Case 1:16-cv-00453-RGA Document 692 Filed 09/04/19 Page 1 of 17 PageID #: 52315
`
`IN THE UNITED STATES DISTRJCT COURT
`FOR THE DISTRJCT OF DELA WARE
`
`ACCELERATION BAY LLC,
`
`Plaintiff,
`
`V.
`
`ACTIVISION BLIZZARD INC.,
`
`Defendant.
`
`Civil Action No. 1: 16-cv-00453-RGA
`
`MEMORANDUM OPINION
`
`Presently before me are Plaintiffs Motion to Exclude Opinions of Catharine M. Lawton
`
`(DJ. 647), Defendant' s Motion in Response to Acceleration Bay' s Damages Proffer (D.I. 650),
`
`and Defendant's Motion to Strike Supplemental Expert Damages Report (D .I. 651 ). I resolve
`
`these motions as follows.
`
`I.
`
`BACKGROUND
`
`Acceleration Bay LLC ("Acceleration") filed suit against Activision Blizzard Inc.
`
`("Activision") on June 17, 2016. (D.I. 1). It alleges that certain versions of Activision's World
`
`of Warcraft ("WoW"), Call of Duty ("CoD"), and Destiny video games infringe its patents.
`
`(Id.). I scheduled this case for a jury trial to start on October 29, 2018. (D .I. 545). That trial did
`
`not happen, however, as it was unclear on the eve of trial whether Plaintiff had an admissible
`
`damages case. (D.I. 619 (describing the sequence of events that led me to continue the trial)). I
`
`postponed the trial indefinitely, pending resolution of the cloud of issues hanging over Plaintiffs
`
`case. (D.I. 613).
`
`

`

`Case 1:16-cv-00453-RGA Document 692 Filed 09/04/19 Page 2 of 17 PageID #: 52316
`
`Following the cancellation of trial, I issued an order allowing Plaintiff a final opportunity
`
`to present an admissible damages case. (D .I. 619 at 2). I granted Plaintiff permission to
`
`supplement its expert reports and allowed Defendant a chance to respond. (Id.). Plaintiff later
`
`requested that it be allowed to submit a report from a new damages expert, Mr. Russell Parr,
`
`rather than supplementing its earlier expert' s report. (D.I. 630). I permitted Plaintiff to submit
`
`such a report with the caveat that I may limit the report depending on its contents. (Id. at 3 n.1 ).
`
`In his report, Mr. Parr opines on seven royalties derived using three approaches: cost
`
`savings, revenue-based, and user-based. The following chart provides a summary of those
`
`opm10ns:
`
`No.
`
`Title
`
`Equation
`
`Amount
`Ill
`Millions
`
`Dr.
`Valerdi
`
`Inputs:
`Boeing/
`Panthesis
`License
`
`Survey
`
`1
`
`2
`
`3
`
`4
`
`Cost Savings:
`Licensing
`Histo
`Cost Savings:
`Rate of
`Return
`Cost Savings:
`Replacement
`Cost of
`Ca ital
`[Alt.] Cost
`Savings:
`Replacement
`Cost of
`Ca ital
`
`$ 2.4 Billion x 12%
`
`$288.30
`
`$2.54 Billion x 12%
`
`$304
`
`$2.4 Billion x 5.9%
`
`$141.70
`
`$2.4 Billion x 5.9% x 2
`
`$283.50
`
`y
`
`y
`
`y
`
`y
`
`1 Plaintiff disagrees with listing the Boeing/Panthesis License as an input in the Rate of Return
`analysis. It argues, "[Mr. Parr' s] only reference to the Boeing/Panthesis rate was to use the
`lesser of the two rates to make the analysis even more conservative." (D.I. 665 at 14 n.7). I do
`not agree with Plaintiffs conclusion. For example, Mr. Parr opines that 30.3% of WoW
`revenues are associated with the patented invention. (D .I. 642-1 , Exh. A at 1 196). He then says,
`"The 30.3% ofrevenues associated with the patent[ed] invention provides significant support for
`the Boeing/Panthesis royalty rate of 12%. These calculations yield a total royalty of
`approximately $304 million ($2,536,822,551 times 12%)." (Id.). While it is true that Mr. Parr
`appears to use the Boeing/Panthesis License as a means of cutting down a potentially higher rate,
`the result is that Mr. Parr input the rate from the license directly into his Rate of Return analysis.
`
`2
`
`

