UNITED STATES PATENT AND TRADEMARK OFFICE
`
`____________________________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`____________________________
`
`ZHONGSHAN BROAD OCEAN MOTOR CO., LTD.,
`BROAD OCEAN MOTOR LLC, and
`BROAD OCEAN TECHNOLOGIES, LLC,
`Petitioners
`
`v.
`
`NIDEC MOTOR CORPORATION,
`Patent Owner
`____________________________
`
`Case IPR2014-01121
`U.S. Patent No. 7,626,349
`
`
`
`REBUTTAL DECLARATION OF IVAN T. HOFMANN, CPA/CFF, CLP
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`ATTORNEY EYES ONLY
`REDACTED VERSION
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`

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`
`
` TABLE OF CONTENTS
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`
`
`Introduction ...................................................................................................... 4
`
`
`
`
`I.
`
`II. Qualifications ................................................................................................. 10
`
`III. Documents reviewed ..................................................................................... 14
`
`IV. HVAC blower motor market overview ......................................................... 16
`
`V.
`
`The definition of commercial success and nexus relative to objective indicia
`of nonobviousness ......................................................................................... 18
`
`VI. The claimed market share and alleged pricing premium claimed in the
`Bokhart Declaration are flawed and do not provide objective indicia of
`nonobviousness .............................................................................................. 19
`
`A. The Bokhart Declaration relies on speculative and unsupported estimates
`and projections rather than actual historical data ..................................... 19
`a. The Filla Market Data contains Nidec estimates rather than actual
`historical results for the HVAC Blower market .................................. 20
`b. The Filla Market Data utilizes unsupported assumptions regarding
`the portion of the HVAC Blower Motor market comprised of ECMs22
`B. The market for HVAC Blower Motors is the correct market to evaluate
`the Practicing Nidec Motors ..................................................................... 23
`C. The Practicing Nidec Motors are not a commercial success in the market
`for HVAC Blower Motors ........................................................................ 25
`D. Even considering only the sales of ECMs, the market share of the
`Practicing Nidec Motors does not support a finding of commercial
`success ...................................................................................................... 27
`E. The Bokhart Declaration ignores changes in the portfolio of products
`offered by Nidec after launch of the Practicing Nidec Motors in 2007. .. 30
`F. The analysis of alleged pricing premium in the Bokhart Declaration is
`misleading, fails to address certain factors, and mischaracterizes the
`relative commercial performance of the Practicing Nidec Motors .......... 33
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`VII. There is a lack of nexus between the commercial performance of the
`Practicing Nidec Motors and the claims of the ‘349 Patent. ......................... 37
`
`
`
`A. The Bokhart Declaration relies on anecdotal evidence of a purported
`decision by a single OEM without sufficient basis or independent
`analysis ..................................................................................................... 37
`B. The Bokhart Declaration does not address the numerous factors that
`actually influence the purchasing decisions of OEMs and aftermarket
`customers. ................................................................................................. 40
`C. The Bokhart Declaration fails to address the various patents other than
`the ‘349 Patent that also allegedly cover the Practicing Nidec Motors. .. 43
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`I, Ivan T. Hofmann, hereby declare as follows.
`
`I.
`
`Introduction
`
`
`
`1.
`
`I am over the age of eighteen and otherwise competent to make this
`
`declaration.
`
`2.
`
`I have been retained as an independent expert on behalf of Petitioners
`
`ZHONGSHAN BROAD OCEAN MOTOR CO., BROAD OCEAN MOTOR LLC,
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`and BROAD OCEAN TECHNOLOGIES, LLC, (collectively, “Broad Ocean”) for
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`the above-captioned inter partes review (“IPR”).
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`3.
`
`I understand that this IPR involves U.S. Patent No. 7,626,349 (the
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`“ ‘349 Patent” or the “Patent-at-Issue”). EX. 1001. I understand that Joseph G.
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`Marcinkiewicz, Arthur E. Woodard, Prakash B. Shahi, Mark E. Carrier, and
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`Michael I. Henderson are the named inventors and that, according to the United
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`States Patent and Trademark Office (“USPTO”) records, the ‘349 Patent is
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`currently assigned to NIDEC MOTOR CORPORATION (“Nidec”). EX. 1001 and
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`EX. 1018.
