Case 1:16-cv-00453-RGA Document 703 Filed 10/25/19 Page 1 of 7 PageID #: 52407
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
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`ACCELERATION BAY LLC,
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`ACTIVISION BLIZZARD, INC.,
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`Plaintiff,
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`v.
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`Defendant.
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`C.A. No. 16-453 (RGA)
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`REDACTED –
`PUBLIC VERSION
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`MORRIS, NICHOLS, ARSHT & TUNNELL LLP
`Jack B. Blumenfeld (#1014)
`Stephen J. Kraftschik (#5623)
`1201 North Market Street
`P.O. Box 1347
`Wilmington, DE 19899
`(302) 658-9200
`jblumenfeld@mnat.com
`skraftschik@mnat.com
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`Attorneys for Defendant
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`DEFENDANT ACTIVISION BLIZZARD, INC.’S
`RESPONSE TO ACCELERATION BAY’S DAMAGES PROFFER
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`OF COUNSEL:
`B. Trent Webb
`Aaron Hankel
`John D. Garretson
`Jordan T. Bergsten
`Maxwell C. McGraw
`SHOOK, HARDY & BACON LLP
`2555 Ground Boulevard
`Kansas City, MO 64108
`(816) 474-6550
`Tanya Chaney
`SHOOK, HARDY & BACON LLP
`600 Travis Street, Suite 3400
`Houston, TX 77002
`(713) 227-8008
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`Original Filing Date: October 23, 2019
`Redacted Filing Date: October 25, 2019
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`Case 1:16-cv-00453-RGA Document 703 Filed 10/25/19 Page 2 of 7 PageID #: 52408
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`I.
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`INTRODUCTION
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`Acceleration Bay has already proposed at least twelve legally deficient expert and fact-
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`based damages theories.1 This Court gave Acceleration a “final opportunity” to present an
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`admissible damages case. (D.I. 619, p. 2). In response, Acceleration proffered seven new expert
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`opinions from Mr. Parr with no alternative “fact-based” damages theories. All seven theories
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`proposed by Acceleration were stricken. Nevertheless, flouting the Court’s prior rulings and
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`admonition, Acceleration now proposes a new, thirteenth theory that is devoid of proper analysis
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`and results in its largest damages request to date.2
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`Acceleration’s expert previously proposed a damages theory based on the alleged 12%
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`Boeing-Panthesis license with a
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`apportionment based on an Activision survey. The Court
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`struck this theory for failure to properly apportion, finding that the
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` apportionment failed to
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`account for unpatented features. (D.I. 692, p. 9). Acceleration now suggests that the alleged
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`12% Boeing-Panthesis royalty needs no apportionment at all, without any expert testimony to
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`explain why. Instead, Acceleration contends it will present previously undisclosed testimony
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`from its named inventors to cure what Acceleration’s expert failed to do. Acceleration does not
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`identify where it disclosed these “facts” in its final proffer, which was required to “contain a
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`fulsome explanation of all of Plaintiff’s damages theories, [and] all evidence it plans to put on in
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`support of those theories.” (D.I. 619, p. 2). Furthermore, this testimony cannot replace a proper
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`expert opinion on apportionment. Acceleration cites no authority allowing lay testimony on
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`apportionment, and there is no evidence that these inventors have any personal knowledge of the
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`1 D.I. 521, D.I. 578, pp. 27-28, D.I. 600, pp. 1-2, D.I. 692.
`2 Acceleration’s new proffer applies the 12% rate from the purported Boeing-Panthesis license
`to the
` royalty base (the total worldwide revenue of the accused products), resulting
`in approximately
`—a 75% increase from Mr. Parr’s previous calculations.
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`1
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`Case 1:16-cv-00453-RGA Document 703 Filed 10/25/19 Page 3 of 7 PageID #: 52409
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`accused products, let alone the relative values of their allegedly patented and unpatented
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`features.
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`Activision respectfully submits that the Court should reject this previously undisclosed
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`and unsupported theory offered after Acceleration’s “final opportunity,” and should enter
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`judgment of no damages. (See D.I. 694, pp. 3-5).
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`II. BACKGROUND
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`At the Court’s request, the parties recently submitted a joint status report addressing how
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`the case should proceed after the Court found that Acceleration had “no intact damages
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`theories.” (D.I. 694; D.I. 692, p. 5). Acceleration’s portion of the joint submission stated that
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`Acceleration could proceed to trial on portions of its damages theories that were not stricken,
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`including an unidentified “fact based” apportionment theory. On October 15, 2019, the Court
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`issued an Order requiring Acceleration to show: (1) how Acceleration’s proposed damages
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`testimony alluded to in the joint status report complies with the Court’s Order on October 30,
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`2018 (D.I. 619); and (2) what factual evidence Acceleration will use to establish appropriate
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`apportionment to the footprint of the inventions. (D.I. 699). Acceleration submitted a new
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`proffer on October 18, 2019 (“October 18 proffer”), which fails to meet either of the Court’s
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`requirements. (D.I. 700).
