Case 1:19-cv-01410-MN Document 215 Filed 03/30/23 Page 1 of 11 PageID #: 8863
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
`
`VB ASSETS, LLC,
`
`Plaintiff,
`
`v.
`
`AMAZON.COM, INC., AMAZON.COM LLC,
`AMAZON WEB SERVICES, INC., A2Z
`DEVELOPMENT CENTER, INC. d/b/a LAB126,
`RAWLES LLC, AMZN MOBILE LLC, AMZN
`MOBILE 2 LLC, AMAZON.COM SERVICES, INC.
`f/k/a AMAZON FULFILLMENT SERVICES, INC.,
`and AMAZON DIGITAL SERVICES LLC,
`
`Defendants.
`
`C.A. No. 1:19-cv-01410-MN
`
`REDACTED PUBLIC VERSION
`
`REPLY BRIEF IN SUPPORT OF MOTION TO EXCLUDE THE UNRELIABLE
`TESTIMONY OF VB ASSETS’ DAMAGES EXPERT BRETT REED
`
`ASHBY & GEDDES, P.A.
`Steven J. Balick (#2114)
`sbalick@ashbygeddes.com
`Andrew C. Mayo (#5207)
`amayo@ashbygeddes.com
`500 Delaware Avenue, 8th Floor
`P.O. Box 1150
`Wilmington, DE 19899
`(302) 654-1888
`
`Counsel for Defendants
`Amazon.com, Inc., Amazon.com LLC, Amazon
`Web Services, Inc., A2Z Development Center,
`Inc. d/b/a Lab126, Rawles, LLC, AMZN
`Mobile LLC, AMZN Mobile 2 LLC,
`Amazon.com Services, Inc. f/k/a Amazon
`Fulfillment Services, Inc., and Amazon.com
`Services LLC
`
`Of counsel:
`
`J. David Hadden, CSB No. 176148
`Saina S. Shamilov, CSB No. 215636
`Ravi R. Ranganath, CSB No. 272981
`Vigen Salmastlian, CSB No. 276846
`Allen Wang, CBS No. 278953
`Johnson Kuncheria, CSB No. 335765
`Min Wu, CSB No. 307512
`Jeffrey A. Ware, CSB No. 271603
`Rebecca A.E. Fewkes, CSB No. 209168
`FENWICK & WEST LLP
`801 California Street
`Mountain View, CA 94041
`(650) 988-8500
`
`Dated: February 3, 2023
`
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`Case 1:19-cv-01410-MN Document 215 Filed 03/30/23 Page 2 of 11 PageID #: 8864
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`
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`I.
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`II.
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`TABLE OF CONTENTS
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`Page
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`Mr. Reed’s “cost savings” methodology is fundamentally flawed. .....................................1
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` is not a “proxy” for the purported patented benefits. .........................................2
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`A.
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`B.
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`VB Assets’
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` “proxy” argument lacks foundational support. ...................3
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` is not a proxy for non-Shopping Alexa
`Alexa Shopping’s
`usage. .......................................................................................................................4
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`III. Mr. Reed’s attempt to recapture inflated damages resulting from a math error is arbitrary,
`flawed and unreliable. ..........................................................................................................5
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`Case 1:19-cv-01410-MN Document 215 Filed 03/30/23 Page 3 of 11 PageID #: 8865
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`
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`CASES
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`TABLE OF AUTHORITIES
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`Page(s)
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`Elcock v. Kmart Corp.,
`233 F.3d 734 (3d Cir. 2000).......................................................................................................3
`
`Ericsson, Inc. v. D-Link Sys., Inc.,
`773 F.3d 1201 (Fed. Cir. 2014)..............................................................................................2, 3
`
`Prism Techs. LLC v. Sprint Spectrum L.P.,
`849 F.3d 1360 (Fed. Cir. 2017)..............................................................................................1, 2
`
`TC Tech., LLC v. Sprint Corp.,
`No. 16-cv-153-WCB, D.I. 393 (D. Del. June 18, 2019) Memo Opinion ..............................1, 2
`
`UGI Sunbury LLC v. A Permanent Easement for 1.7575 Acres,
`949 F.3d 825 (3d Cir. 2020).......................................................................................................1
`
`VirnetX, Inc. v. Cisco Sys., Inc.,
`767 F.3d 1308 (Fed. Cir. 2014)..................................................................................................5
`
`OTHER AUTHORITIES
`
`Fed. R. Evid. 702 .............................................................................................................................5
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`Case 1:19-cv-01410-MN Document 215 Filed 03/30/23 Page 4 of 11 PageID #: 8866
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`TABLE OF EXHIBITS
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`
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`(AMZ_VB_00342253–
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`
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`
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`EXHIBIT NO. / D.I. NO. DESCRIPTION
`D.I. 183, Ex. 1
`Opening Expert Report of Brett L. Reed, served on August 15,
`2022
`Reply Expert Report of Brett L. Reed, served on October 14, 2022
`Excerpt of Deposition Transcript of Brett L. Reed, taken on
`December 12, 2022
`Rebuttal Expert Report of Keith R. Ugone, Ph.D., served on
`September 22, 2022
`
`
`AMZ VB 00342259)
`U.S. Patent No. 8,073,681 (the “’681 patent”)
`Rebuttal Expert Report of Michael T. Johnson, Ph.D. (“Johnson
`Reb. Rpt.”)