`

`Case 1:16-cv-00453-RGA Document 692 Filed 09/04/19 Page 3 of 17 PageID #: 52317
`
`Cost Savings:
`Maintenance
`Costs
`Revenue(cid:173)
`Based
`User-Based
`
`5
`
`6
`
`7
`
`$132 Million x 2
`
`$264.80
`
`$4.5 Billion x 57% x 12%
`
`$57 x 12% x 57% x 61 Million
`
`$305
`
`$240
`
`II.
`
`LEGAL STANDARDS
`
`A. Daubert
`
`Federal Rule of Evidence 702 sets out the requirements for expert witness testimony and
`
`states:
`
`A witness who is qualified as an expert by knowledge, skill,
`experience, training, or education may testify in the form of an
`opinion or otherwise if: (a) the expert's scientific, technical, or other
`specialized knowledge will help the trier of fact to understand the
`evidence or to determine a fact in issue; (b) the testimony is based
`on sufficient facts or data; ( c) the testimony is the product of reliable
`principles and methods; and ( d) the expert has reliably applied the
`principles and methods to the facts of the case.
`
`Fed. R. Evid. 702. The Third Circuit has explained:
`
`Rule 702 embodies a trilogy of restrictions on expert testimony:
`qualification, reliability and fit. Qualification refers to the
`requirement that the witness possess specialized expertise. We have
`interpreted this requirement liberally, holding that a broad range of
`knowledge, skills, and training qualify an expert. Secondly, the
`testimony must be reliable; it must be based on the methods and
`' subjective belief or
`procedures of science' rather than on
`unsupported speculation; the expert must have good grounds for his
`In sum, Daubert holds that an inquiry into the
`or her belief.
`reliability of scientific evidence under Rule 702 requires a
`determination as to its scientific validity. Finally, Rule 702 requires
`that the expert testimony must fit the issues in the case. In other
`words, the expert' s testimony must be relevant for the purposes of
`the case and must assist the trier of fact. The Supreme Court
`explained in Daubert that Rule 702's helpfulness standard requires
`a valid scientific connection to
`the pertinent inquiry as a
`precondition to admissibility.
`
`By means of a so-called "Daubert hearing," the district court acts as
`a gatekeeper, preventing opinion testimony that does not meet the
`requirements of qualification, reliability and fit from reaching the
`
`3
`
`

`

`Case 1:16-cv-00453-RGA Document 692 Filed 09/04/19 Page 4 of 17 PageID #: 52318
`
`jury. See Daubert ("Faced with a proffer of expert scientific
`testimony, then, the trial judge must determine at the outset,
`pursuant to Rule 104(a) of the Federal Rules of Evidence whether
`the expert is proposing to testify to (1) scientific knowledge that (2)
`will assist the trier of fact to understand or determine a fact in
`issue.").
`
`Schneider ex rel. Estate of Schneider v. Fried, 320 F.3d 396, 404- 05 (3d Cir. 2003) (cleaned up). 1
`
`B. Motions to Strike
`
`Federal Rule of Civil Procedure 37(c)(l) provides,"If a party fails to provide information .
`
`. . as required by Rule 26(a) or (e), the party is not allowed to use that information ... to supply
`
`evidence on a motion, at a hearing, or at trial, unless the failure was substantially justified or is
`
`harmless." To determine whether a failure to disclose was harmless, courts in the Third Circuit
`
`consider the Pennypack factors: (1) the prejudice or surprise to the party against whom the
`
`evidence is offered; (2) the possibility of curing the prejudice; (3) the potential disruption of an
`
`orderly and efficient trial; (4) the presence of bad faith or willfulness in failing to disclose the
`
`evidence; and (5) the importance of the information withheld. Konstantopoulos v. Westvaco Corp.,
`
`112 F.3d 710, 719 (3d Cir. 1997) (citing Meyers v. Pennypack Woods Home Ownership Ass 'n, 559
`
`F.2d 894, 904-05 (3d Cir. 1977)). "[T]he exclusion of critical evidence is an ' extreme' sanction,
`
`not normally to be imposed absent a showing of willful deception or 'flagrant disregard' of a court
`
`order by the proponent of the evidence." Id. The determination of whether to exclude evidence is
`
`within the discretion of the district court. Id.
`
`Ill.
`
`ANALYSIS
`
`Defendant moves to strike Mr. Parr' s report or, in the alternative, to exclude large
`
`portions of Mr. Parr' s report on Daubert grounds. I will grant Defendant's motion to strike in
`
`1 The Court of Appeals wrote under an earlier version of Rule 702, but the 2011 amendments to it
`were not intended to make any substantive change.
`
`4
`
`