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`4.
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`Nidec was formed when Nidec Corporation acquired the motors and
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`controls business of Emerson Electric Company in September 2010. EX. 2015.
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`Nidec is a manufacturer of commercial, industrial, and appliance motors and
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`controls. EX. 2012.
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`5.
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`Broad Ocean is a global supplier of small and electric machines, and
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`
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`serves customers in five continents around the globe with the annual production
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`capacity of more than 50 million motors for various purposes. EX. 2017.
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`6.
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`I have been asked by counsel for Broad Ocean to analyze Nidec’s
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`claims of commercial success and nexus related to the ‘349 Patent. I have
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`specifically been asked to review and provide rebuttal testimony to the assertions
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`regarding alleged commercial success and nexus related to the Patent-at-Issue
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`within the Patent Owners’ Response (the “POR”), dated May 8, 2015, and within
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`the Declaration of Christopher J. Bokhart, dated May 7, 2015 (the “Bokhart
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`Declaration”). Paper 29 and EX. 2010.
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`7. My rebuttal declaration focuses on the alleged commercial success of
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`electronic motors and controllers described in the Bokhart Declaration, which
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`include Nidec electric motors and controllers sold under the names PerfectSpeed,
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`EcoTech, 16X4W, EcoApex48, Rescue Select, and SelecTech (the “Practicing
`
`Nidec Motors”). EX. 2010, p.11. I understand that Nidec claims that the Practicing
`
`Nidec motors are commercial embodiments falling within the scope of certain
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`claims of the ‘349 Patent. EX. 2003, p.13-15 and EX. 2010, p.11.
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`8.
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`I understand that the challenged claims of the ‘349 Patent “generally
`
`relate to systems and methods for heating, ventilating, and/or cooling (“HVAC”)
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`systems with a permanent magnet synchronous motor that drives a fan or blower”.
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`
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`Paper No. 7, p.1. More specifically, the claims of the ‘349 Patent recite an HVAC
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`blower motor drive that uses sine wave commutation and independent q- and d-
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`axis currents to create continuous currents in the windings of an HVAC blower
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`motor. Paper No. 7, p.1. The ‘349 Patent, titled “Low Noise Heating Ventilating
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`and/or Air Conditioning (HVAC) Systems”, has a filing date of February 1, 2007
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`and issued on December 1, 2009. EX. 1001.
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`9.
`
`In July 2014, Broad Ocean filed a Petition for IPR seeking
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`cancellation of claims 1-3, 8-9, 12, 16, and 19 of the ‘349 Patent. Paper No. 7, p.3.
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`Broad Ocean asserts that claims 1-3, 8-9, 12, 16, and 19 of the ‘349 Patent would
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`have been obvious in light of the prior art. Paper No. 7, p.3-4.Upon consideration
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`of the IPR and the accompanying evidence in support, the Patent Trial and Appeal
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`Board (“PTAB”) instituted trial. Paper 20, p.2.
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`10. My company, Gleason IP, a division of Gleason & Associates, P.C.
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`(“Gleason”), is being compensated for the work performed on this engagement
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`based on the time incurred by me at a rate of $425 per hour and by other Gleason
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`personnel, working at my direction and under my supervision, at rates ranging
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`from $90 to $270 per hour. Our compensation is not affected by the outcome of
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`this case.
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`11. For the reasons set forth below, it is my opinion that the Bokhart
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`
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`Declaration is fundamentally flawed and unreliable. Based on my analysis, the
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`performance of the Practicing Nidec Motors does not provide objective evidence of
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`nonobviousness of the claims of the ‘349 Patent for at least the following reasons:
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`a. The calculations and conclusions in the Bokhart Declaration are based on
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`inherently flawed data for both the HVAC Blower Motor market and the
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`calculation of the portion of the HVAC Blower Motor market comprised
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`of electronically commutated motors (“ECM”s). Indeed, the data does
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`not even reflect actual sales in the HVAC Blower Motor market. Rather,
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`for the years 2006 through 2014, the Bokhart Declaration calculates
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`purported market shares using unreliable estimates and projections.
