Adverse Claim Construction and Evidentiary Rulings Do Not Justify Immediate Appeal Under Rule 54(b)

Following claim construction and an order in limine precluding testimony by plaintiff's damages expert, the court ordered additional briefing on the parties' stipulated motion for judgment of noninfringement under Rule 54(b). "[T]he stipulated judgment does not constitute a disposal of an 'individual claim' in this action. The stipulated judgment states that in light of the court’s three pretrial orders, '[Plaintiff] acknowledges that . . . it cannot prove infringement on the claims to be tried . . . or to the extent it could prove infringement, it has no available remedies.'. . . [Plaintiff's] equivocation leaves open the possibility that it could still prove infringement. . . . [Plaintiff] cannot appeal the court’s rulings if some other avenue for proving infringement still exists and is reserved; it must stipulate to a judgment that precludes any avenues for proving infringement. Moreover, it is not clear to the court from the record before it why its pretrial orders mandate that [plaintiff] cannot prove infringement. . . . [A] ruling on a motion in limine alone does not create 'an ultimate disposition of an individual claim entered in the course of a multiple claims action.' Appeals on claim construction rulings alone also are disfavored."

Dynetix Design Solutions, Inc. v. Synopsys, Inc., 5-11-cv-05973 (CAND August 28, 2013, Order) (Grewal, M.J.).

License of Specific Patent Claims to Handset Manufacturers Exhausts All Claims as to Downstream Use of the Handsets

The court granted defendants' motion for summary judgment on their patent exhaustion defense because plaintiff’s license to cellular handset manufacturers, which were limited to specific patent claims and specific fields of use, exhausted the entire licensed patents as to downstream consumers and third party users of the handsets. "[Plaintiff] contends it ‘carefully licensed the materially different content and handset claims to the respective infringers in the respective fields.’ It is apparent that [plaintiff] sought to carefully construct some of its Licensing Agreements in such a way that it could recover multiple royalties on the same patents from a single sale or use. . . . [Plaintiff] argues that the handset manufacturer companies which obtained licenses from [plaintiff] received licenses to practice only the handset claims. Defendants’ activities . . . purportedly infringe [plaintiff's] content claims, which were not licensed to the handset manufacturer companies. . . . However, [plaintiff] cannot avoid patent exhaustion by attempting to shield some of the claims within the patents-in-suit from being covered by Licensing Agreements. . . . Once [plaintiff] licensed its patent portfolio to, for example, Motorola, downstream consumers and third-party users of Motorola devices employing [plaintiff’s] patents cannot be found to be infringing. . . . All of the patents-at-issue require the use of a handset device. . . . If these claims are separate and distinct within a single patent that a patentee seeks royalties on licenses for each individual claim, the patentee must file separate patents and then issue a license on each distinct patent. . . . To permit [plaintiff] to recover multiple times on the same patent by selling licenses to the patents piece by piece (or claim by claim) is contradictory to these policies supporting the doctrine of patent exhaustion.”

Helferich Patent Licensing, LLC. v. New York Times Co., 1-10-cv-04387 (ILND August 14, 2013, Order) (Darrah, J.).

Availability of Patent Pilot Program Does Not Factor Into Venue Analysis

The court granted defendant's motion to transfer plaintiff's infringement action from the Northern District of Illinois to the Western District of Washington and rejected plaintiff's argument that the patent pilot program made Illinois a better forum for its case. "The pilot program involves fourteen federal district courts, including the Northern District of Illinois but not the Western District of Washington. However, [plaintiff] misunderstands the underlying purpose and function of the pilot program. . . . '[T]he program does not necessarily enhance the patent expertise of the participating districts vis-à-vis other districts. Instead, it enhances the patent expertise of participating judges within a district vis-à-vis other judges in the same district.'. . . Consequently, this is a neutral factor."

Craik v. The Boeing Company, 1-13-cv-00874 (ILND August 15, 2013, Order) (Darrah, J.).

No Expert Testimony as to Hypothetical Negotiation “Extending Over Several Years”

The court granted in part plaintiff's motion to strike defendant's damages expert's report. "The law regarding the date of the so-called 'hypothetical negotiation' is well-understood. There is a date of the negotiation, not some range, and certainly not a range extending over several years. Is this an artificial construct? Yes, but so is the entire hypothetical negotiation, which by its very nature involves some conjecture. This court is not at liberty to dispense with long-standing case law from the Federal Circuit making clear that there is a discrete point in time to consider, and that point in time is the date the jury decides infringement first began. [Defendant's expert] may not confuse the jury as to this law by suggesting anything to the contrary."

