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Uniloc USA, Inc. v. Samsung Electronics America, Inc.

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

April 17, 2019




         Before the Court is Defendants Samsung Electronics America, Inc. and Samsung Electronics Co. Ltd.'s (collectively, “Samsung”) Motion to Strike Certain Opinions in the Amended Expert Report of R. Christopher Rosenthal (“the Motion to Strike”) (Dkt. No. 175) and Samsung's Second Daubert Motion to Exclude Certain Opinions and Testimony of Uniloc's Damages Expert R. Christopher Rosenthal (“the Daubert Motion”) (Dkt. No. 184).

         For the reasons described herein, the Court finds that the Motion to Strike should be and hereby is GRANTED-IN-PART and DENIED-IN-PART as follows:

The Court GRANTS the Motion to Strike with respect to paragraphs 40, 91-97, 108(B), Exhibits 1 and 2, and certain documents in Appendix D of Mr. Rosenthal's 3/12/19 Amended Report. The Court DENIES the Motion with respect to paragraph 108(A) of Mr. Rosenthal's 3/12/19 Amended Report.

         Further, the Court finds that the Daubert Motion should be and hereby is GRANTED-IN-PART and DENIED-IN-PART as follows:

The Court GRANTS the Daubert Motion with respect to the RoyaltySource Licenses, the issue of apportionment and the Entire Market Value Rule, and the references to Samsung's overall revenue projections and totals. The Court DENIES the Daubert Motion with respect to the XXXXX License.

         I. Factual and Procedural History

          The Court held a pretrial hearing on March 4, 2019, in preparation for a trial then set to begin on April 1, 2019, to address a number of pending motions, including Samsung's Motion for Summary Judgment of Non-Infringement. (Dkt. No. 102). After considering the parties' submissions, the Court granted Samsung's motion for summary judgment of noninfringement with respect to direct infringement by Samsung and denied the motion as to indirect infringement. (See Dkt. No. 173).

         Since Plaintiffs Uniloc USA, Inc., Uniloc Luxembourg, S.A., and Uniloc 2017 LLC (collectively, “Uniloc”) sought pre-suit damages only for direct infringement, the Court's order eliminating direct infringement also had the effect of eliminating the pre-suit damages period. Uniloc's damages expert, R. Christopher Rosenthal, had not then distinguished between pre-suit and post-suit damages in his original damages report. Rather than striking Mr. Rosenthal's entire report on the eve of trial, the Court exercised its discretion to grant Uniloc limited leave to submit an amended expert report that accounted for the Court's ruling. Specifically, the Court instructed Uniloc that any amendments should only effectuate the Court's ruling by truncating the relevant damages period to distinguish between pre-suit damages (direct infringement) and post-suit damages (indirect infringement). The Court instructed Uniloc that it was not permitted to otherwise introduce new material, opinions, or analyses, and counsel for Uniloc indicated that they understood the Court's instructions and had no additional questions. The Court also reset the trial to start on April 23, 2019. Further, and in view of the limited scope of amendment, the Court set the following expedited briefing schedule:

• Uniloc's amended report was due three days after the hearing, on March 8, 2019.
• Samsung's responsive damages report was due on March 11, 2019.
• Both parties could take relevant depositions no later than March 14, 2019.
• Both parties could submit Daubert motions, if any, no later than March 18, 2019.
• Both parties could submit responses to any Daubert motions no later than March 21, 2019.

         Consistent with the Court's order, Uniloc served Samsung with Mr. Rosenthal's amended damages report on March 8, 2019 (“the 3/8/19 Amended Report”). Samsung immediately lodged objections to such, saying that various portions of the 3/8/19 Amended Report went beyond the scope granted by this Court and were accordingly improper. (Dkt. No. 175 at 5). The parties conferred between March 8 and March 11, and partially resolved their disputes-Uniloc agreed to withdraw a number of additions while Samsung agreed to withdraw a number of objections. (Id.) Uniloc served Samsung with Mr. Rosenthal's second amended damages report on March 12, 2019 (“the 3/12/19 Amended Report”), implementing the agreements that resulted from their meet-and-confer process. The 3/12/19 Amended Report is identical to the 3/8/19 Amended Report in all respects relevant to this Order, except that it has different paragraph numbering resulting from a number of the prior paragraphs being altered.

