Case 3:17-cv-05659-WHA Document 231 Filed 11/12/18 Page 1 of 20
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`
`
`PAUL ANDRE (State Bar No. 196585)
`pandre@kramerlevin.com
`LISA KOBIALKA (State Bar No. 191404)
`lkobialka@kramerlevin.com
`JAMES HANNAH (State Bar No. 237978)
`jhannah@kramerlevin.com
`KRISTOPHER KASTENS (State Bar No. 254797)
`kkastens@kramerlevin.com
`KRAMER LEVIN NAFTALIS & FRANKEL LLP
`990 Marsh Road
`Menlo Park, CA 94025
`Telephone: (650) 752-1700
`Facsimile: (650) 752-1800
`
`Attorneys for Plaintiff
`FINJAN, INC.
`
`
`IN THE UNITED STATES DISTRICT COURT
`
`FOR THE NORTHERN DISTRICT OF CALIFORNIA
`
`SAN FRANCISCO DIVISION
`
`FINJAN, INC., a Delaware Corporation,
`
`
`
`
`
`
`Plaintiff,
`
`v.
`
`
`JUNIPER NETWORKS, INC., a Delaware
`Corporation,
`
`
`Defendant.
`
`
`
`Case No.: 3:17-cv-05659-WHA
`
`
`PLAINTIFF FINJAN, INC.’S NOTICE OF
`MOTION AND MOTION TO EXCLUDE
`OPINIONS OF DEFENDANT’S DAMAGES
`EXPERT DR. KEITH R. UGONE;
`MEMORANDUM OF POINTS AND
`AUTHORITIES
`
`November 29, 2018
`
`Date:
`8:00 a.m.
`Time:
`Courtroom: Courtroom 12, 19th Floor
`Hon. William Alsup
`Before:
`
`
`
`
`
`
`REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED
`
`
`FINJAN’S MOTION TO EXCLUDE OPINIONS OF CASE NO. 3:17-cv-05659-WHA
`DEFENDANT’S DAMAGES EXPERT DR. KEITH R. UGONE\
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`Case 3:17-cv-05659-WHA Document 231 Filed 11/12/18 Page 2 of 20
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`
`
`TABLE OF CONTENTS
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`Page
`
`NOTICE OF MOTION AND MOTION ................................................................................................. 1 
`
`STATEMENT OF RELIEF SOUGHT .................................................................................................... 1 
`
`STATEMENT OF ISSUES ..................................................................................................................... 1 
`
`I. 
`
`II. 
`
`III. 
`
`IV. 
`
`V. 
`
`INTRODUCTION ....................................................................................................................... 1 
`
`DR. UGONE’S ANALYSIS OF THE PARTIES’ PRIOR SOFTWARE AND PATENT
`LICENSE AGREEMENTS IS UNRELIABLE........................................................................... 2 
`
`A. 
`
`Dr. Ugone’s Opinions Based on Juniper’s Non-Comparable Agreements are
`Unreliable. ........................................................................................................................ 3 
`
`1. 
`
`2. 
`
` is Not Comparable
`Juniper’s
`to the Hypothetical License. ................................................................................ 4 
`
`Juniper’s Prior Patent Agreements are Not Comparable to the
`Hypothetical License. .......................................................................................... 6 
`
`B. 
`
`Dr. Ugone’s Opinions Based on Finjan’s Prior License Agreements are
`Unreliable. ........................................................................................................................ 7 
`
`DR. UGONE’S OPINIONS REGARDING THE ROYALTY BASE ARE
`UNRELIABLE ............................................................................................................................ 9 
`
`DR. UGONE IMPERMISSIBLY USED JUNIPER’S ACTUAL REVENUES AS A
`CAP ON DAMAGES IN VIOLATION OF FEDERAL CIRCUIT PRECEDENT .................. 12 
`
`DR. UGONE’S OPINIONS REGARDING THE COST OF PURPORTED NON-
`INFRINGING ALTERNATIVES IS CONTRARY TO LAW AND UNRELIABLE ............. 14 
`
`VI. 
