Case 3:14-cv-02235-DMS-BLM Document 462 Filed 07/26/18 PageID.22325 Page 1 of 7
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`JOHN ALLCOCK (Bar No. 98895)
`john.allcock@dlapiper.com
`SEAN C. CUNNINGHAM (Bar No. 174931)
`sean.cunningham@dlapiper.com
`ERIN GIBSON (Bar No. 229305)
`erin.gibson@dlapiper.com
`ROBERT WILLIAMS (Bar No. 246990)
`robert.williams@dlapiper.com
`TIFFANY MILLER (Bar No. 246987)
`tiffany.miller@dlapiper.com
`JACOB ANDERSON (Bar No. 265768)
`jacob.anderson@dlapiper.com
`DLA PIPER LLP (US)
`401 B Street, Suite 1700
`San Diego, California 92101-4297
`Tel: 619.699.2700
`Fax: 619.699.2701
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`ROBERT BUERGI (Bar No. 242910)
`robert.buergi@dlapiper.com
`AMY WALTERS (Bar No. 286022)
`amy.walters@dlapiper.com
`DLA PIPER LLP (US)
`2000 University Avenue
`East Palo Alto, CA 94303-2215
`Tel: 650.833.2000
`Fax: 650.833.2001
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`Attorneys for
`APPLE INC.
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`UNITED STATES DISTRICT COURT
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`SOUTHERN DISTRICT OF CALIFORNIA
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`WI-LAN, INC.,
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`Plaintiff,
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`v.
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`APPLE INC.,
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`Defendant.
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`AND RELATED
`COUNTERCLAIMS
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`DLA PIPER LLP (US)
`S A N D I E G O
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`WEST\282494158.2
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`CASE NO. 3:14-cv-1507-DMS-BLM
`(consolidated);
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`CASE NO. 3:14-cv-02235-DMS-BLM
`(lead case)
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`APPLE INC.’S OBJECTIONS TO
`DAVID KENNEDY’S OPINIONS
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`Dept.: 13A
`Judge: Hon. Dana M. Sabraw
`Magistrate Judge: Hon. Barbara L. Major
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`OBJECTIONS TO KENNEDY’S OPINIONS
`3:14-CV-001507-DMS-BLM
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`Case 3:14-cv-02235-DMS-BLM Document 462 Filed 07/26/18 PageID.22326 Page 2 of 7
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`In order to avoid disrupting the presentation of evidence at trial with multiple
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`preservation objections, Apple Inc. (“Apple”) respectfully submits for the record
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`the following written objections to the expected testimony by David Kennedy. Mr.
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`Kennedy is expected to testify in support of Wi-LAN’s unapportioned damages
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`claim, which is legally flawed. Therefore, this testimony should not be admitted for
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`the reasons stated in Apple’s Daubert motion briefing and trial brief, and as
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`irrelevant and more prejudicial than probative under Federal Rules of Evidence
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`401, 402 and 403. Dkt. Nos. 333, 373, 433.
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`First, Mr. Kennedy rejects the proper smallest saleable patent-practicing unit,
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`the baseband processor, and instead uses the entire iPhone as his royalty base. Dkt.
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`No. 433 at 12. Allowing this evidence is contrary to Federal Circuit damages law
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`and Supreme Court law starting in 1884 with Garretson v. Clark. Indeed, the
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`Federal Circuit explained earlier this month that “where multi-component products
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`are accused of infringement, the royalty base should not be larger than the smallest
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`salable unit embodying the patented invention.” Power Integrations, Inc. v.
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`Fairchild Semiconductor Int’l, Inc., 894 F.3d 1258 (Fed. Cir. 2018);
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`Commonwealth Sci. & Indus. Research Org. v. Cisco Sys., Inc., 809 F.3d 1295,
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`1302 (Fed. Cir. 2015) (“Where small elements of multi-component products are
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`accused of infringement, calculating a royalty on the entire product carries a
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`considerable risk that the patentee will be improperly compensated for non-
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`infringing components of that product.”). “Fundamentally, the smallest salable
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`patent-practicing unit principle states that a damages model cannot reliably
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`apportion from a royalty base without that base being the smallest salable patent-
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`practicing unit.” CSIRO, 809 F.3d at 1303; LaserDynamics, Inc. v. Quanta
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`Comput., Inc., 694 F.3d 51, 67 (Fed. Cir. 2012). “A patentee should not be able to
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`opt in or out of the smallest salable patent-practicing unit doctrine based on its
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`decision of whom to sue.” GPNE Corp. v. Apple, Inc., No. 12-cv-2885-LHK, 2014
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`DLA PIPER LLP (US)
`S A N D I E G O
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`WL 1494247, at *12 (N.D. Cal. Apr. 16, 2014). Here, Wi-LAN will be permitted
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`OBJECTIONS TO KENNEDY’S OPINIONS
`3:14-CV-001507-DMS-BLM
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`Case 3:14-cv-02235-DMS-BLM Document 462 Filed 07/26/18 PageID.22327 Page 3 of 7
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`to opt out of the smallest salable unit doctrine against iPhones with Qualcomm
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`chips, after having opted in with respect to iPhones with Intel chips.