`

`Case 1:16-cv-00453-RGA Document 692 Filed 09/04/19 Page 5 of 17 PageID #: 52319
`
`two significant respects: (1) I will strike Mr. Parr's reliance on Dr. Valerdi for "cost savings"
`
`opinions and (2) I will strike Mr. Parr's use of certain Activision surveys as the grounds for
`
`apportioning the royalty base. I recognize that exclusion of those two aspects of Mr. Parr's
`
`report leaves Plaintiff with no intact damages theories. For completeness, however, I address
`
`each of Defendant's other Daubert arguments and Defendant's motion to strike Mr. Parr's entire
`
`report. I also address Plaintiffs motion to exclude certain opinions of Defendant's damages
`
`expert.
`
`A. Defendant 's Motion to Exclude Mr. Parr 's Opinions
`
`Defendant moves to exclude Mr. Parr's expert opinion on several grounds, including: (1)
`
`reliance on an unreliable cost savings opinion, (2) failure to properly apportion, (3) reliance on a
`
`non-comparable license, (4) failure to address negative facts, and (5) failure to apprehend the
`
`scope of the alleged method claim infringement. I address each of its arguments in turn.
`
`1. "Cost Savings" Opinions: Reliance on Dr. Valerdi2
`
`Five of Mr. Parr's reasonable royalty calculations rely on "cost savings" calculations
`
`done by Dr. Ricardo Valerdi. (See D.I. 444-1 , Exh. C-2 (Valerdi expert report)). Dr. Valerdi
`
`specifically opines on "the cost of rearchitecting each of the Accused Products in this case in
`
`2 Defendant previously objected to Dr. Valerdi's opinion based on the computer program he used
`to generate his $7 billion redesign estimate. (D.I. 442 at 48-49). I dismissed Defendant's
`argument as a "failure of proof argument." (D.I. 578 at 30-31). Plaintiff characterizes that
`decision as an approval of Dr. Valerdi's opinion. (D.I. 665 at 3). It was not. My decision was a
`resolution of the specific issues Defendant chose to raise given the status of Plaintiffs damages
`case at that time. Defendant does not renew its earlier arguments in this briefing. Rather, it
`"raises new arguments germane to Mr. Parr's extended reliance on Dr. Valerdi's estimates."
`(D.I. 650 at 23 n.12). Defendant's decision to identify more specific issues with Dr. Valerdi's
`opinion at this juncture makes sense. Never before has Plaintiff relied on Dr. Valerdi as a source
`of its damages base. Accordingly, I will address Defendant's new arguments related to Dr.
`Valerdi' s opinion.
`
`5
`
`