`
`CONCLUSION .......................................................................................................................... 15 
`
`i
`FINJAN’S MOTION TO EXCLUDE OPINIONS OF CASE NO. 3:17-cv-05659-WHA
`DEFENDANT’S DAMAGES EXPERT DR. KEITH R. UGONE
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`Case 3:17-cv-05659-WHA Document 231 Filed 11/12/18 Page 3 of 20
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`
`
`TABLE OF AUTHORITIES
`
`
`
`Page(s)
`
`
`
`Cases
`
`Acceleration Bay LLC v. Activision Blizzard Inc.,
`Civ A. No. 1:16-cv-00453-RGA, Dkt. No. 620 (D. Del. Oct. 30, 2018) ............................................ 4
`
`Accentra, Inc. v. Staples, Inc.,
`No. CV-07-5862 ABC, 2010 WL 8450890 (C.D. Cal. Sept. 22, 2010) ........................................... 15
`
`Aqua Shield v. Inter Pool Cover Team,
`774 F.3d 766 (Fed. Cir. 2014)........................................................................................................... 13
`
`Arctic Cat Inc. v. Bombardier Recreational Prods. Inc.,
`876 F.3d 1350 (Fed. Cir. 2017)......................................................................................................... 13
`
`DataQuill Ltd. v. High Tech Computer Corp.,
`887 F.Supp.2d 999 (S.D. Cal. 2011) ................................................................................................... 3
`
`Daubert v. Merrell Dow Pharms., Inc.,
`509 U.S. 579 (1993) ............................................................................................................................ 1
`
`Douglas Dynamics, LLC v. Buyers Prods. Co.,
`717 F.3d 1336 (Fed. Cir. 2013)................................................................................................... 12, 13
`
`Finjan, Inc. v. Secure Computing Corp.,
`626 F.3d 1197 (Fed. Cir. 2010)......................................................................................................... 10
`
`Finjan, Inc. v. Sophos, Inc.,
`244 F. Supp. 3d 1016 (N.D. Cal. 2017) .............................................................................................. 8
`
`Golight, Inc. v. Wal–Mart Stores, Inc.,
`355 F.3d 1327 (Fed. Cir. 2004)......................................................................................................... 13
`
`General Elec. Co. v. Joiner,
`522 U.S. 136 (1997) .......................................................................................................................... 12
`
`Georgia–Pacific Corp. v. U.S. Plywood Corp.,
`318 F. Supp. 1116 (S.D.N.Y. 1970) .................................................................................................... 2
`
`Golden Bridge Tech. v. Apple Inc.,
`No. 5:12-cv-04882-PSG, 2014 WL 2194501 (N.D. Cal. May 18, 2014) ......................................... 12
`
`Icon-IP Pty Ltd. v. Specialized Bicycle Components, Inc.,
`No. 12-cv-03844-JST, 2015 WL 1476399 (N.D. Cal. Mar. 31, 2015) ............................................. 15
`
`i
`FINJAN’S MOTION TO EXCLUDE OPINIONS OF CASE NO. 3:17-cv-05659-WHA
`DEFENDANT’S DAMAGES EXPERT DR. KEITH R. UGONE
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`Case 3:17-cv-05659-WHA Document 231 Filed 11/12/18 Page 4 of 20
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`
`
`Integra Lifescience I, Ltd. v. Merk KgaA,
`331 F.3d 860 (Fed. Cir. 2003)............................................................................................................. 3
`
`LaserDynamics, Inc. v. Quanta Computer, Inc.,
`694 F.3d 51 (Fed. Cir. 2012)........................................................................................................... 6, 8
`
`Lucent Techs. Inc., v. Gateway, Inc.,
`580 F.3d 1301 (Fed. Cir. 2009)........................................................................................................... 9
`
`M2M Sols. LLC v. Motorola Sols., Inc.,
`No. 12-33-RGA, 2016 WL 767900 (D. Del. Feb. 25, 2016) .............................................................. 3
`
`Mars, Inc. v. Coin Acceptors, Inc.,
`527 F.3d 1359 (Fed. Cir. 2008)......................................................................................................... 14
`
`MediaTek Inc. v. Freescale Semiconductor, Inc.,
`No. 11-cv-5341 YGR, 2014 WL 2854890 (N.D. Cal. June 20, 2014) ............................................. 11
`
`NetAirus Techs., LLC v. Apple, Inc.,
`No. LA CV10-03257-JAK (Ex), 2013 WL 11237200 (C.D. Cal. Oct. 23, 2013) .............................. 3
`