         On March 12, 2019, Samsung filed the present Motion to Strike portions of the 3/8/19 Amended Report as beyond the leave granted by the Court and thus untimely pursuant to Fed.R.Civ.P. 26.[1] (Dkt. No. 175). Samsung specifically asked the Court to strike paragraphs “40, 87-93, 104, Exhibits 1 and 2, and certain documents in Appendix D (i.e., the 74 new documents, two new patent applications, and the previously unconsidered deposition transcript and exhibits of Arthur Kinsolving)”. (Id. at 5). Uniloc timely responded to the Motion to Strike on March 15, 2019, in part seeking additional leave to amend to the extent the Court found Mr. Rosenthal's 3/12/19 Amended Report went beyond the Court's order granting leave to amend. (Dkt. No. 181). While the Motion to Strike for untimeliness was pending, Samsung also filed the present Daubert Motion seeking to exclude various opinions contained in Mr. Rosenthal's 3/12/19 Amended Report pursuant to Daubert. (Dkt. No. 184). Uniloc untimely responded[2] to the Daubert Motion on March 22, 2019. (Dkt. No. 187).

         As detailed in Sections III.A(1)-(4) and III.C of this Order, Uniloc's briefing in response to Samsung's Daubert Motion relies heavily on the new material added in Mr. Rosenthal's 3/12/19 Amended Report. In a moment of admirable candor, Uniloc explicitly concedes in the briefing that it made numerous changes to respond to criticisms raised in Samsung's first Daubert motion, rather than in response to the Court's order. (See, e.g., Dkt. No. 181 at 6 (“Mr. Rosenthal amended his Georgia-Pacific Factor 13 analysis to answer Samsung's direct criticism that he did not begin his analysis with the smallest-salable patent practice [sic] unit. Samsung's suggestion that Mr. Rosenthal's ultimate royalty opinion, which was based on comparable license agreements, was improper. . . . Mr. Rosenthal thus provided this analysis-starting his Georgia-Pacific analysis with the technology most closely related to the patent in suit that could be valued. That was the fitness tracker.”); id. at 11 (“Finally, Mr. Rosenthal reviewed the deposition transcript of Arthur Kingsolving [sic] at the request of Samsung's own counsel and in response to Samsung's Daubert motion against Mr. Rosenthal.”)).

         Since resolution of Samsung's Motion to Strike affects the Court's analysis of Samsung's Daubert Motion, the Court first addresses the Motion to Strike and will subsequently turn to the Daubert Motion.

         II. Legal Standard for a Motion to Strike

         A party must disclose the opinions of its experts “at the times and in the sequence that the court orders.” Fed.R.Civ.P. 26(a)(2)(D). When confronted with a violation of Rule 26, Rule 37 grants district courts the authority to exclude untimely information. Fed.R.Civ.P. 37(c)(1). Since a district court has “broad discretion” in imposing a sanction pursuant to Rule 37, a district court's decision “will not be disturbed ordinarily unless there are unusual circumstances showing a clear abuse.” Moore v. CITGO Ref. & Chemicals Co., L.P., 735 F.3d 309, 315 (5th Cir. 2013); Passmore v. Baylor Health Care Sys., 823 F.3d 292, 294-95, 296-97 (5th Cir. 2016) (holding that Rules 26 and 37 operate jointly to create a “federal discovery scheme” that assigns “broad discretion” to district courts with respect to “their control of timing and sanctions for noncompliance”).

         Four factors guide the Court's exercise of discretion in evaluating whether to exclude evidence under Rule 37. CQ, Inc. v. TXU Min. Co., L.P., 565 F.3d 268, 280 (5th Cir. 2009). Those factors are: “(1) [The untimely party's] explanation for its failure to disclose the evidence, (2) the importance of the evidence, (3) the potential prejudice to [the objecting party] in allowing the evidence, and (4) the availability of a continuance.” Id. A party's failure to provide any justification for its untimely disclosure weighs heavily in favor of striking the disclosure, and may even be sufficient standing alone to support exclusion. Sobrino-Barrera v. Anderson Shipping Co., 495 Fed.Appx. 430, 433 (5th Cir. 2012) (affirming district court's exclusion of an expert's new affidavit purporting to supplement the original report with new methodology because the proffering party gave no justification for untimeliness); Patterson v. Houston Indep. Sch. Dist., 570 Fed.Appx. 367, 370 (5th Cir. 2014) (collecting cases affirming district court exclusions where the party offered no justification for untimeliness).

         III. Discussion

         The Court addresses Samsung's Motion to Strike by considering four categories of testimony contained in Mr. Rosenthal's 3/12/2019 Amended Report: (1) paragraph 40, (2) paragraphs 91- 97, (3) paragraph 108 and Exhibits 1-2, and (4) certain new documents contained in Appendix D. The analysis for all four categories of testimony overlaps in certain respects but is distinct in others. Accordingly, the Court will consolidate its analysis where practicable and will identify distinct reasoning where otherwise appropriate.