`

`Case 1:16-cv-00453-RGA Document 692 Filed 09/04/19 Page 6 of 17 PageID #: 52320
`
`order to develop a new networking platform for each of the accused games." (Id. at 1). Dr.
`
`Valerdi' s estimated cost ofrearchitecting the accused games is $2.4 billion. (Id. at 12-13 ).
`
`In forming his opinion, Dr. Valerdi relied on:
`
`the opinions of Drs. Medvidovic and Mitzenmacher that the Accused Products are
`infringing each of the Asserted Claims. [He] further relied on their opinions that
`there are no viable non-infringing alternatives to the Asserted Claims, but that, if
`there were such an alternative, it would require rearchitecting the game to develop
`a new network architecture and associated functionality.
`
`(Id. at 3). Dr. Valerdi's bases his estimate of the cost on the number oflines of code in the
`
`current games. (See generally D.I. 444-1 , Exh. C-2). Essentially, he estimates the cost of
`
`developing the software "as-is." (D.I. 653-1 , Exh. 7 at 100:6-11). His opinion does not,
`
`however, estimate the cost of making any particular alternative network.
`
`"Reliance upon estimated cost savings from use of the infringing product is a well settled
`
`method of determining a reasonable royalty." Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d
`
`1075, 1080-81 (Fed. Cir. 1983) (allowing damages theory based on cost difference between use
`
`of an infringing snow-making machine versus a prior art machine); see also Prism Techs. LLC v.
`
`Sprint Spectrum L.P., 849 F.3d 1360, 1376 (Fed. Cir. 2017) (affirming damages award that was
`
`based, in part, on the costs saved by renting an infringing backhaul structure versus building a
`
`non-infringing backhaul structure); Powell v. Home Depot US.A ., Inc. , 663 F.3d 1221 , 1240-41
`
`(Fed. Cir. 2011) (affirming jury damages award that was based, in part, on savings from a
`
`reduction in injuries caused by a prior art radial arm saw as a result of the patented invention).
`
`The Federal Circuit's precedent on cost savings does not, however, support the admissibility of
`
`the estimated cost to switch to an undefined alternative that the patentee contends does not exist.
`
`Defendant argues that Dr. Valerdi' s cost savings opinion is "no more reliable or scientific
`
`than an estimate of the cost to drive to Shangri-La, or El Dorado, or any other imaginary place
`
`with an unspecified location." (D.I. 679 at 8). As such, Defendant notes, Dr. Valerdi's cost
`
`6
`
`

`

`Case 1:16-cv-00453-RGA Document 692 Filed 09/04/19 Page 7 of 17 PageID #: 52321
`
`savings conclusions are inherently untestable. (Id.) . I agree. Dr. Valerdi does not articulate any
`
`characteristics of a non-infringing network and, indeed, adopts the position that such a network
`
`does not exist. It defies logic, then, that Dr. Valerdi is able to estimate the cost of making such a
`
`thing. As a theoretical matter, one could postulate that the cost of making something that does
`
`not exist would cost infinitely more, or infinitely less, than the structure that does exist. Dr.
`
`Valerdi provides no justification as to why developing an alternative network would, in theory,
`
`cost exactly the same amount as developing the existing network. Of course, he cannot justify
`
`this conclusion because he has no basis in fact for concluding that an alternative network might
`
`exist at all. Indeed, there is no basis in fact to conclude that creation of the infringing network
`
`saved Defendant any money over a theoretical alternative.
`
`Dr. Valerdi ' s opinion is not an acceptable basis for determining an amount of costs saved
`
`by using the accused infringing technology. It is entirely speculative, untestable, and divorced
`
`from the facts of this case. Thus, I will exclude Dr. Parr's "cost saving" reasonable royalty
`
`opinions as they depend entirely on Dr. Valerdi's opinion.
`
`As this was Plaintiffs final opportunity to present a damages case, Plaintiff will not have
`
`an opportunity to submit revised expert reports from Mr. Parr or Dr. Valerdi. Accordingly, I do
`
`not consider Defendant's blanket objection that Plaintiff did not cite authority supporting the
`
`admissibility or sufficiency of certain cost savings opinions. (See D.I. 679 at 19).
`
`2. Apportionment
`
`Defendant argues that Mr. Parr failed to sufficiently apportion between the patented and
`
`unpatented features of the accused products for his revenue-based and user-based reasonable
`
`7
`
`

`

`Case 1:16-cv-00453-RGA Document 692 Filed 09/04/19 Page 8 of 17 PageID #: 52322
`
`royalties. 3
`
`(D.I. 650 at 6-15). In his report, Mr. Parr concludes, based on an Activision survey
`
`in which gamers picked the mode they anticipated playing when they bought CoD: Black Ops
`
`III, that 57% of CoD revenue is attributable to multiplayer functionality. (D.I. 642-1 , Exh. A at 1
`
`208). He then reasons, based on the relative importance of multi player functionality in the other
`
`accused games, that 57% is a reasonable estimate of the proper amount of revenue to apportion
`
`to multiplayer functionality in those games. (Id. at 11209-211).
`
`Mr. Parr's use of Defendant's survey to apportion between the value to consumers of the
`
`multiplayer functionality versus unpatented features is insufficient to meet the standard set by the
`
`Federal Circuit for proper apportionment. " [T]he governing rule is that the ultimate combination
`
`of royalty base and royalty rate must reflect the value attributable to the infringing features of the
`
`product, and no more." Ericsson, Inc. v. D-Link Sys. , Inc., 773 F.3d 1201 , 1226 (Fed. Cir. 2014).
`
`"When the accused infringing products have both patented and unpatented features, measuring
`
`this value requires a determination of the value added by such features .. . . The essential
`
`requirement is that the ultimate reasonable royalty award must be based on the incremental value
`
`that the patented invention adds to the end product." Id. Thus, a damages expert must tailor his
`
`or her proposed royalty by, for example, "careful selection of the royalty base to reflect the value
`
`added by the patented feature, where that differentiation is possible; by adjustment of the royalty
`
`rate so as to discount the value of a product' s non-patented features; or by a combination
`
`thereof." Id.
`
`The 2016 CoD survey that Mr. Parr relies on does not account for any factors, other than
`
`gameplay mode options, that may contribute to the value of the accused games. Specifically, the
`
`3 As I exclude Mr. Parr' s cost savings opinions, I do not consider whether those are adequately
`apportioned.
`
`8
`
`