`Odetics, Inc. v. Storage Tech. Corp.,
`185 F.3d 1259 (Fed. Cir. 1999)........................................................................................................... 8
`
`Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc.,
`711 F.3d 1348 (Fed. Cir. 2013)......................................................................................................... 11
`
`ResQNet.com, Inc. v. Lansa, Inc.,
`594 F.3d 860 (Fed. Cir. 2010)..................................................................................................... 4, 5, 6
`
`Spectralytics, Inc. v. Cordis Corp.,
`650 F. Supp. 2d 900 (D. Minn. 2009) ............................................................................................... 14
`
`Sprint Commc'ns Co. L.P. v. Comcast IP Holdings, LLC,
`No. 12-1013-RGA, 2015 WL 456154 (D. Del. Jan. 30, 2015) ........................................................... 3
`
`Uniloc USA, Inc. v. Microsoft Corp.,
`632 F.3d 1292 (Fed. Cir. 2011)........................................................................................................... 3
`
`Wordtech Sys., Inc. v. Integrated Network Solutions, Inc.,
`609 F.3d 1308 (Fed. Cir. 2010)........................................................................................................... 3
`
`Other Authorities
`
`Federal Rules of Civil Procedure 26(a)(2) .............................................................................................. 12
`
`Federal Rules of Evidence 702 ........................................................................................................... 1, 11
`
`ii
`FINJAN’S MOTION TO EXCLUDE OPINIONS OF CASE NO. 3:17-cv-05659-WHA
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`Case 3:17-cv-05659-WHA Document 231 Filed 11/12/18 Page 5 of 20
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`
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`NOTICE OF MOTION AND MOTION
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`TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD:
`
`
`
`NOTICE IS HEREBY GIVEN that on November 29, 2018, at 8:00 a.m., or as soon thereafter
`
`as counsel may be heard by the Honorable William Alsup in Courtroom 12, 19th Floor, located at 450
`
`Golden Gate Avenue, San Francisco, California 94102, Plaintiff Finjan, Inc. (“Finjan”) will and hereby
`
`does move the Court for an order granting Finjan’s Motion to Exclude Opinions of Defendant’s
`
`Damages Expert Keith R. Ugone.
`
`
`
`This motion is based on this Notice of Motion, the following Memorandum of Points and
`
`Authorities, the Declaration of Cristina Martinez filed herewith and exhibits attached thereto, the
`
`proposed order submitted herewith, the pleadings and papers on file in this action, any evidence and
`
`argument presented to the Court at or before the hearing on this motion, and all matters of which the
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`Court may take judicial notice.
`
`STATEMENT OF RELIEF SOUGHT
`
`
`
`Finjan seeks an Order excluding the opinions of Juniper’s damages expert, Dr. Keith R. Ugone.
`
`regarding the reasonable royalty Juniper owes to Finjan as a result of its infringement of Finjan’s U.S.
`
`Patent No. 8,677,494 (the “ ‘494 Patent”).
`
`STATEMENT OF ISSUES
`
`
`
`Whether the Court should exclude the opinions of Juniper’s damages expert, Dr. Keith R.
`
`Ugone, regarding the amount of the reasonably royalty Juniper owes to Finjan based on his flawed
`
`analysis of purported value indicators, as unreliable, lacking foundation and methodologically flawed
`
`pursuant to Fed. R. Evid. 702 and Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 597 (1993).
`
`I.
`
`INTRODUCTION
`Plaintiff Finjan, Inc. (“Finjan”) respectfully requests the Court, pursuant to Fed. R. Evid. 702
`
`and Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 597 (1993), preclude defendant Juniper
`
`Network Inc.’s (“Juniper”) expert, Dr. Keith Ugone, from offering at trial unreliable and arbitrary
`
`1
`FINJAN’S MOTION TO EXCLUDE OPINIONS OF CASE NO. 3:17-cv-05659-WHA
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`Case 3:17-cv-05659-WHA Document 231 Filed 11/12/18 Page 6 of 20
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`
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`opinions based on flawed methodologies regarding the reasonable royalty Juniper owes to Finjan for
`
`Juniper’s infringement of Finjan’s U.S. Patent No. 8,677,494 (the “‘494 Patent”).
