The opinion of the court was delivered by: Judge Nora Barry Fischer
The jury trial in this patent infringement case brought by Plaintiff
University ("CMU") against Defendants Marvell Technology Group, Ltd.
and Marvell Semiconductor, Inc. ("Marvell") commenced on November 28,
2012 and is ongoing. This Memorandum Opinion provides further support
for the Court's bench order granting, in part, and denying in part,
Marvell's Motion to Exclude the Testimony of Catharine M. Lawton. (See
Docket No. 686 at 29-31; Trial Trans. 12/10/12). During trial, Marvell
objected to the proffered testimony of Ms. Lawton, CMU's damages
expert, whom CMU proffered as an expert in intellectual property
damages. (Docket No. 684). Through its objections, Marvell sought all
of the following relief: to exclude Lawton's testimony entirely; to
limit the scope of her testimony; and/or to preclude her from relying
on a proffered slide presentation CMU sought to use during her
examination which was marked as Plaintiff's DEMO 9.*fn1
(Id.). CMU contended that Marvell waived its objections to
Lawton's qualifications to testify, that her testimony should not be
limited and that it should be permitted to use its proffered slide
presentation, over Marvell's objections. (Docket Nos. 706 at 186; 686
at 13-17; 683).
The Court heard extensive argument from the parties during hearings outside the presence of the jury which lasted well into the evenings on December 5 and 6 and on the morning of December 7, 2012. (Docket Nos. 682, 686, 706). The Court also conducted a Daubert hearing outside the presence of the jury on the afternoon of December 6 during which Plaintiff's counsel essentially conducted his direct examination of Lawton, using the proffered slide presentation.*fn2 (See Trans of Daubert Hr'g 12/6/12; see also Plaintiff's DEMO 9).
CMU filed a Bench Brief Regarding the Daubert Standard for Qualification of an Expert Damages Witness on December 6, 2012. (Docket No. 683). Marvell then filed its Motion and Memorandum of Law to Exclude the Testimony of Catharine M. Lawton in the middle of the night on December 7, 2012. (Docket No. 684).
The Court accepted CMU's proffer of Lawton on December 7 and then accepted her as an expert on December 10 and permitted her to testify as to her ultimate opinion on the reasonable royalty in this case. (See Docket No. 686 at 29-31; Trial Trans. 12/10/12). The Court's analysis supporting these decisions follows.
A.Procedural History as to CMU's Proffer of Lawton's Expert Testimony
The Court first recounts the procedural history relevant to CMU's proffer of Lawton's expert testimony. The Court set deadlines for the disclosure of expert testimony and the filing of Daubert motions challenging the "capacity of any expert to testify" in its Pretrial Order issued in October of 2011. (Docket Nos. 315, 335). CMU provided Lawton's report to Marvell pursuant to these deadlines. She was also deposed by Marvell, at length. Marvell then moved to exclude her testimony by filing a Daubert motion in accordance with the Court's deadlines (which had been extended). (Docket No. 367, 368). After consideration of opposition briefs (Docket No. 395), and oral arguments presented at the hearing on July 10 and 11, 2012 (Docket No. 433), the Court granted, in part, and denied, in part, Marvell's motion. (Docket No. 451). Marvell did not challenge Lawton's qualifications to opine that the reasonable royalty in this case was $0.50 per chip at that time.*fn3 (Docket Nos. 367, 368). Instead, it raised four separate challenges to her testimony, arguing that: (1) Lawton's purported use of the entire market value rule was unreliable; (2) her apportionment analysis was unreliable; (3) her reliance on an irrelevant PowerPoint slide was unreliable; and (4) a host of other reasons indicated that her opinions were unreliable. (Id.). Marvell's motion was granted, in part and denied, in part. The Court held that "[t]he motion is granted to the extent that Ms. Lawton may not testify to total revenue, total profit, or total margin, except to start her analysis. The motion is denied in all other respects, such that Ms. Lawton may refer to the total number of sales, total apportioned revenue, average price per chip, operating profit per chip, and apportioned profit per chip in making her calculations." See CMU v. Marvell, Civ. A. No. 09-290, 2012 WL 3679564 at *7.
Closer to trial, Marvell also timely filed a number of motions in limine which challenged Lawton's expert testimony; however, Marvell again did not challenge her qualifications to opine as to a reasonable royalty of $0.50 as of this time. (Docket Nos. 514, 517, 520, 523). The motions in limine were extensively argued by the parties at a two-day motion hearing in October.