`

`Case 1:16-cv-00453-RGA Document 692 Filed 09/04/19 Page 9 of 17 PageID #: 52323
`
`survey questions were, "What gameplay mode(s) were behind your decision to purchase or ask
`
`for each game below?" and "What mode was the primary reason why you bought or asked for
`
`each game?" (D.I. 653-1, Exh. 5 at 13 (bar graph visualizing consumer responses of either
`
`"Single Player/Campaign," "Multiplayer," or "3rd Mode")). Critically, these questions assume
`
`that the gameplay mode is the exclusive driver of a consumer's decision to buy the game. They
`
`do not capture those gamers who may purchases a game, for example, because of the quality of
`
`the graphics, the storyline, ease of use, or based on the brand of the game. The survey certainly
`
`does not attempt to discern what portion of a gamer's decision to buy the game is driven by the
`
`multi player functionality versus all of the other unpatented features.
`
`Mr. Parr admits that there are other, significant, features of the accused products that
`
`contribute economic value to the accused games. (See D.I. 642-1 , Exh. A at 1145 (noting that
`
`story, characters, game quality, ease of use, quality of customer service, and compatibility with
`
`popular platforms contribute to the value of the accused games)). His methodology accounts for
`
`none of those features. Thus, Mr. Parr's proposed damages figure fails to "carefully tie proof of
`
`damages to the claimed invention' s footprint in the market place." ResQNet.com, Inc. v. Lansa,
`
`Inc., 594 F.3d 860, 869 (Fed. Cir. 2010). I will exclude Mr. Parr' s reliance on the 57% figure
`
`pulled from Activision' s 2016 survey as a means of apportioning down to the value of the
`
`patented invention. 4 Accordingly, the Revenue-Based and User-Based reasonable royalty
`
`theories are excluded for failure to properly apportion.
`
`4 Mr. Parr notes two other surveys in his apportionment analysis. Both surveys suffer from the
`same deficiency as the 2016 survey-they address only the significance of multiplayer modes as
`compared to other modes. (See D.I. 680-1 , Exh. 35 at 14, 42; see also D.I. 642-1 , Exh. A at
`1208 (Parr report summarizing surveys)). Thus, while I do not address them separately, I find
`both surveys are independently insufficient to properly apportion the damages base.
`
`9
`
`