`
`Dr. Ugone did not perform a specific mathematical computation to arrive at a reasonable
`
`royalty figure. Rather, he picked a random sum based on his flawed evaluation of certain “value
`
`indicators” he contends would be relevant to the hypothetical negotiation. Declaration of Cristina
`Martinez (“Martinez Decl.”) filed herewith, Ex. 1,1 Ugone Rpt. ¶¶ 14-16. These purported “value
`indicators” include Dr. Ugone’s (i) improper use of Finjan and Juniper’s prior software and patent
`
`license agreements (ii) application of flawed royalty rates to Dr. Ugone’s incorrect royalty base; (iii) an
`
`impermissible cap on damages based on Juniper’s total profits, which are tied to his limited
`
`interpretation of the patented invention; and (iv) an insufficient and unsupported opinion regarding
`
`purported non-infringing alternatives. Id. Because Dr. Ugone’s opinion regarding each such value
`
`indicator is fundamentally unsound, the Court should preclude him from offering his flawed reasonable
`
`royalty opinion at trial.
`
`II.
`
`DR. UGONE’S ANALYSIS OF THE PARTIES’ PRIOR SOFTWARE AND PATENT
`LICENSE AGREEMENTS IS UNRELIABLE
`Dr. Ugone opined that certain of Juniper’s and Finjan’s prior software and/or patent license
`
`agreements are “value indicators” that the parties would look to in determining the amount of a
`
`reasonable royalty payment for a license to the ’494 Patent. Ex. 1, Ugone Rpt. ¶¶ 123-139. Not only
`
`did Dr. Ugone cherry-pick from the parties’ prior agreements to artificially lower his damages
`
`calculation, he also failed to establish the economic and technological comparability of these
`
`agreements, which is necessary to rely upon the agreements in the manner that he did for his opinion.
`
`As a preliminary matter, the first and second Georgia-Pacific factors consider “royalties
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`received by the patentee for licensing the patent in suit” and “[t]he rates paid by the licensee for the use
`
`of other patents comparable to the patent in suit.” Georgia–Pacific Corp. v. U.S. Plywood Corp., 318
`
`F. Supp. 1116, 1120 (S.D.N.Y. 1970). “[T]here must be a basis in fact to associate the royalty rates
`
`
`1 Unless otherwise noted, all exhibits are attached to the Declaration of Cristina Martinez in support of
`Finjan’s Motion to Exclude Opinions of Defendant’s Damages Expert Dr. Keith R. Ugone.
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`2
`FINJAN’S MOTION TO EXCLUDE OPINIONS OF CASE NO. 3:17-cv-05659-WHA
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`Case 3:17-cv-05659-WHA Document 231 Filed 11/12/18 Page 7 of 20
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`
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`used in prior licenses to the particular hypothetical negotiation at issue.” Uniloc USA, Inc. v. Microsoft
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`Corp., 632 F.3d 1292, 1317 (Fed. Cir. 2011). A party cannot rely on license agreements that are
`
`“radically different from the hypothetical agreement under consideration.” Id. at 1316 (citations
`
`omitted). Indeed, the Federal Circuit recognized that “comparisons to other licenses are inherently
`
`suspect because economic and scientific risks [between licenses] vary greatly.” Integra Lifescience I, Ltd.
`
`v. Merk KgaA, 331 F.3d 860, 871 (Fed. Cir. 2003).
`
`Consequently, “comparisons of past patent licenses to the infringement must account for the
`
`‘technological and economic differences’ between them.” Wordtech Sys., Inc. v. Integrated Network
`
`Solutions, Inc., 609 F.3d 1308, 1320 (Fed. Cir. 2010) (citation omitted); M2M Sols. LLC v. Motorola
`
`Sols., Inc., No. 12-33-RGA, 2016 WL 767900, at *8 (D. Del. Feb. 25, 2016) (excluding expert opinion
`
`that failed to consider the economic differences between negotiations of prior licenses and the
`
`hypothetical negotiation), citing DataQuill Ltd. v. High Tech Computer Corp., 887 F.Supp.2d 999,
`
`1022-23 (S.D. Cal. 2011) (“The testimony of a damages expert in a patent suit who relies on non-
`
`comparable licenses in reaching his royalty rate should be excluded.”); Sprint Commc'ns Co. L.P. v.