`TC Tech., LLC v. Sprint Corp., No. 16-cv-153-WCB, D.I. 300 (D.
`Del. Jan. 16, 2019) TC’s Answering Br. in Opp’n to Sprint’s
`Consol. Mot to Exclude Expert Testimony of Reed and Regis
`Bates
`TC Tech., LLC v. Sprint Corp., No. 16-cv-153-WCB, D.I. 393 (D.
`Del. June 18, 2019) Memo Opinion
`Excerpt of Deposition Transcript of Brett L. Reed, taken on
`December 12, 2022
`Excerpt of Deposition Transcript of Nathaniel Polish, Ph.D.,
`taken on December 8, 2022
`
`D.I. 183, Ex. 2
`D.I. 183, Ex. 3
`
`D.I. 183, Ex. 5
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`D.I. 183, Ex. 7
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`D.I. 188, Ex. 1
`D.I. 189, Ex. 7
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`D.I. 205, Ex. H.
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`D.I. 205, Ex. I.
`
`Ex. 111
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`Ex. 12
`
`
`1 Exhibits 11 and 12 are attached to the accompanying Reply Declaration of Jeffrey Ware.
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`Case 1:19-cv-01410-MN Document 215 Filed 03/30/23 Page 5 of 11 PageID #: 8867
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`
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`VB Assets does not meaningfully challenge the following facts, each of which merits
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`exclusion of Mr. Reed’s damages opinion: (1) Mr. Reed arrives at his
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` “cost savings” that he
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`attributes to the patented features by comparing user growth of allegedly infringing Alexa Shopping
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`to allegedly infringing Alexa; (2) Alexa Shopping’s
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` initiative had no relation to
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`Amazon’s alleged implementation of the accused patented technology; (3) Mr. Reed has no data to
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`support his “proxy” argument that
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` reduced Alexa Shopping’s turn rate by
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` turns (or
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`any turns); (4) Mr. Reed fails to explain why the same assumptions for
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` purported
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`improvement of Alexa Shopping apply equally to non-shopping Alexa features allegedly implicated
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`by the ’681 patent; and (5) Mr. Reed uses new methodology in his reply report to arrive at a
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`predetermined
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` royalty that VB Assets concedes was a “spreadsheet error.” VB Assets
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`instead argues that the Court should disregard these fundamental defects as expert disagreement
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`subject to cross-examination. That is incorrect. “[D]istrict courts must apply Rule 702 to assess an
`
`expert’s qualifications, reliability, and fit before weighing the expert’s opinions to decide a triable
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`issue.” UGI Sunbury LLC v. A Permanent Easement for 1.7575 Acres, 949 F.3d 825, 832-33 (3d
`
`Cir. 2020). These core methodological errors and unsound assumptions render Mr. Reed’s damages
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`opinion unreliable and unfit. The Court should thus exclude Mr. Reed’s testimony at trial.
`
`I.
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`Mr. Reed’s “cost savings” methodology is fundamentally flawed.
`
`VB Assets argues that the Court should accept Mr. Reed’s “cost-savings” opinion because
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`this methodology is “well settled” and “this Court has previously approved” of Mr. Reed’s cost
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`savings approach in TC Technology., LLC v. Sprint Corp. (D.I. 201 (“Opp.”) at 8-9). But here
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`Mr. Reed invents a different methodology which he mislabels “cost savings.”
