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United Services Automobile Association v. Wells Fargo Bank, N.A.

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

December 19, 2019

UNITED SERVICES AUTOMOBILE ASSOCIATION, Plaintiff,
v.
WELLS FARGO BANK, N.A., Defendant.

          MEMORANDUM ORDER

          ROY S. PAYNE, UNITED STATES MAGISTRATE JUDGE

         Plaintiff United Services Automobile Association filed a Daubert Motion to Strike Portions of the Expert Report of Christopher Gerardi, which is now before the Court. (Dkt. No. 79).[1] USAA seeks to strike portions of the expert report of Defendant Wells Fargo Bank, N.A.'s damages expert, Christopher Gerardi, regarding a several issues.

         I.ANALYSIS

         a. USAA's efforts to license the asserted patents

         USAA first asks the Court to strike Mr. Gerardi's discussions of USAA's efforts to license the asserted patents since the discussion is “irrelevant and will only serve to confuse and mislead the jury.” (Dkt. No. 79 at 1.) Specifically, USAA asks the Court to strike the discussion found in Paragraphs 22, 68-69, 118-123, 148, and 177 of Mr. Gerardi's Report. (See Dkt. No. 79-3.)

         USAA argues that Mr. Gerardi's discussion of USAA's outreach “to over 1, 000 financial institutions with less than $10 billion in assets” in order to license its remote deposit capture portfolio of over fifty patents, including three of the five asserted patents, was improper. (Id. at 21) Most importantly, USAA argues that Mr. Gerardi did not lay a proper foundation that the third-party financial institutions USAA contacted were in comparable situations to Wells Fargo in a hypothetical negotiation.

         For an expert to introduce other licenses, agreements, negotiations, or the like to support the expert's theory surrounding the hypothetical negotiation, the Federal Circuit requires a showing of comparability. A showing of comparability requires showing that the other data point is comparable, both technologically and economically, to the hypothetical negotiation between the parties. See Virnetx, Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1330 (Fed. Cir. 2014) (“Thus, we have cautioned that ‘district courts performing reasonable royalty calculations [must] exercise vigilance when considering past licenses to technologies other than the patent in suit,' ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 869 (Fed. Cir. 2010), and ‘must account for differences in the technologies and economic circumstances of the contracting parties,' Finjan, Inc. v. Secure Computing Corp., 626 F.3d 1197, 1211 (Fed. Cir. 2010).”).

         USAA also argues that the purported statements and views of unnamed bank managers in response to USAA's outreach are hearsay and it is improper for Mr. Gerardi to recite them in his report or channel them to the jury. Further, USAA argues that injecting these third-party quotes into the trial would be confusing, prejudicial, and require a complicated backstory and sideshow about various third parties, including opening the door to discussion of the Patent Trial and Appeal Board's denials of Wells Fargo's petitions for Covered Business Method review.

         This Court excluded the same testimony, offered by Mr. Gerardi in his expert report, in the previous case by the parties, No. 2:18-CV-245-JRG (“Case 1”). In Case 1, Chief Judge Gilstrap granted USAA's motion to strike the same material. He described his reasoning as such:

Well, I'm going to grant the motion in this regard. Mr. Gerardi concedes, and counsel agrees, that these offers weren't comparable, and there's nothing to support comparability here. I'm very concerned about the likelihood of jury confusion. If we start down this path, this seems to me to be fraught with dangers of becoming a distraction and side show. If Mr. Gerardi is going to talk about these thousand banking institutions who declined, if the Plaintiff has got evidence that they declined because Wells Fargo leaned on Fiserv and Fiserv told them not to take a license, we're going to -- we're going to end up in a quagmire that is going to result in confusion and distraction, that probative value is going to quickly get swallowed up by the prejudice and the confusion. And I'm not at all excited about opening the possible -- possibly opening the door to talking about review at the PTAB or the PTO under CBM or IPR. We went through all of that yesterday. On balance, I think the probative value is exceeded by the risk of prejudice and confusion. And on that basis alone, especially considering the lack of comparability, I'm going to grant Plaintiff's motion in regard to these paragraphs.

(Dkt. No. 79-8 at 16.)

         While Mr. Gerardi does not explicitly concede that USAA's efforts to license the asserted patents are not comparable here, neither does he lay a foundation in his report that the efforts are comparable to a hypothetical negotiation. Instead, Wells Fargo argues that it does not have a duty to establish a comparability foundation between the terms of the licensing contacts and the terms of the hypothetical license at issue in this case. The Court disagrees.

         Since Mr. Gerardi did not establish the comparability of the hypothetical negotiation between USAA and Wells Fargo with USAA's efforts to license its patents to smaller banks, its relevance is quite unclear. See Fed. R. Evid. 401 (defining “relevant evidence”). Irrelevant evidence is not admissible. Fed.R.Evid. 402. Further, even relevant evidence may be excluded if there is a high risk of confusing or misleading the jury. Fed.R.Evid. 403. As Chief Judge Gilstrap discussed in Case 1, the probative value of discussing the licensing campaign could easily be exceeded by the risk of prejudice and confusion. Therefore, the Court finds that Mr. Gerardi needed to establish comparability in his report for it to be admitted.

         Next, Wells Fargo argues that the two are comparable, although a similar argument cannot be found in Mr. Gerardi's report. The Court will not find comparability based solely on Wells Fargo's argument in its Response. (Dkt. No. 91 at 3-5.) Thus, the Court grants the motion to strike the references to USAA's licensing campaign in Paragraphs 22, 68-69, 118-23, 148, and 177 of Mr. Gerardi's Report since Mr. Gerardi did not establish comparability and the probative value is exceeded by the risk of prejudice and confusion.

         b. USAA's prior litigation with Mitek

         USAA next asks the Court to strike Paragraphs 65, 66, and 67 of Mr. Gerardi's report as they refer to unrelated prior litigation between USAA and Mitek and will only serve to confuse and mislead the jury. USAA argues that the interactions, which led to litigation and settled in 2014, did not involve the asserted patents or Wells Fargo. Wells Fargo responds that it “does not intend to reference USAA's litigation with Mitek at trial. Indeed, it filed a motion in limine seeking to preclude such references in [Case 1], which the Court granted as modified by agreement. Dkt. No. 294 at 9-10 (‘USAA shall not reference the Mitek litigation.')” (Dkt. No. 91 at 7.) The ...


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