`
`Comcast IP Holdings, LLC, No. 12-1013-RGA, 2015 WL 456154, at *1–3 (D. Del. Jan. 30, 2015)
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`(excluding expert testimony based on prior license agreements because it was not “sufficiently
`
`comparable to the hypothetical licenses”); NetAirus Techs., LLC v. Apple, Inc., No. LA CV10-03257-
`
`JAK (Ex), 2013 WL 11237200, at *8 (C.D. Cal. Oct. 23, 2013) (granting motion to exclude expert
`
`damages opinions where expert did not demonstrate comparability). Here, as explained below, Dr.
`
`Ugone failed to account for such differences that render the parties’ prior agreements non-comparable
`
`to the hypothetical license and, as a result, his opinion based upon these agreements is unreliable.
`
`A.
`
`Dr. Ugone’s Opinions Based on Juniper’s Non-Comparable Agreements are
`Unreliable.
`Dr. Ugone opined that Juniper’s prior software and patent license agreements are indicative of
`
`the amount that Juniper would agree to pay as a reasonable royalty at the hypothetical negotiation. Ex.
`
`1, Ugone Rpt. ¶¶ 114-120. Specifically, Dr. Ugone relied upon Juniper’s (i) software license
`
`agreement with
`
` and (ii) patent settlement
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`3
`FINJAN’S MOTION TO EXCLUDE OPINIONS OF CASE NO. 3:17-cv-05659-WHA
`DEFENDANT’S DAMAGES EXPERT DR. KEITH R. UGONE
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`Case 3:17-cv-05659-WHA Document 231 Filed 11/12/18 Page 8 of 20
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`
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`license agreements with
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` (collectively, “Juniper’s Prior Patent Agreements”). Id. Because Dr. Ugone failed to
`
`establish the technological and economic comparability of these agreements to the hypothetical
`
`negotiation, his opinion is unreliable, unfounded and should not be presented to the jury.
`
`1.
`
`Juniper’s
`the Hypothetical License.
`Dr. Ugone should not be permitted to present to the jury his opinion that the amount of the
`
` is Not Comparable to
`
`
`
` can be used to determine the amount of the hypothetical license. Dr. Ugone
`
`performed no economic analysis of, and failed to account for technological differences between, the
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` compared to the hypothetical license. Ex. 1, Ugone Rpt. ¶¶ 118-120.
`
`The
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`
`
`which Juniper agreed to pay a software license fee of approximately
`
`. Ex. 1, Ugone
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`Rpt. ¶¶ 12(e)(ii), 14(c)(i), 138. Dr. Ugone opines that this amount is “informative as to” or a
`
`“reasonable check” on the amount of the hypothetical license. Ex. 1, Ugone Rpt. ¶¶ 120, 139. Dr.
`
`Ugone, however, made no effort to account for any of the economic or technological differences in his
`
`analysis that ultimately render the
`
` non-comparable to the hypothetical
`
`license, such that this software license agreement should not play any part in his opinion.
`
`Finjan’s damages expert, Mr. Arst, noted the “fundamentally different” rights that would be
`
`granted under the hypothetical patent license as compared to the
`Arst Rpt. at 34-36.2 For example, the
`intellectual property rights are licensed, placed limitations on usage and had time constraints. Ex. 3,
`
` explicitly acknowledges that no
`
`. Ex. 2,
`
`
`2 Courts have called into doubt the comparability of software license agreements to the extent an expert
`fails to establish the comparability to the hypothetical license. ResQNet.com, Inc. v. Lansa, Inc., 594
`F.3d 860, 870 (Fed. Cir. 2010) (software “rebundling licenses” had no relation to the claimed
`invention.); see also Ex. 4, Acceleration Bay LLC v. Activision Blizzard Inc., Civ A. No. 1:16-cv-
`00453-RGA, Dkt. No. 620 at 2 (D. Del. Oct. 30, 2018) (“[Software publisher agreement] is not a
`patent license and therefore not a license comparable to the one which would have resulted from a
`hypothetical negotiation. It is not relevant to the question of comparable licenses.”)(citation omitted).