Dynetix Design Solutions, Inc. v. Synopsys, Inc., 5-11-cv-05973 (CAND August 22, 2013, Order) (Grewal, M.J.).

Damages Expert Precluded From Testifying as to Royalty Rate Based on “50% of Defendant’s Gross Profit Margin”

The court granted defendant's motion to exclude the testimony of plaintiff's damages expert on a reasonable royalty rate because the expert improperly assumed that the starting point for a hypothetical negotiation would be 50% of defendant's gross profit margin. "While the court does not disagree that this could be 'one' reasonable starting place, the law requires [plaintiff's expert] to tailor the royalty rate to the specific facts of this particular case, including the 'particular technology, industry, or party.' [Plaintiff] admits in its opposition brief that '[its expert's] starting point relies on nothing but the assumptions that the patent is valid and infringed, and that there is no other information. . . . [He] considered no analogous facts of the case here other than the presumed validity of the patent. He failed to cite any evidence to support his conclusion that the 50% starting place would apply to component parts such as [the accused feature] in this particular industry. [Plaintiff's expert's] methodology is indistinguishable from 25% rule rejected in [Uniloc v. USA, Inc. v. Microsoft Corp., 632 F.3d 1292 (Fed. Cir. 2011)], except that it may be even more arbitrary. . . . [The expert’s] opinions and testimony based on his present damages report cannot be allowed to lead the jury into certain error.”

Dynetix Design Solutions, Inc. v. Synopsys, Inc., 5-11-cv-05973 (CAND August 22, 2013, Order) (Grewal, M.J.).

Damages Expert’s Reliance on “25% Rule” Supports Preclusion of Testimony

The court granted defendant's motion to strike plaintiff's damages expert's reports and rejected plaintiff's argument that its expert relied on the 25% rule of thumb as an alternative method to calculate reasonable royalty damages. "Plaintiff claims that [the expert's] opinions do not rely on the discredited 25 percent rule, contending instead that [the expert's] report shows that the 25 percent rule is 'an alternative method' for determining reasonable royalty damages. However, in the view of the Federal Circuit, the 25 percent rule is not 'an alternative method' at all; it is a 'fundamentally flawed,' forbidden method, which the Court as gatekeeper cannot allow to taint the jury’s consideration of damages. Even where the 25 percent rule is offered merely as a starting point to which the relevant factors for a reasonable royalty calculation found in Georgia-Pacific are then applied to adjust the rate, the taint of the 25 percent rule remains. . . . Plaintiff has not shown [the expert] to possess sufficient 'scientific, technical, or other specialized knowledge [that] will help the trier of fact to understand the evidence or to determine a fact in issue.' Fed. R. Evid. 702(a). Accordingly, the Court strikes [the expert's] reports and precludes him from testifying at trial."

Info-Hold, Inc. v. Muzak Holdings LLC, et. al., 1-11-cv-00283 (OHSD August 20, 2013, Order) (Black, J.).

NPE Litigation Misconduct Does not Warrant Dismissal . . . Yet

The court denied defendant's motion to dismiss a non-practicing entity's infringement action in light of litigation misconduct but reserved the right to consider such a sanction in the future. "[Plaintiff's founders] were aware that [plaintiff] might not own the [patent-in-suit] back in 2010. [Plaintiff] attempted to conceal evidence of the incomplete transfer through discovery stonewalling and obfuscation. . . . Taken in its entirety, [plaintiff and its founders] engaged in an extensive cover-up. . . . [Plaintiff] manufactured venue in Texas via a sham. [The founders] rented a windowless file-cabinet room with no employees in Texas and held it out as an ongoing business concern to the Texas judge. . . . To create the impression that [plaintiff] is something other than a patent troll, [plaintiff] and its principals have repeatedly made misleading statements to [defendant] and to the Court. . . . The litigation misconduct is most troubling. But does it warrant outright dismissal? This is a close case. At this stage, the Court is unwilling to impose a terminating sanction but may be willing to do so if the abuse continues. Attorney’s fees caused by and traceable to the misconduct are likely to be imposed but that remedy will be held in abeyance to see how well both sides behave from here on out."

Network Protection Sciences, LLC v. Juniper Networks, Inc., et. al., 3-12-cv-01106 (CAND August 20, 2013, Order) (Alsup, J.).