`

`Case 1:16-cv-00453-RGA Document 692 Filed 09/04/19 Page 10 of 17 PageID #: 52324
`
`Plaintiff also cursorily argues, "The 12% rate Mr. Parr selected from the Boeing(cid:173)
`
`Panthesis license . . . is already apportioned to the footprint of the invention in that it too
`
`attempts to value the use of the patented technology in video games in the context of preexisting
`
`network technology and unpatented features. " (D.I. 665 at 7). An earlier license of the patents(cid:173)
`
`in-suit may have "built in apportionment." Commonwealth Sci. & Indus. Research Organisation
`
`v. Cisco Sys., Inc. , 809 F.3d 1295, 1303 (Fed. Cir. 2015). Thus, Plaintiff's attorneys '
`
`apportionment argument is not, on its face, unreasonable. Mr. Parr' s opinion does not, however,
`
`tie apportionment to the royalty rate of the Boeing/Panthesis License. (See D .I. 642-1 at 11 205-
`
`223). He does not even mention the Boeing/Panthesis License in the apportionment section of
`
`his expert opinion. (Id.). Mr. Parr's apportionment opinion cannot survive on an opinion that he
`
`does not express. Thus, as the selection of the 12% royalty rate is not a basis of Mr. Parr' s
`
`opinion on apportionment, I do not find that Mr. Parr' s opinion properly apportions based on the
`
`Boeing/Panthesis License alone.
`
`Defendant next argues that Mr. Parr' s efforts to apportion revenues are inadequate
`
`because he doesn't account for multiplayer functionality that existed in the prior art. (D.I. 650 at
`
`9-11). It appears that Defendant's argument is that Mr. Parr should apportion down to some
`
`subset of the infringing network to account for its incremental value. I do not find Defendant' s
`
`argument persuasive. Plaintiff accuses the network on which Defendant' s games operate. The
`
`network as a whole is the infringing unit. Without the underlying network, the accused game
`
`modes do not operate. There is no expert testimony to support a conclusion that the patented
`
`aspect of the network could be plucked from the gan1e without impacting the functionality of the
`
`games. Thus, the value attributable to the infringing network is the value properly apportioned
`
`to the patented invention.
`
`10
`
`

`

`Case 1:16-cv-00453-RGA Document 692 Filed 09/04/19 Page 11 of 17 PageID #: 52325
`
`A final note: Defendant argues throughout this section of its brief that unaccused earlier
`
`versions of the accused games are non-infringing alternatives. (See D.I. 650 at 12-15; D.I. 679 at
`
`13-15). As I discuss below, there is no evidence or expert opinion in the record to support a
`
`conclusion that earlier versions of the game are non-infringing. (See D.I. 665 at 10-11 ). The fact
`
`that a party does not accuse an earlier version of a game is not an admission that the earlier
`
`version is non-infringing. Thus, I do not find Defendant's arguments on this point persuasive.
`
`3. Boeing/Panthesis License
`
`Defendant objects to Mr. Parr's reliance on a July 2002 patent license between Boeing
`
`and Panthesis ("Boeing/Panthesis License"). (D.I. 650 at 15- 21). A copy of the final , executed
`
`Boeing/Panthesis License has not been produced in this case. (Id. at 15; D.I. 665 at 19-20).
`
`There is, however, significant record evidence of the license in the form of drafts and fact
`
`witnesses. (D.I. 667 at 14; see also 642-l , Exh. A at 11 63-65 (summary of evidence of the
`
`license in Mr. Parr's expert report)). The Boeing/Panthesis license, as described by fact witness
`
`Fred Holt, licensed the patent applications that resulted in the patents-in-suit and other
`
`intellectual property to Panthesis for 5% of Panthesis stock, $5 million paid over time, and 12%
`
`of future revenue. (D .I. 642-1 , Exh. A at 1 65). Mr. Parr's reasonable royalty calculations apply
`
`that 12% rate. Defendant argues that I should exclude Mr. Parr' s Boeing/Panthesis License(cid:173)
`
`based theories because (1) Mr. Parr fails to address technical comparability, (2) Mr. Parr ignores
`
`economic differences, and (3) Defendant is prejudiced by not having a copy of the final
`
`agreement. (D.I. 650 at 16).
`
`As the Boeing/Panthesis License licensed the patents-in-suit, it is sufficiently technically
`
`comparable. Defendant argues that the License between Boeing and Panthesis came before
`
`certain important amendments to the patent applications. (Id. at 16-17). It notes specifically that
`
`11
`
`