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`Acceleration’s latest damages theory rests entirely on the un-apportioned 12% royalty
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`rate derived from the purported 2002 Boeing-Panthesis license agreement. The Court previously
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`rejected this very same theory as being undisclosed by Acceleration:
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`Mr. Parr's opinion does not, however, tie apportionment to the royalty rate of the
`Boeing/Panthesis License. He does not even mention the Boeing/Panthesis
`License in the apportionment section of his expert opinion. 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.
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`2
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`Case 1:16-cv-00453-RGA Document 703 Filed 10/25/19 Page 4 of 7 PageID #: 52410
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`(See D.I. 692, p. 10). In the face of the Court’s order excluding this theory from Acceleration’s
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`damages expert, Acceleration now seeks to present this theory through the testimony of lay
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`witnesses that was not previously identified in Acceleration’s damages proffer.
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`III. ACCELERATION’S “FACT-BASED” DAMAGES PROFFER VIOLATES BOTH
`THIS COURT’S ORDER AND CONTROLLING APPORTIONMENT LAW.
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`Acceleration now attempts to support an un-apportioned 12% royalty rate against
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`Activision’s total worldwide revenues for the accused products with previously undisclosed
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`expert opinions from lay witnesses on the wrong issue.3 In its October 18 proffer, Acceleration
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`discloses that it will rely upon “factual” testimony from the two named inventors (Dr. Holt and
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`Mr. Bourassa) to establish that the 12% royalty rate from the 2002 Boeing-Panthesis license
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`“was already apportioned” to represent the “contributions of the Patents-in-Suit to the video
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`games that Panthesis was developing.” (D.I. 700, p. 2). Acceleration discloses no other theories
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`of apportionment, and expressly states that Mr. Parr, its damages expert, “will not address the
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`specific issue of the apportionment of the rate.” Id., p. 3.
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`First, Acceleration’s newly proposed fact-based damages theory violates the Court’s prior
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`order by advancing an undisclosed theory based on undisclosed evidence. In its October 30,
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`2018 Order, the Court allowed Acceleration “a final opportunity to present . . . an admissible
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`damages case” and required that this proffer “contain a fulsome explanation of all of Plaintiff’s
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`damages theories, [and] all evidence it plans to put on in support of those theories.” (D.I. 619, p.
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`2) (emphasis added). Acceleration’s February 15, 2019 proffer (“February 15 proffer”) did not
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`3 Acceleration’s October 18 proffer also includes its cost-based damages theory that currently
`stands rejected by this Court to preserve the argument pending its motion for reconsideration.
`(D.I. 700, p. 2 n.3). For the reasons stated in Activision’s opposition (D.I. 696) this Court should
`deny Acceleration’s motion. (See also D.I. 701, Ex. A) (order excluding similar opinion from the
`same expert).
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`3
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`Case 1:16-cv-00453-RGA Document 703 Filed 10/25/19 Page 5 of 7 PageID #: 52411
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`disclose any theory that the purported 12% license is “already apportioned,” and, in fact,
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`admitted the opposite by providing testimony from Mr. Parr attempting to apportion the damages
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`theories that relied on the purported license. (See D.I. 692, pp. 9-10). Further, the inventors’
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`“factual evidence” that the 12% royalty rate was already apportioned appears nowhere in
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`Acceleration’s February 15 proffer or anywhere else in Acceleration’s discovery disclosures. In
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`fact, although Acceleration’s October 18 proffer cites to its February 15 proffer for the facts
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`surrounding the final terms of the Boeing-Panthesis license, Acceleration provides no citation to
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`previously disclosed testimony from its inventors regarding apportionment. (See D.I. 700, p. 2).
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`Because Acceleration failed to disclose until now any theory that the alleged 12% rate is
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`“already apportioned,” or its reliance on factual testimony from its inventors on apportionment,
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`its October 18 proffer directly violates the Court’s prior order and should be stricken.
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`Second, even if the Court were inclined to allow this new theory and factual testimony, it
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`is insufficient to tie the alleged damages to the footprint of the invention. Acceleration’s
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`proposal improperly substitutes lay testimony where expert testimony is required and, in any
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`event, addresses the wrong issue.
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`Proper apportionment is essential to a reliable expert damages opinion, and there must be
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`admissible evidence apportioning between “the patented and unpatented features” of the
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`“accused infringing products.” Ericsson, Inc. v. D-Link Sys. Inc., 773 F.3d 1201, 1226 (Fed. Cir.