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`Second, Mr. Kennedy does not apportion the value of the asserted patents by
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`using rates from comparable licenses. The Federal Circuit has held that “a
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`methodology that values the asserted patent based on comparable licenses” may
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`constitute the required apportionment. CSIRO, 809 F.3d at 1303. “Such a model
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`begins with rates from comparable licenses and then account[s] for differences in
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`the technologies and economic circumstances of the contracting parties.” Id.
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`(internal quotations and citations omitted). When license-based apportionment
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`takes the place of actual apportionment, the Federal Circuit requires that “damages
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`testimony regarding those licenses takes into account the very types of
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`apportionment principles contemplated in Garretson.” Ericsson, Inc. v. D-Link
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`Sys., Inc., 773 F.3d 1201, 1228 (Fed. Cir. 2014). Instead, Mr. Kennedy disregards
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`these requirements and offers opinions based on unadjusted portfolio license
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`agreements and royalty rate sheets that do not allow the jury to weigh the economic
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`value of the patented feature against the economic value of the features and services
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`covered by the license agreement or license offer. See id.
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`Third, Mr. Kennedy includes millions of iPhones that do not even allegedly
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`infringe the asserted patents his damages calculations based on a fundamental
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`misunderstanding of Wi-LAN’s infringement case. Wi-LAN’s infringement claims
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`requires(among other things) a VoLTE connection. iPhones that have never been
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`configured by the carrier to make a VoLTE call cannot infringe, even under Wi-
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`LAN’s theory. Thus, even assuming infringement based on Wi-LAN’s theory,
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`these iPhones that are not VoLTE-enabled cannot infringe and should not be
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`included in the damages base.
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`Fourth, Mr. Kennedy inappropriately uses survey results from Wi-LAN’s
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`survey expert, Professor Prince as a proxy for apportionment. Professor Prince’s
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`DLA PIPER LLP (US)
`S A N D I E G O
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`survey results do not apportion the relative value between the patented and
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`OBJECTIONS TO KENNEDY’S OPINIONS
`3:14-CV-001507-DMS-BLM
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`Case 3:14-cv-02235-DMS-BLM Document 462 Filed 07/26/18 PageID.22328 Page 4 of 7
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`unpatented features, yet Mr. Kennedy’s opinions in his expert report relied on those
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`calculations as a proxy for apportionment. Mr. Kennedy’s opinions based on
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`Professor Prince’s calculations are therefore inadmissible because the patentee
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`“must in every case give evidence tending to separate or apportion the defendant’s
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`profits and the patentee’s damages between the patented feature and the unpatented
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`features.” Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1318 (Fed. Cir.
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`2011) (quoting Garretson v. Clark, 111 U.S. 120, 121 (1884)); Finjan, Inc. v. Blue
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`Coat Sys., Inc., 879 F.3d 1299, 1311 (Fed. Cir. 2018) (“Further apportionment was
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`required to reflect the value of the patented technology compared to the value of the
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`unpatented elements.”).
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`Fifth, Mr. Kennedy’s opinions that rely on Dr. Madisetti’s unreliable benefits
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`opinions should fall with Dr. Madisetti’s opinions, which are inadmissible for the
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`reasons stated in Apple’s objections to Dr. Madisetti’s testimony. Dkt. No. 453.
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`Sixth, Mr. Kennedy should not be permitted to offer testimony regarding
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`unfairly prejudicial, large financial numbers, including those identified in Apple’s
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`Motion In Limine No. 3. Dkt. No. 405. In addition, Wi-LAN failed to offer any
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`testimony regarding the technical comparability of these licenses. Federal Circuit
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`law does not permit Wi-LAN and its damages expert, Mr. Kennedy to “skew the
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`damages horizon for the jury” with large numbers. Uniloc USA, Inc., 632 F.3d at
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`1320. Wi-LAN and Mr. Kennedy intend to disregard this rule and show the jury
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`certain Apple license amounts without any adjustments to account for those
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`differences for the sole purpose of establishing, according to Wi-LAN’s damages
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`expert, that “Apple is willing to pay a substantial sum for the rights to use valuable
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`patented technology.” Dkt. No. 352, Ex. 1, Kennedy Report at ¶ 514. In short, Mr.