`

`Case 1:16-cv-00453-RGA Document 692 Filed 09/04/19 Page 12 of 17 PageID #: 52326
`
`m-regularity was added to the claims after the licensing date. (Id.) . It does not, however,
`
`articulate how any post-license amendments would have impacted the value of the licensed
`
`patents. (Id.) . Moreover, it is undisputed that the specification discusses m-regularity. (D.I. 679
`
`at 4). That is, the applications discuss the exact technology that is at issue in this case. The close
`
`tie between the technology discussed in the application and the issued claims renders them
`
`technically comparable. It is not a requirement of technical comparability that the technology be
`
`identical. Thus, the patents as they exist today are technically comparable to the applications
`
`that existed in 2002. I will not exclude Mr. Parr' s opinion on this basis.
`
`Defendant further argues that the Boeing/Panthesis License licensed more than the
`
`patents-in-suit. (D.I. 650 at 17). Specifically, the deal also included copyrights, trade secrets,
`
`and trademarks. (D.I. 679 at 3). Mr. Parr addresses this issue by noting his understanding, based
`
`on conversations with Dr. Holt, that the other property was less important to the deal and
`
`attributing the 5% Panthesis stock and $5 million payment to the non-patent property. (D.I. 642-
`
`1, Exh. A at, 65). Mr. Parr' s explanation, considering the close tie between the
`
`Boeing/Panthesis License and the patents-in-suit, is sufficient to support a conclusion of
`
`technical comparability. The specific details of the Boeing/Panthesis License may be useful for
`
`cross-examination but are not a basis for exclusion.
`
`Defendant next argues that the Boeing/Panthesis License is not economically comparable
`
`to the hypothetical negotiation. (D.I. 650 at 18-20). Mr. Parr addresses some of the economic
`
`differences in his report. (D.I. 642-1 , Exh. A at,, 67-70). Defendant notes additional
`
`circumstances it views as inconsistent with the nature of the hypothetical negotiation: the
`
`license' s date being eight years before the hypothetical negotiation and the nature of Panthesis' s
`
`business model. (D.1. 650 at 18-20). Although potentially good impeachment, these economic
`
`12
`
`

`

`Case 1:16-cv-00453-RGA Document 692 Filed 09/04/19 Page 13 of 17 PageID #: 52327
`
`differences are not significant enough to render Mr. Parr's opinion so unreliable as to be
`
`inadmissible.
`
`Finally, for the purpose of Mr. Parr's expert opinion, Plaintiff sufficiently disclosed the
`
`Boeing/Panthesis License. The briefing reflects that there was extensive discovery on the facts
`
`and circumstances surrounding the Boeing/Panthesis License. (See D.I. 650 at 20; D.I. 665 at
`
`19-20 (discussing discovery efforts related to Boeing/Panthesis License)). Defendant identifies
`
`no evidence that Mr. Parr now uses that Plaintiff failed to disclose at an earlier date. There is no
`
`requirement that Plaintiff disclose a document that it does not have.
`
`Accordingly, I will not exclude Mr. Parr's opinions for relying on the Boeing/Panthesis
`
`License.
`
`4. Failure of Mr. Parr to Address Negative Facts
`
`Defendant argues that I should exclude Mr. Parr' s opinion for failing to account for
`
`certain facts, such as Boeing's attempt to sell the asserted patents for $1 million. (D.I. 650 at 28-
`
`30). It cites Intellectual Ventures I LLC v. Xilinx, Inc., 2014 WL 1814384 (D. Del. Apr. 14,
`
`2014), as support for the proposition that an expert must account for negative facts. Xilinx is,
`
`however, distinguishable. In that case, Xilinx had the contractual option, at the time of the
`
`hypothetical negotiation, to license the asserted patents from Intellectual Ventures for $ 2
`
`million. Id. at *1-2. Judge Stark found that Intellectual Ventures' expert's failure to address this
`
`fact rendered the opinion unreliable and irrelevant. Id. at 4. Here, there was no relationship,
`
`contractual or otherwise, between Boeing and Activision at the relevant date. Thus, although
`
`Boeing's efforts to sell the asserted patents for a relatively low sum are good fodder for cross(cid:173)
`
`examination of Mr. Parr's opinions, Mr. Parr's omission of those efforts does not render his
`
`opinion wholly unreliable or irrelevant. I will not exclude Mr. Parr's opinion on this basis.
`
`13
`
`