(Docket Nos. 590, 591). The Court then provided the parties with written rulings on all of the motions prior to the pretrial conference. (Docket Nos. 595-596, 601-602, 604-605, 607-614).
Relevant here, Marvell filed two related motions, i.e., "Motion in Limine No. D9 to Exclude Reference to the Entire Price, Profit, and/or Margin Associated with Any One or More Accused Chips" and "Motion in Limine No. D10 to Preclude CMU from Introducing Evidence and Argument Regarding Excess Profits, Premiums, and Operating Profit Premiums." (Docket Nos. 514, 517). With these motions, Marvell sought to exclude Lawton's references in her reasonable royalty calculations to "entire price," "operating profit," profit margin," "premiums," and "excess profits" at trial in light of the Federal Circuit's decision in LaserDynamics, Inc. v Quanta Computer, Inc., 694 F.3d 51, (Fed. Cir. 2012) and its position that the admission of this evidence would unfairly prejudice Marvell and create confusion for the jury. The Court denied both motions. See CMU v. Marvell, Civ. A. No. 09-290, Docket No. 604 (W.D. Pa. Nov. 5, 2012), Docket No. 607, 2012 WL 5451567, at *1 (W.D. Pa. Nov. 6, 2012). Hence, these rulings did not limit Lawton's proposed testimony at trial on these issues.
Marvell also submitted its "Motion in Limine No. D12 to Preclude CMU From Introducing Evidence and Argument Regarding Any Compensatory Damages Beyond a Reasonably Royalty," whereby Marvell sought to exclude CMU from presenting "evidence and argument regarding any purported 'harms' or 'damages' other than the loss of the reasonable royalty that would have resulted from the hypothetical negotiation for a license to the patents-in-suit." (Docket No. 523). The Court granted this motion and precluded CMU from introducing evidence or argument at trial directed to the alleged harms to CMU (as set forth in pages 377--79 of Ms. Lawton's expert report) as a result of the alleged failure of Marvell to enter into a license for the patents-in-suit. See CMU v. Marvell, Civ. A. No. 09-290, 2012 WL 5409800, at *1 (W.D. Pa. Nov. 6, 2010).
In addition, Marvell filed a motion to exclude a portion of Lawton's damages calculation due to CMU's failure to comply with the marking statute, 35 U.S.C. § 287(a). (Docket No. 520). The Court granted this motion, in part, finding that CMU's licensees were required to mark all products which contained the '839 Patent and that, as of March 6, 2009, CMU's licensees had sold products which contained the '839 Patent without marking these products. See CMU v. Marvell, Civ. A. No., 09-290, --- F. Supp. 2d ----, 2012 WL 5398818, at *1 (W.D. Pa. Nov. 2, 2012). As such, the Court precluded CMU from introducing evidence of damages as to the '839 Patent prior to its filing of this lawsuit on March 6, 2009. See id. Lawton was further ordered to submit a supplemental damages report addressing this ruling. Id. at *11.
Lawton and CMU were also provided with updated financial and sales information by Marvell prior to trial. Lawton ultimately submitted two updated expert reports to Marvell addressing the changes in her opinions due to the updated financial and sales information. (Docket No. 706 at 91). She also submitted a supplemental report on November 13, 2012 which conforms her opinions to the Court's decision on the marking issue. (Id. at 91-92).
At trial, CMU has presented evidence through a number of fact witnesses, including the inventors, Aleksandar Kavcic and Jose Moura, its expert on infringement, Dr. Steven W. McLaughlin, its expert on the hard disk drive industry and the sales cycle, Dr. Christopher Bajorek, and Dr. Mark Kryder and Robert Wooldridge, who testified as fact witnesses regarding the technology transfer office at CMU and their respective experiences running that office.
CMU has used slide presentations in conjunction with many of its witnesses thus far. See Plaintiff's DEMO exhibits. Some of the slides have contained actual exhibits (such as the patents) which have been admitted into evidence while others have been demonstrative aids which the Court permitted to be shown to the jury given the parties' agreements and finding that the slides would help the jury's comprehension of this complex case. The Court found the slide presentations to be particularly useful with respect to Dr. McLaughlin's testimony, as it was highly technical in nature.