`
`The Federal Circuit recognizes “cost savings” as the cost difference between infringement
`
`and using non-infringing alternatives. Prism Techs. LLC v. Sprint Spectrum L.P., 849 F.3d 1360,
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`1376 (Fed. Cir. 2017). That is the kind of opinion Judge Andrews allowed in TC Technology,
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`Case 1:19-cv-01410-MN Document 215 Filed 03/30/23 Page 6 of 11 PageID #: 8868
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`
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`where Mr. Reed relied on “Sprint’s internal analysis” comparing the cost of providing the
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`infringing service (LTE) versus the cost of the non-infringing alternative (3G). (D.I. 205, Ex. I.
`
`(TC Tech., LLC v. Sprint Corp., No. 16-cv-153-WCB, D.I. 393 (D. Del. June 18, 2019) Memo
`
`Opinion) (while also excluding Mr. Reed’s remaining damages opinions as “unreliable” and
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`“inadmissible” on other Daubert grounds); D.I. 205, Ex. H at 6).)
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`Here Mr. Reed does not compare the cost of infringing versus non-infringing alternatives.
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`He instead compares the difference in user growth between Alexa and Alexa Shopping for Q1
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`2017-18, when both had the features that VB Assets accuses of infringement. (D.I. 183, Ex. 3,
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`Reed Dep. Tr. 85:3-86:2; see also D.I. 182 (“Mot.”) at 4-5, 8.) Comparing two allegedly infringing
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`features is not a proper “cost savings” methodology. See Prism Techs., 849 F.3d at 1376. No
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`court has blessed Mr. Reed’s “infringing vs. infringing” comparison because it tells you nothing
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`about the value of the asserted patents. His approach violates “[t]he essential requirement” for
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`reliability under Daubert—i.e., “that the ultimate reasonable royalty award must be based on the
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`incremental value that the patented invention adds to the end product.” Ericsson, Inc. v. D-Link
`
`Sys., Inc., 773 F.3d 1201, 1226 (Fed. Cir. 2014).
`
`II.
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` is not a “proxy” for the purported patented benefits.
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`VB Assets does not dispute that Alexa Shopping’s
`
` initiative in late-2018 had
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`nothing to do with the accused features. Nor can it.
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`
`
`. (D.I. 183,
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`Ex. 7 AMZ_VB_00342253 at 254; Mot. at 7, 9.) The asserted patents, by contrast, claim the use
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`of shared knowledge from past and present voice conversations to recognize and respond to voice
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`utterances (’681 patent), targeted advertising based on a voice utterance (Voice Ad patents), and
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`Case 1:19-cv-01410-MN Document 215 Filed 03/30/23 Page 7 of 11 PageID #: 8869
`Case 1:19-cv-01410-MN Document 215 Filed 03/30/23 Page 7 of 11 PagelD #: 8869
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`completing a voice purchase of a product without further user input (°703 patent).? Mr. Reed’s
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`royalty based on Alexa Shopping’s annual growth after thus does not“reflect the value
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`attributable to the [allegedly] infringing features ... .” Ericsson, 773 F.3d at 1226.
`A.
`VB Assets’P| “proxy” argumentlacks foundational support.
`
`VB Assets argues that Mr. Reed can disregard Federal Circuit law that requires him to
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`value only the accused features becauseP| is a “proxy”for the purported “effect” of the
`patents: an average a turn-rate reduction for all Alexa voice interactions for the ’681 patent and
`Biturn-rate reduction for all Alexa Shopping voiceinteractions for the Voice Ad and ’703 patents
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`each respectively. (Opp. at 3, 11). VB Assets’ proxy argument lacks legal and factual support.
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`To be admissible, expert
`
`testimony must be “accompanied by a sufficient factual
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`foundation”rather than “unsupported speculation.” Elcock v. Kmart Corp., 233 F.3d 734, 745,
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`755 (3d Cir. 2000). Thus, for Mr. Reed to use as a proxy for what VB Assetscalls the
`patented “effect” (Opp. at 11)—the average a turn-rate rate reduction—he mustfirst show that
`P| in fact caused the same reduction. But Mr. Reed and VB Assets fail to identify any
`data showing that reduced Alexa Shopping’s turn rates by turns (or by any amount
`stall). Indeed, when asked whetherheh
`I225 aited ne had none.