`

`Case 1:16-cv-00453-RGA Document 692 Filed 09/04/19 Page 14 of 17 PageID #: 52328
`
`5. Method Claim Infringement Issue
`
`Defendant argues that Mr. Parr misunderstood the scope of infringement of the method
`
`claims in this case, rendering his opinion on damages for such infringement unreliable. (D.I. 650
`
`at 27-28). It is not clear from the briefing how any potential misunderstanding, or possible
`
`misspeaking, impacted Mr. Parr' s ultimate conclusion. Thus, I will not exclude Mr. Parr' s
`
`opinion on this basis.
`
`B. Def endant 's Motion to Strike Mr. Parr 's Report
`
`Defendant moves to strike Mr. Parr's expert report under Rule 37. (D.I. 651). On
`
`November 28, 2018, I granted Plaintiff leave to submit a damages report from a new expert
`
`rather than supplement the report already filed by its previous damages expert, Dr. Meyer. (D.I.
`
`630). While allowing Plaintiff to retain a new expert, I reserved the right to "strike or limit it
`
`depending on its contents." (Id. at 3 n.1 ).
`
`Defendant's primary argument is that Mr. Parr's report is not a "supplement" to Dr.
`
`Meyer's report within the meaning of Federal Rule of Civil Procedure 26(e). (D.I. 652 at 3-9).
`
`Rather, two of the damages methodologies, cost savings (excluded under Daubert) and revenue(cid:173)
`
`based, are entirely new as compared to Dr. Meyer' s report. (Id. at 7). This, Defendant argues,
`
`significantly prejudices Activision so as to warrant exclusion. (Id. at 9-10).
`
`Although Plaintiff pushed the bounds of what I reasonably meant to allow it to do in
`
`supplementing its damages case, I find that, regardless of anything else, the changes do not
`
`prejudice Defendant under Pennypack. Defendant' s argument under Pennypack focuses entirely
`
`on the first factor of the analysis. (Id. at 9-11 ). The first Pennypack factor accounts for
`
`"prejudice or surprise to the party against whom the evidence is offered." 559 F.2d at 904.
`
`When a case involves complex litigation between sophisticated parties, courts are more willing,
`
`given a strong showing of prejudice, to exclude evidence even absent a showing under each
`
`14
`
`

`

`Case 1:16-cv-00453-RGA Document 692 Filed 09/04/19 Page 15 of 17 PageID #: 52329
`
`Pennypack factor. Bridgestone Sports Co. v. Acushnet Co., 2007 WL 521894, at *4 (D. Del.
`
`Feb. 15, 2007).
`
`Defendant has not made a strong showing of prejudice. And, to the extent that Mr. Parr's
`
`report prejudiced Defendant at all, the prejudice has been cured by expert depositions and ample
`
`time to prepare for trial on the new theories. Defendant's primary complaint is that Mr. Parr
`
`relies on new discussions he had with fact witnesses and technical experts, including an
`
`interview with Dr. Holt on the terms of the Boeing/Panthesis License. (D.I. 652 at 10-11). It is
`
`undisputed, however, that in 2017, Plaintiff produced the documents Mr. Parr relies on in
`
`forming his Boeing/Panthesis License-based theories. (D.I. 667 at 10). It is similarly undisputed
`
`that Plaintiff produced Dr. Holt as the fact witness with information relevant to the
`
`Boeing/Panthesis License. (Id. at 14). Moreover, Defendant's damages expert expressly
`
`considered the Boeing/Panthesis relationship in her own expert report. (See, e.g., D.I. 486, Ex. C-
`
`6 at 1 106). Thus, the only piece of evidence that Defendant did not have throughout this case is
`
`an executed version of the Boeing/Pan thesis License. The mere fact that Plaintiff never
`
`produced a final version of the Boeing/Panthesis License, which it does not have, is not
`
`sufficient prejudice to support the extreme sanction of excluding Plaintiffs damages expert.
`
`Accordingly, I will not strike Mr. Parr' s report on the basis that the final Boeing/Panthesis
`
`agreement has not been produced. 5
`
`5 Defendant makes an additional evidentiary argument in its motion to strike. Specifically, it
`argues that the Federal Rules of Evidence preclude testimony on the Boeing/Panthesis License
`and Mr. Parr's opinion relying on such testimony. (D.I. 652 at 11-14). The admissibility of the
`Boeing/Panthesis testimony under the best evidence rule is not truly a question related to the
`propriety of Mr. Parr's report. Pursuant to Rule 703 , Mr. Parr can rely on evidence that is
`otherwise inadmissible if it is the sort of evidence an expert in his field "would reasonably rely
`on." And, assuming testimony on the content of the Boeing/Panthesis License is inadmissible as
`an exception to the best evidence rule, it is nevertheless likely reasonable for Plaintiffs damages
`expert to rely on such testimony in forming his opinion. The factual underpinnings of the Ru