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`Kennedy intends to do precisely what the Federal Circuit prohibits: “skew the
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`damages horizon for the jury” with big dollar numbers. Uniloc USA, Inc., 632 F.3d
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`at 1320. Because the licenses are so radically different from the agreement arising
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`DLA PIPER LLP (US)
`S A N D I E G O
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`out of a hypothetical negotiation for six patents allegedly directed to a fringe feature
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`OBJECTIONS TO KENNEDY’S OPINIONS
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`Case 3:14-cv-02235-DMS-BLM Document 462 Filed 07/26/18 PageID.22329 Page 5 of 7
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`(VoLTE), these amounts “serve[] no purpose other than to increase the reasonable
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`royalty rate above rates more clearly linked to the economic demand for the
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`claimed technology.” LaserDynamics, Inc., 694 F.3d at 80-81 (internal quotations
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`omitted).
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`The unfair prejudice from these numbers significantly outweighs their
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`probative value because an expert may not rely on license agreements that are
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`“radically different from the hypothetical agreement under consideration” to
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`determine a reasonable royalty. Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d
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`1301, 1327 (Fed. Cir. 2009). As another judge in this District noted in DataQuill
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`Ltd. v. High Tech Comput. Corp., “where a license covers a portfolio of patents or
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`includes other intellectual property or services, Plaintiff must present evidence
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`sufficient to allow the jury to weigh the economic value of the patented feature
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`against the economic value of the features and services covered by the license
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`agreement.” 887 F. Supp. 2d 999, 1021-25 (S.D. Cal. 2011) (quoting
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`LaserDynamic, Inc. v. Quanta Comput., Inc., No. 06-cv-348, 2011 WL 7563818, at
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`*3 (E.D. Tex. Jan. 7, 2011)). Here, Mr. Kennedy admitted “there are too many
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`differences between these licenses and the Hypothetical License to be able to
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`calculate an acceptably comparable per‐device royalty rate.” Dkt. No. 352, Ex. 1,
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`Kennedy Report, ¶ 483.
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`Seventh, Mr. Kennedy should not be permitted to offer the new opinions in
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`Wi-LAN’s Daubert opposition brief that “the value of an accused iPhone’s
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`unaccused features can be calculated by subtracting Prof. Prince’s results from the
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`accused iPhone profit—leaving behind only the value of the unaccused features.”
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`Dkt No. 352 at 18-19.
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`For the foregoing reasons, and for the reasons set forth in Apple’s Daubert
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`briefing (Dkt. Nos. 333, 373), Apple’s motion in limine (Dkt. No. 405), and
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`Apple’s trial brief (Dkt. No. 433), the Court should sustain Apple’s objections and
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`DLA PIPER LLP (US)
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`exclude Mr. Kennedy’s opinions about (a) the appropriate damages base (including
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`OBJECTIONS TO KENNEDY’S OPINIONS
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`Case 3:14-cv-02235-DMS-BLM Document 462 Filed 07/26/18 PageID.22330 Page 6 of 7
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`the noninfringing iPhones in his damages base); (b) the appropriate royalty rate; (c)
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`his “Survey Approach” to calculating the purported benefits of the asserted patents
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`(including his opinions about the “profit impact” to Apple of “avoiding” the
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`asserted patents); (d) his “Network Infrastructure Cost Approach” to calculating the
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`purported benefits of the asserted patents; (e) the parties’ license agreements (for
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`which Mr. Kennedy performed no apportionment), and (f) the Wi-LAN Rate Sheets
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`(for which Mr. Kennedy performed no apportionment); and (g) the new opinion
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`found in Wi-LAN’s Daubert opposition brief.
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`Dated: July 26, 2018
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`DLA PIPER LLP (US)
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`By /s/ Sean C. Cunningham
`JOHN ALLCOCK
`SEAN C. CUNNINGHAM
`ERIN GIBSON
`ROBERT BUERGI
`ROBERT WILLIAMS
`TIFFANY MILLER
`JACOB ANDERSON
`AMY WALTERS
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`Attorneys for
`APPLE INC.
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`OBJECTIONS TO KENNEDY’S OPINIONS
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`Case 3:14-cv-02235-DMS-BLM Document 462 Filed 07/26/18 PageID.22331 Page 7 of 7
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`CERTIFICATE OF SERVICE
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`I hereby certify that on July 26, 2018, I electronically transmitted the
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`attached document to the Clerk’s Office using the CM/ECF System for filing and
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`transmittal of a Notice of Electronic Filing to the CM/ECF registrants.
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` /s/ Sean C. Cunningham
`Sean C. Cunningham
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`OBJECTIONS TO KENNEDY’S OPINIONS
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