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`4
`FINJAN’S MOTION TO EXCLUDE OPINIONS OF CASE NO. 3:17-cv-05659-WHA
`DEFENDANT’S DAMAGES EXPERT DR. KEITH R. UGONE
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`Case 3:17-cv-05659-WHA Document 231 Filed 11/12/18 Page 9 of 20
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` at ¶¶ 1, 8. Dr. Ugone acknowledged the existence of the economic
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`differences identified by Mr. Arst (Ex. 1, Ugone Rpt. ¶ 153 n. 429), but entirely failed to address them
`
`in rendering his opinion that the
`
` is comparable.
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`In addition, Dr. Ugone did not address any comparability between the benefits realized by
`
`Juniper as a result of the
`
` to the benefits specifically attributable to the
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`’494 Patent. A patent license allows a licensee freedom to operate whereas a software agreement
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`allows solely the right to use a particular software, which is a very different set of rights. Ex. 3,
`
`
`
` at ¶ 1. As Mr. Arst explained, and Juniper acknowledges, the software licensed under
`
`the
`
` relates to technology that is utilized by the accused products
`
`themselves. Ex. 2, Arst Rpt. at 34 n.112 (citing Juniper’s Patent L.R. 3-9 Responsive Damages
`
`Contentions, pp. 8-9). Thus, any benefits derived from
`
` are necessarily
`
`distinct from the footprint of the ’494 Patent. ResQNet.com, 594 F.3d at 869 (damages must be tied to
`
`claimed inventions footprint in the market place). Dr. Ugone did not account for these differences.
`
`For technological comparability, Dr. Ugone relied exclusively on the opinion of Juniper’s
`
`technical expert, Dr. Rubin, that the
`
` is technologically comparable to
`
`the hypothetical license. Ex. 1, Ugone Rpt. ¶ 12(e)(ii). However, neither Dr. Rubin nor Dr. Ugone
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`(who would not be qualified to do so) addressed exactly how the software license rights relate to the
`
`patent license rights that Juniper would require for freedom to operate with respect to the accused
`
`products, i.e., the SRX and Sky ATP, or the specific material technological differences between the
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`
`
` and the hypothetical license. Dr. Rubin and Dr. Ugone fail to address how
`
`exactly the
`
` software product is comparable to all of the benefits and rights disclosed in
`
`Claim 10 of the ‘494 Patent. Id., Ugone Rpt. ¶ 119. Thus, Dr. Ugone, who relied wholesale on Dr.
`
`Rubin’s analysis and made no effort whatsoever to account for these material technological or
`
`economic differences, should not be permitted to introduce his unreliable opinion at trial that the
`
`amount of the Joe Security License is informative of the amount of the hypothetical license.
`
`5
`FINJAN’S MOTION TO EXCLUDE OPINIONS OF CASE NO. 3:17-cv-05659-WHA
`DEFENDANT’S DAMAGES EXPERT DR. KEITH R. UGONE
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`Case 3:17-cv-05659-WHA Document 231 Filed 11/12/18 Page 10 of 20
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`2.
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`Juniper’s Prior Patent Agreements are Not Comparable to the
`Hypothetical License.
`Dr. Ugone’s opinion that the amount of Juniper’s Prior Patent Agreements is indicative of the
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`amount of the hypothetical license should also be excluded because he failed to establish the economic
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`and technological comparability with the hypothetical license between Finjan and Juniper. Ex. 1,
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`Ugone Rpt. ¶ 14(c)(ii), ¶¶ 116-117. Dr. Ugone discussed the amounts of these agreements, which
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`ranged from
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`, but entirely failed to account for the differences between them and
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`the hypothetical license. Id.
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`For example, all three of Juniper’s Prior Patent Agreements are settlement agreements. Ex. 2,
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`Arst Rpt. at pp. 41-44; see also id., at Ex. 3.1. Courts have found that settlement agreements, which
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`result from litigation, are fundamentally different from the hypothetical license, which is the result of
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`an arms-length negotiation between the parties, unless an expert establishes the comparability of the
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`settlement agreement. LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 77 (Fed. Cir.