In this regard, the parties had reached a "gentleman's agreement" pursuant to which they agreed to submit their proposed slide presentations which they intended to use with a witness to the opposition two days before the witness was scheduled to testify in order to permit the opposition the opportunity to object to same. (See Docket No. 708-1 at 2). With respect to Ms. Lawton's testimony, CMU submitted its initial slide presentation to Marvell on December 4, 2012 at 6:42 a.m. and submitted an additional slide which was added to the presentation at 7:05 p.m. on the same day. (Docket Nos. 708-1, 708-2, 708-3). These presentations were exchanged via emails from Plaintiff's counsel, Christopher Verdini, Esquire to the defense team. (Id.). At this point, the presentation consisted of 185 slides. Id; see also Plaintiff's DEMO 9. Marvell responded by objecting to nearly all of CMU's slides in an email forwarded to CMU's counsel after midnight on December 5, 2012. (Docket No. 708-4). Those objections were then forwarded to the Court at 12:14 a.m. on December 5, 2012. (Docket Nos. 708-5, 708-6, 708-7). Arguments and briefing then ensued, as is described above in the introduction.
B.CMU's Proffer of Lawton's Testimony at Trial and Daubert Hearing on December 6
1. Lawton's Qualifications
Lawton testified to the following with respect to her qualifications. She is presently a director at the Berkeley Research Group, LLC ("BRG"), which is an international consulting firm that specializes in, among other things, strategy issues related to complex litigation. (Docket No. 706 at 75). She was hired by CMU to conduct an investigation with respect to damages in this case and is proffered by CMU as an expert in intellectual property damages. Id. at 75.
Lawton's educational background is limited to a Bachelor's of Science in Finance, with a Minor in Business Economics, which she earned from the University of Illinois in 1984. Id. at 76. She has not completed any post-graduate work since that time. Id. She also has not attained a C.P.A. or any other formal certification in business or finance. Id. at 97-98. She admitted that she lacks educational and technical experience in the fields of engineering, computer science, algorithms, simulators, architecture read channels, semiconductors, or analyzing patents. Id. at 98-99. Instead, Lawton has spent her twenty-seven year career as a consultant and expert witness on damages issues. Id. at 99.
Upon her graduation from Illinois, in 1985, Lawton was hired by Peterson and Company as a staff consultant. Id. at 76, 82. She was at Peterson until 1998 and during her thirteen-year tenure, she "rose up the ranks" from staff consultant to become a vice-president and managing director. Id. at 82. She left Peterson in 1998 along with a number of her partners and they started a new firm, Technology and Dispute Resolution Consulting, which later changed its name to InteCap. Id. at 77. The focus of the firm was on intellectual property issues and Lawton served as managing director. Id. Lawton moved on to LECG, LLC as a director, where she remained from 2004 until 2011. Id. She then assumed her present role at BRG in March of 2011. Id. at 77. Given this resume, Lawton conceded that she had never worked at an accounting firm, a corporation or non-profit academic institution. Id. at 99, 116-17. She has also never served as a chief financial officer for a company. Id. at 130.
In her career as a financial consultant/expert witness, Lawton testified that she specializes in intellectual property cases; however, she does not specialize in any particular industry within that broader field. Id. at 77-78. She clarified that she has "worked extensively" in a number of industries, including: mechanical, computer, information technology, and pharmaceutical. Id. at 78. Lawton also explained that the methods that she uses to value damages, including the reasonable royalty method at issue in this case, are applied similarly across all of these industries. Id.
Lawton's prior experience is largely litigation-based, although she has some experience in general consulting. In regard to her litigation experience, she estimated that she has worked on approximately 100 cases involving intellectual property issues during her career. Id. at 82. She has offered expert testimony in many of these cases. Id. at 78-79. Indeed, she first testified as an expert witness in the late 1980s. Id. at 78-79. Since 1997, she has testified at trial as an expert in 16 cases and has given depositions in many other cases, for a total of 58 cases. Id. She elaborated that most of these cases have involved intellectual property issues. Id. at 79. Lawton has never been excluded as an expert witness, but the scope of her testimony was limited in Eastman Kodak Company, Inc. v. Sun Microsystems, Inc., Civ. A. No. 02-0674T(F) (W.D. N.Y.), such that she was not permitted to rely on opinions of an expert who had yet to testify at trial.
Lawton explained that the following cases that she has worked on involved computer technology:
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