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`2014).4 This Court already has explained that an “opinion on a reasonable royalty is necessarily
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`based on specialized knowledge.” (D.I. 600, p. 3) (excluding lay opinion of Mr. Garland on a
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` royalty). This Court also has held that a named inventor cannot testify beyond his or her
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`4 Acceleration states that the revenue base is “apportioned” because Mr. Parr has removed
`revenues from un-accused products (D.I. 700, pp. 5-6), but this does not address the required
`apportioning out of unpatented features of accused products.
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`4
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`Case 1:16-cv-00453-RGA Document 703 Filed 10/25/19 Page 6 of 7 PageID #: 52412
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`personal knowledge on “calculations” that “are the province of expert analysis,” or on “events
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`that ‘would have’ occurred.” AVM Techs., LLC v. Intel Corp., 927 F. Supp. 2d 139, 146 (D. Del.
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`2013).5
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`Here, there is no expert testimony that the purported 12% royalty is “already
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`apportioned” in any way relating to this case, or otherwise tying a 12% royalty to a damages
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`number a jury could properly award. (D.I. 692, p. 10). Acceleration does not cite a single case
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`in which a Court allowed fact witnesses to testify on apportionment, as Acceleration now
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`proposes. Acceleration also points to no evidence (and none exists) that its inventors have any
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`personal knowledge of the accused products, which would be necessary for those inventors to
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`testify on whether the purported 12% Panthesis royalty is “already apportioned” to only the
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`“patented features” of the “accused infringing products.” Ericsson, 773 F.3d at 1226. And even
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`assuming that these inventors had personal knowledge that the alleged 12% royalty rate perfectly
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`accounted for the contributions of the asserted patents to video games Panthesis was developing
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`(something that Acceleration has never disclosed until now), that is irrelevant—as well as
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`inadmissibly confusing and unfairly prejudicial—on the footprint of the invention as allegedly
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`utilized in Activision’s accused products. See, e.g., Limelight Networks, Inc. v. XO Commc’ns,
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`LLC, No. 3:15-CV-720-JAG, 2018 WL 1460703, at *3 (E.D. Va. Mar. 23, 2018) (granting
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`motion to strike damages proffer, finding that “Limelight’s proffer still fail[ed] to explain how
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`the 8% rate and the newly proposed base actually show[ed] the incremental value that the ‘002
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`5 Citing Veritas Operating Corp. v. Microsoft Corp., 2008 WL 657936, at *33 (W.D.Wash.
`Jan. 17, 2007) (lay witness may not offer an opinion on ultimate patent damages, “including
`determining a reasonable royalty”), and Donlin v. Philips Lighting N. Am. Corp., 581 F.3d 73,
`82–84 (3d Cir.2009) (vacating district court judgment where damages testimony from lay
`witness “went beyond those easily verifiable facts with their personal knowledge and instead
`required forward-looking speculation for which she lacked necessary training”).
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`5
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`Case 1:16-cv-00453-RGA Document 703 Filed 10/25/19 Page 7 of 7 PageID #: 52413
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`Patent add[ed] to Akamai’s product offerings”). Acceleration has been given numerous chances
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`to submit an admissible damages theory but it failed each time. It should not be allowed to offer
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`yet another new theory, and then use unqualified fact witnesses to provide previously
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`undisclosed testimony to repair the failures of their damages experts.
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`IV. CONCLUSION
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`Acceleration has
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`failed
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`to comply with either
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`requirement
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`in
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`this Court’s
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`October 15, 2019 Order. Accordingly, Activision respectfully requests that the Court find
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`Acceleration has failed to proffer an admissible damages case, and enter a judgment of no
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`damages.
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`OF COUNSEL:
`B. Trent Webb
`Aaron E. Hankel
`John D. Garretson
`Jordan T. Bergsten
`Maxwell C. McGraw
`SHOOK HARDY & BACON LLP
`2555 Grand Boulevard
`Kansas City, MO 64108
`(816) 474-6550
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`Tanya Chaney
`SHOOK HARDY & BACON LLP
`600 Travis Street, Suite 3400
`Houston, TX 77002
`(713) 227-8008
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`October 23, 2019
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`MORRIS, NICHOLS, ARSHT & TUNNELL LLP
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`/s/ Jack B. Blumenfeld
`__________________________________
`Jack B. Blumenfeld (#1014)
`Stephen J. Kraftschik (#5623)
`1201 North Market Street
`P.O. Box 1347
`Wilmington, DE 19899
`(302) 658-9200
`jblumenfeld@mnat.com
`skraftschik@mnat.com
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`Attorneys for Defendant
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`6
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