`(Ware
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`Reply Decl., Ex. 11 (Reed Dep. Tr.) at 87:22-88:2.). Mr. Reed thus lacks “sufficient factual
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`foundation” to use P| as a proxy for the asserted patents because he fails to show
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`SimpleCX achieved the same claimed result. Elcock, 233 F.3d at 755.
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`2 VB Assets argues that
`wasabout morethan just
`)-)
`. at 13; see also id. at 3 (discussing goal of
`
`features
`, much less any
`Butit fails to identify any
`
`
`patents. Indeed, Amazon implemented
`having anything to do with the asserted
`
`
`
` (D.I. 183, Ex. 7 AMZVB_00342253at 254.)
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`”
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`Case 1:19-cv-01410-MN Document 215 Filed 03/30/23 Page 8 of 11 PageID #: 8870
`Case 1:19-cv-01410-MN Document 215 Filed 03/30/23 Page 8 of 11 PagelD #: 8870
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`Alexa Shopping’s is not a proxy for non-Shopping Alexausage.
`B.
`VB Assets also fails to provide support for Mr. Reed’s use of|| to value the ’681
`patent’s purported contribution to non-Shopping Alexa features. (Opp. at 11.) Indeed,P|
`
`a. Becausepo had nothing to do with non-Shopping use ofAlexa, Mr. Reed has
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`no basis to extrapolate any benefits in user growth to Alexa in general.
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`VB Assets’ attempt to paint this as a dispute between technical experts also fails. (Opp.at
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`11-12.) To be clear, Mr. Reed (nor Dr. Polish) devised the purported average[ill turn benefit from
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`the °681 patent for a// Alexa interactions. Dr. Polish performed no technical comparability
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`analysis, andP| cannot be a proxy regardless for a more general -un reduction to
`Alexa as explained. Moreover, Mr. Reed has no technical support for his i-tum average. Mr.
`
`Reed cites Dr. Polish’s opinion that non-infringing alternatives (NIA) to the ’681 patent would
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`result ina (D1. 183, Ex. 1 at 116, n. 323; id., Ex. 6 at {J 767-771; see also
`Opp. at 23,7, 11) But only maximEc
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`can possiblyinfringe underDr. Polish’s multiturn infringement theory for the 681 patent. (D.L
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`186 at 7, 29; D.I. 189, Ex. 7 at § 119.) Thus, Dr. Polish’s infringement and NIA opinions directed
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`to a small proportion of Alexa interactions plainly contradict Mr. Reed’s assumptionthat the 681
`
`patent reduced a// Alexa interactions by an averageofBi-tums.
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`3 VB Assets argues that Dr. Polish opinesin his report
`
`
`
`original).) Dr. Polish later testified howeverthat
`. (Ware Reply Decl., Ex. 12 (Polish Day 1 Tr.) at 75:19-81:3; D.L. 186 at 7, 29.)
`Moreover, the ’681 patent claims require multiturn dialogs because one-shot interactions cannot
`already have “accumulated short-term shared knowledge .
`.
`. about the utterance received during
`the current conversation”or use that shared knowledgeto “identify[] .
`.
`. a context” as required by
`the claims. (D.I. 188, Ex. 1, 681 patent, claims 1, 13, 25; D.I. 186 at 29.)
`
`emphasis im
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`Case 1:19-cv-01410-MN Document 215 Filed 03/30/23 Page 9 of 11 PageID #: 8871
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`
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`III. Mr. Reed’s attempt to recapture inflated damages resulting from a math error is
`arbitrary, flawed and unreliable.
`
`VB Assets concedes Mr. Reed arrived at his
`
` royalty in his opening report
`
`through a “spreadsheet input error.” (Opp. at 5.) It argues, however, that Mr. Reed’s
`
`acknowledgement of this error entitled him to “reassess” his methodology so that he could arrive
`
`at the exact same number applying new “considerations.” (Id. at 6, 10.) This is hindsight-based
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`litigation strategy unsupported by law. “[A] critical prerequisite” for expert testimony on
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`reasonable royalties “is that the underlying methodology be sound.” VirnetX, Inc. v. Cisco Sys.,
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`Inc., 767 F.3d 1308, 1328 (Fed. Cir. 2014). Mr. Reed’s results-based methodology—conjuring
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`new assumptions and inputs to support a predetermined calculation that overstated damages by
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`—is unsound and unreliable.
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`VB Assets’ remaining arguments lack merit. It argues that Amazon did not move to strike
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`Mr. Reed’s reply report after submission. (Opp. at 9.) But Amazon properly moved to strike Mr.