         A. Factor 1-Party's Explanation

          1. Paragraph 40

         Paragraph 40 of Mr. Rosenthal's 3/12/19 Amended Report contains Mr. Rosenthal's comparison of the patent-in-suit, U.S. Patent No. 7, 690, 556 (“the '556 Patent”) to the various patents covered by the four licenses identified by the RoyaltySource database (collectively, “the RoyaltySource Licenses”). (Dkt. No. 175-6 at 12 ¶ 40). In paragraph 40, Mr. Rosenthal offers a new technological comparability analysis based on an untranscribed, thirty-minute phone call he had with Uniloc's technology expert, Dr. William Easttom II. (Dkt. No. 184-3 at 117:1-118:1). Mr. Rosenthal represents that Dr. Easttom ranked the comparability of the four RoyaltySource License agreements on a scale from one to four, based on two criteria: “the degree of improvement over existing technology as well as a comparable level of skill and innovation regarding the patents in the RoyaltySource agreements.” (Dkt. No. 175-6 at 12 ¶ 40). “According to Dr. Easttom, anything equal to or above a 2 on his scale is comparable from a technical standpoint.” (Id.) Mr. Rosenthal acknowledged that while Dr. Easttom provided him with numerical conclusions about technological comparability, Dr. Easttom did not explain the basis for the scale, the basis for the cutoff thresholds used in the scale, the basis for the criteria, the metrics for measuring the criteria, or any other details that informed Dr. Easttom's conclusions about comparability. (See Dkt. No. 184-3 at 120:11-124:11). Mr. Rosenthal confirmed at deposition that he could not explain the basis for Dr. Easttom's conclusions and suggested, “it's probably better for Mr. Easttom to answer” the “lot of technical questions” which Samsung raised. (Id. at 261:8-9).

         Uniloc does not offer a justification for the new opinions contained in paragraph 40. Uniloc does not claim, for example, that the new analysis in paragraph 40 is necessary to implement the Court's order or that it is otherwise reactive to the Court's grant of summary judgment. Instead, Uniloc attempts to argue that the technological comparability analysis in paragraph 40 is not substantively “new, ” but instead reflects substantially the same analysis as is present in Mr. Rosenthal's original report. (Dkt. No. 181 at 5).

         Uniloc's argument is untenable because paragraph 40 is new in every sense of the term. It is literally new, in the sense that the language in paragraph 40 is not contained anywhere in Mr. Rosenthal's original report. It is also substantively new, in the sense that none of the analysis contained in the amended paragraph 40 is present in Mr. Rosenthal's original report. Mr. Rosenthal's original report does not include an analysis of technological comparability for the RoyaltySource Licenses at all. That is to say, it does not compare the claims of the '556 Patent to the claims in any of the patents licensed under the four RoyaltySource License agreements. (See Dkt. No. 175-3 at 10 ¶¶ 37(A)-(D) (listing the four RoyaltySource Licenses without discussing the claims of the '556 Patent or conducting any other analysis)). By contrast, new paragraph 40 purports to introduce a new quantitative scale based on new criteria which come to new conclusions about the comparability of the RoyaltySource Licenses. (See Dkt. No. 175-6 at 12 ¶ 40). Specifically, the original report has no methodology for comparison; the new report has a quantified scale. (Compare Dkt. No. 175-3 at 10 ¶¶ 37(A)-(D), with Dkt. No. 175-6 at 12 ¶ 40). The original report has no criteria for comparing the RoyaltySource patents and the '556 Patent; the new report introduces two new criteria. (Compare Dkt. No. 175-3 at 10 ¶¶ 37(A)-(D), with Dkt. No. 175-6 at 12 ¶ 40). The original report concludes that all four RoyaltySource patents are comparable; the new report rejects that conclusion and opts for the view that only three are comparable. (Compare Dkt. No. 175-3 at 10 ¶¶ 37(A)-(D), with Dkt. No. 175-6 at 12 ¶ 40). The use of a new methodology to reach a new conclusion can only be fairly described as new, and well beyond the scope allowed by the Court.