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`2012) (“The propriety of using prior settlement agreements to prove the amount of a reasonable royalty
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`is questionable.”) (citations omitted); ResQNet.com, 594 F.3d at 872. Here, Dr. Ugone acknowledges
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`that each of the Juniper’s Prior Patent Agreements is a settlement agreement, but did not account for
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`such differences in his opinion. Ex. 1, Ugone Rpt. ¶¶ 116-117, 138-139.
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`Nor did Dr. Ugone account for another significant difference between Juniper’s Prior Patent
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`Agreements and the hypothetical license, namely that at the time of these agreements the validity and
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`infringement of the licensed patent rights had yet to be resolved, whereas under the hypothetical
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`negotiation the ‘494 Patent is assumed valid and infringed. Ex. 2, Arst Rpt. at pp. 41-44; see also id.,
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`at Ex. 3.1. Where there are questions regarding the validity or infringement, Dr. Ugone needed to
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`account for these issues and how it related to the license fee, as well as the other terms in those
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`agreements, but failed to do so.
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`Finally, Dr. Ugone did not account for differences in the rights granted under Juniper’s Prior
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`Patent Agreements, facts that Finjan’s damages expert detailed. Id. For example, Mr. Arst explained
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`that the
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` merely granted releases and/or covenants not to assert
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`6
`FINJAN’S MOTION TO EXCLUDE OPINIONS OF CASE NO. 3:17-cv-05659-WHA
`DEFENDANT’S DAMAGES EXPERT DR. KEITH R. UGONE
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`Case 3:17-cv-05659-WHA Document 231 Filed 11/12/18 Page 11 of 20
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`patents, whereas the hypothetical license at issue in this case would provide Juniper with a license to
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`the ‘494 Patent and the corollary benefits. Ex. 2, Arst Rpt. pp. 40-44. Dr. Ugone made no effort to
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`address the differences that exist between a release or covenant not to sue, compared to a license that
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`would be reached as a result of the hypothetical negotiation.
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`B.
`Dr. Ugone’s Opinions Based on Finjan’s Prior License Agreements are Unreliable.
`Dr. Ugone should be precluded from offering his opinion that the jury can rely on the amounts
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`of four of Finjan’s nineteen settlement and license agreements of its patent portfolio, as well as
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`purported “effective royalty rates” that Dr. Ugone attempts to recreate from hindsight, are indicative of
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`the value of the hypothetical license. Ex. 1, Ugone Rpt. ¶¶ 17, 135-137, 148. Dr. Ugone opined that
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`four of Finjan’s nineteen prior settlement and license agreements are “most relevant” to the
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`hypothetical negotiation—namely, settlement agreements that resolved litigation with
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` where no litigation was involved. Id. at ¶ 14. Based on these
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`, and an agreement with
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`agreements, Dr. Ugone opined that the hypothetical negotiation for a license to the ‘494 Patent would
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`result in an amount significantly less than the range of royalty payments in these agreements (
` Id. at ¶¶ 17, 135-137, 148.3
`However, Dr. Ugone’s manufactured effective royalty rates and opinion that does not account for the
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`) and an effective royalty rate of
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`actual circumstances of Finjan’s agreements lack foundation and should not be presented to the jury.
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`First, Dr. Ugone made no effort to account for differences between the parties’ circumstances
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`for each of Finjan’s prior four agreements and the circumstances of the hypothetical negotiation
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`between Juniper and Finjan. For example, and as discussed above, Dr. Ugone’s opinion is flawed
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`because he makes no effort to account for the fact that three of the four agreements Dr. Ugone relies
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`3 Dr. Ugone’s identification of the amount of certain of these agreements is wrong. Dr. Ugone states
`that the Sophos settlement amount was
` when, in fact, the agreement totaled
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`Ex. 2, Arst Rpt. at 10-11. Similarly,
` amount was
`, but Dr. Ugone excludes
` to “adjust” for another patent without explaining why the settlement agreement supports
`such an exclusion. Ex. 1, Ugone Rpt. ¶¶ 10(c), 14(b).
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`7
`FINJAN’S MOTION TO EXCLUDE OPINIONS OF CASE NO. 3:17-cv-05659-WHA
`DEFENDANT’S DAMAGES EXPERT DR. KEITH R. UGONE
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`Case 3:17-cv-05659-WHA Document 231 Filed 11/12/18 Page 12 of 20
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`upon are settlement agreements, namely the settlement agreements with
`at ¶¶ 10(c) n.20, ¶¶ 72, 76-89, 136.4
`Furthermore, despite the parties’ agreement that the date of the hypothetical negotiation is
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`. Id.
