


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