         Underscoring the newness of paragraph 40, in its Daubert briefing on technological comparability, Uniloc does not identify any material from Mr. Rosenthal's original report in support of its comparability argument. (See Dkt. No. 187 at 1-3, 7-8) (addressing technological comparability without referencing the content of Mr. Rosenthal's original report). Paragraph 40 is the only portion of any of Mr. Rosenthal's reports upon which Uniloc relies for technological comparability. (See Id. at 7-8). Fundamentally, when pressed to identify a basis in Mr. Rosenthal's report for technological comparability, Uniloc only pointed to new material.

         Accordingly, the Court finds that the material in paragraph 40 is new and beyond the scope permitted by the Court. Further, Uniloc has offered no justification for its untimeliness. The Court thus finds that Factor 1 weighs in favor of striking paragraph 40.

         2. Paragraphs 91-97

         Paragraphs 91-97 of Mr. Rosenthal's 3/12/19 Amended Report describe additional analysis of Georgia-Pacific Factor 9, [3] including quantification of the various measurement efficiency gains purportedly created by the '556 Patent. In Mr. Rosenthal's original report, the Georgia-Pacific Factor 9 analysis consists of four paragraphs. (Dkt. No. 175-3 at 25-26 ¶¶ 84- 87). The first two paragraphs are quoted excerpts of the specification of the '556 Patent. (Id. at 25- 26 ¶¶ 84-85). The third paragraph summarizes the excerpts, stating that the '556 Patent “is more accurate than older modes.” (Id. ¶ 86). The fourth paragraph concludes that since Samsung caters to “fitness and health conscious consumers, ” Samsung would consider the '556 Patent to be “an important factor.” (Id. ¶ 87).

         Mr. Rosenthal's 3/12/19 Amended Report adds seven new paragraphs and a chart.[4] (Dkt. No. 175-6 at 27-28 ¶¶ 91-97). The first paragraph (id. ¶ 91) and the chart attempt to quantify “the percentage improvement in accuracy over previous modes of calculating calorie burn information.” (Id.) This quantitative analysis is completely new in Mr. Rosenthal's 3/12/19 Amended Report. The subsequent six paragraphs introduce new arguments about Samsung's prototypical “use case” (id. ¶ 92), commentary on Samsung's damages expert (id. ¶¶ 93-94), analysis of Samsung's “S-Health” application (id. ¶¶ 94-95), and reliance upon Samsung's own internal reviews (id. ¶ 96).

         Samsung argues that paragraphs 91-97 introduce information that is unfairly advantageous to Uniloc, unrelated to the Court's order granting leave to amend, and otherwise “completely new.” (Dkt. No. 175 at 10). In its response, Uniloc does not dispute that the information is new. Uniloc also does not argue that the additional information added in paragraphs 91-97 was introduced in order to effectuate the Court's grant of leave to amend. Instead, Uniloc claims that the Court should not strike paragraphs because they are broadly “consistent with [Mr. Rosenthal's] prior analysis.” (Dkt. No. 181 at 4-5).

         The Court finds that Factor 1 favors striking paragraphs 91-97 and the chart. Both paragraph 91 and the chart introduce a substantially new basis for Mr. Rosenthal's opinion: a quantitative claim that the “accuracy of calorie burn information would have improved between 23% to 118% depending on the degree of incline” based on “the use of '556 patent.” (Dkt. No. 175-6 at 27 ¶ 91). This quantitative analysis is not fairly disclosed by the original report for the simple reason that it is not mentioned in the original report. The calculations contained in paragraph 91 and the chart thus furnish additional, originally undisclosed support for Mr. Rosenthal's analysis of Georgia-Pacific Factor 9.

         Similarly, the Court finds that paragraphs 92-97 are also both literally and substantively new. Paragraphs 92-97 are literally new in the sense that the language contained in the paragraphs is not present in Mr. Rosenthal's original report. Paragraphs 92-97 are also substantively new because they introduce additional and previously undisclosed justifications for Uniloc's Georgia-Pacific Factor 9 analysis.

         As was true of paragraph 40, the newness of paragraphs 91-97 is demonstrated by Uniloc's response to Samsung's Daubert Motion. When pressed by Samsung's Daubert Motion to demonstrate an apportionment analysis, Uniloc did not cite a single paragraph that was present in Mr. Rosenthal's original report. (See Dkt. No. 187 at 11-15) (discussing Mr. Rosenthal's apportionment analysis without reference to the original report). Uniloc instead relied on the wholly new paragraphs 91-97. (Id. at 11 (citing ¶¶ 91- 97 & ¶¶ 91-92); id. at 12 (citing ¶¶ 93- 94 & ¶¶ 94-95 & ¶¶ 95-96); see also Id. at 11, 12 (citing ...

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