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`Reed’s opinion under Daubert, not Rule 37, and filed this motion in accordance with the Court’s
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`scheduling orders. (See D.I. 32 at 6; January 19, 2023 docket order.) VB Assets also argues that
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`Amazon’s damages expert, Dr. Ugone “agrees with
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` used in
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`Mr. Reed’s Reply report.” (Opp. at 10.) VB Assets has it backwards and is fundamentally wrong.
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`Dr. Ugone corrected Mr. Reed’s
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` opening report miscalculation to
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` in his rebuttal report,
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`and that correction reduced Mr. Reed’s opening report damages by
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`. (D.I.
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`183, Ex. 5 at ¶¶ 232-34, 268 b., e., 269.) Mr. Reed then agreed with this math correction in his
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`reply report but then abandoned his asserted formula and concocted new assumptions that
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`mathematically returned his pre-determined
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` starting point. (D.I. 183, Ex. 2 at 18-21.) That
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`is not “the product of reliable principles and methods.” Fed. R. Evid. 702(c). The Court should
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`not allow Mr. Reed to present his unsound methodology to the jury.
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`Case 1:19-cv-01410-MN Document 215 Filed 03/30/23 Page 10 of 11 PageID #: 8872
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`
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`Dated: March 24, 2023
`
`
`Of counsel:
`
`J. David Hadden, CSB No. 176148
`dhadden@fenwick.com
`Saina S. Shamilov, CSB No. 215636
`sshamilov@fenwick.com
`Ravi R. Ranganath, CSB No. 272981
`rranganath@fenwick.com
`Vigen Salmastlian, CSB No. 276846
`vsalmastlian@fenwick.com
`Allen Wang, CBS No. 278953
`awang@fenwick.com
`Johnson Kuncheria, CSB No. 335765
`jkuncheria@fenwick.com
`Min Wu, CSB No. 307512
`min.wu@fenwick.com
`Jeffrey A. Ware, CSB No. 271603
`jware@fenwick.com
`Rebecca A.E. Fewkes, CSB No. 209168
`rfewkes@fenwick.com
`FENWICK & WEST LLP
`801 California Street
`Mountain View, CA 94041
`(650) 988-8500
`
`
`
`
`
`Respectfully submitted,
`
`
`/s/ Andrew C. Mayo
`Steven J. Balick (#2114)
`sbalick@ashbygeddes.com
`Andrew C. Mayo (#5207)
`amayo@ashbygeddes.com
`ASHBY & GEDDES, P.A.
`500 Delaware Avenue, 8th Floor
`P.O. Box 1150
`Wilmington, DE 19899
`(302) 654-1888
`
`Counsel for Defendants
`Amazon.com, Inc., Amazon.com LLC, Amazon
`Web Services, Inc., A2Z Development Center,
`Inc. d/b/a Lab126, Rawles, LLC, AMZN
`Mobile LLC, AMZN Mobile 2 LLC,
`Amazon.com Services, Inc. f/k/a Amazon
`Fulfillment Services, Inc., and Amazon.com
`Services LLC
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`Case 1:19-cv-01410-MN Document 215 Filed 03/30/23 Page 11 of 11 PageID #: 8873
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`CERTIFICATE OF SERVICE
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`I hereby certify that on the 24th day of March, 2023, the attached REPLY BRIEF IN
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`SUPPORT OF MOTION TO EXCLUDE THE UNRELIABLE TESTIMONY OF VB
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`ASSETS’ DAMAGES EXPERT BRETT REED was served upon the below-named counsel of
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`record at the address and in the manner indicated:
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`
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`Ian R. Liston, Esquire
`WILSON SONSINI GOODRICH & ROSATI, P.C.
`222 Delaware Avenue, Suite 800
`Wilmington, DE 19801
`
`
`Edward G. Poplawski, Esquire
`WILSON SONSINI GOODRICH & ROSATI, P.C.
`633 West Fifth Street, Suite 1550
`Los Angeles, CA 90071-2027
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`
`
`James C. Yoon, Esquire
`WILSON SONSINI GOODRICH & ROSATI, P.C.
`650 Page Mill Road
`Palo Alto, CA 94304
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`VIA ELECTRONIC MAIL
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`VIA ELECTRONIC MAIL
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`VIA ELECTRONIC MAIL
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` /s/ Andrew C. Mayo
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`Andrew C. Mayo
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