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`October 2015, (Ex. 2, Arst Rpt. at 29; Ex. 1, Ugone Rpt. at ¶ 7) Dr. Ugone nonetheless finds these
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`agreements as the “most relevant” even though they were executed after the hypothetical negotiation
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`date (i.e.,
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`), while disregarding other agreements
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`executed prior to the hypothetical negotiation date. Ex. 1, Ugone Rpt. at ¶¶ 10(c) n.20, 72, 76-89, 136.
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`Courts exclude opinions that fail to account for differences in the parties’ circumstances, particularly
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`where a license is executed after the hypothetical negotiation. LaserDynamics, 694 F.3d at 78;
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`Odetics, Inc. v. Storage Tech. Corp., 185 F.3d 1259, 1276–77 (Fed. Cir. 1999). Without any analysis
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`comparing the circumstances of these agreements with the facts of the hypothetical negotiation
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`between Finjan and Juniper, Dr. Ugone’s opinion is unreliable.
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`Second, Dr. Ugone’s effective royalty rate opinions lack foundation and are unreliable. For
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`example, Dr. Ugone purports to calculate the high-end of his effective reasonable royalty rate range of
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`. Ex. 1, Ugone Rpt. ¶ 66, n.170.
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`Importantly, the Sophos settlement license followed a two-week jury trial in which the verdict found
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`Sophos liable for infringement and awarded $15 million in damages. Ex. 2, Arst Rpt. at 10. During
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`the trial, Finjan’s fact witnesses and damages expert testified regarding an applicable royalty rate of
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`8%-16%. Ex. 6, Sophos Trial Tr. at 825:2-9, 843:14-18. Dr. Ugone ignores the jury verdict and
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`instead bases his effective royalty rate on an e-mail from December 2014, which was more than two
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`years before the jury’s award, the Court’s confirmation of that verdict and the subsequent settlement
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`agreement. Ex. 1, Ugone Rpt. ¶ 66 n.170. Dr. Ugone provides no analysis comparing the
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`4 For example, the Sophos agreement came after Finjan obtained a jury verdict of infringement and
`received the Court’s post-trial motion confirming the jury verdict. Finjan, Inc. v. Sophos, Inc., 244 F.
`Supp. 3d 1016, 1042 (N.D. Cal. 2017). The Websense agreement came after Finjan had
`unsuccessfully sought to enforce certain patents against Websense in litigation in Delaware and the
`parties were involved in a second litigation in California. Ex. 5, Websense License at ¶¶ A, B. These
`are the types of circumstances that Dr. Ugone improperly failed to consider.
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`8
`FINJAN’S MOTION TO EXCLUDE OPINIONS OF CASE NO. 3:17-cv-05659-WHA
`DEFENDANT’S DAMAGES EXPERT DR. KEITH R. UGONE
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`Case 3:17-cv-05659-WHA Document 231 Filed 11/12/18 Page 13 of 20
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`circumstances of the Sophos settlement agreement to those of the hypothetical negotiation. Similarly,
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`Dr. Ugone calculates the low end of his effective reasonable royalty rate range
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` based on the
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`. Id., Ugone Rpt. ¶ 66. Again, Dr. Ugone relies on an email identifying purported
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`royalty rates and a patent license offer. Id. However, Dr. Ugone provides no context for what
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`revenues,
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`, that were purportedly used in
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`connection with Dr. Ugone’s alleged effectively royalty rate. He further has no explanation or basis to
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`suggest that
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` are equivalent or comparable in any manner to
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`Juniper’s accused revenues. As such, Dr. Ugone’s opinions that Finjan’s prior licenses are indicative
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`of the amount and effective royalty rate of the hypothetical license should be excluded.
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`III. DR. UGONE’S OPINIONS REGARDING THE ROYALTY BASE ARE UNRELIABLE
`Contrary to the fundamental premise that a damages expert must begin his analysis with the
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`assumption that the asserted patent is valid and infringed, Dr. Ugone excluded revenues of the
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`infringing models at issue without any e