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`Furthermore, for the years 2015 and 2016, the Bokhart Declaration relies
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`upon forecasts of future projected performance, which is speculative and
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`inappropriate
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`to use
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`for an analysis of objective
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`indicia of
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`nonobviousness, and overstates the performance of the Practicing Nidec
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`Motors.
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`b. Even considering the actual performance of the Practicing Nidec Motors,
`
`the claimed market share and alleged pricing premium discussed in the
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`
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`Bokhart Declaration are flawed and do not provide objective indicia of
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`nonobviousness of the claims of the ‘349 Patent.
`
`Claimed Market Share of the Practicing Nidec Motors
`
`i. The analysis of claimed market share in the Bokhart Declaration
`
`fails to utilize the appropriate market for HVAC Blower Motors.
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`The use of an artificially narrow market limited to ECMs
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`overstates the claimed market share of the Practicing Nidec Motors
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`by approximately 333 percent to as much as 1,865 percent. Based
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`on my analysis, the actual Nidec market share for the HVAC
`
`Blower Motor Market does not support a finding of commercial
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`success.
`
`ii. Even if the use of the narrow market claimed in the Bokhart
`
`Declaration is correct (which it is not), the Bokhart Declaration
`
`relies on the flawed Filla Market Data. As a result, even the market
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`shares for the narrow market claimed in the Bokhart Declaration
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`are overstated by approximately 91 percent to 121 percent and do
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`not support a finding of alleged commercial success.
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`iii. The Bokhart Declaration fails to address the impact of changes in
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`the portfolio of products offered by Nidec over time, which further
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`
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`mischaracterizes the performance of the Practicing Nidec Motors
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`and is misleading.
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`Claimed Pricing Premium of the Practicing Nidec Motors
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`c. The analysis of an alleged pricing premium in the Bokhart Declaration
`
`mischaracterizes the relative performance of the Practicing Nidec Motors,
`
`is misleading, and fails to address relevant factors.
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`d. In any event, there is a lack of nexus between the commercial
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`performance of the Practicing Nidec Motors and the claims of the ‘349
`
`Patent. The Bokhart Declaration inappropriately and unreliably attributes
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`the performance of the Practicing Nidec Motors to the ‘349 Patent.
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`i. The entire analysis of alleged nexus in the Bokhart Declaration
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`relies on the perspective of Mark Carrier (Nidec’s Vice President
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`of New Product Development and a named inventor of the ‘349
`
`Patent) without sufficient basis or independent analysis. Indeed,
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`the conclusions regarding purported nexus
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`in
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`the Bokhart
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`Declaration rely on anecdotal evidence provided by Mr. Carrier of
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`a purported decision at a single original equipment manufacturer
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`(“OEM”).
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`ii. The Bokhart Declaration does not address the numerous factors
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`that actually influence the purchasing decisions of OEMs and
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`aftermarket customers. Based on my analysis and evidence from
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`multiple sources, the performance of the Practicing Nidec Motors
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`is unrelated to the claims of the ‘349 Patent.
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`iii. The Bokhart Declaration fails to address various patents other than
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`the ‘349 Patent that also allegedly cover the Practicing Nidec
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`Motors, thereby inappropriately and unreliably attributing the
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`entire performance of the Practicing Nidec Motors to the ‘349
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`Patent.
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`II. Qualifications
`
`12.
`
`I am a Managing Director at Gleason, which is an economic,
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`accounting, and financial consulting firm that provides services primarily in the
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`areas of Valuation, Litigation Support, Intellectual Property, Forensic Accounting
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`and Financial Reorganization. I am the leader of the Intellectual Property Practice.
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`Prior to joining Gleason, I worked for the global firm of Deloitte & Touche, LLP.
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`13.
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`I graduated magna cum laude from the University of Notre Dame in
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`1994 with a Bachelor of Business Administration degree and a double major in
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`Economics and Accounting. I am a Certified Public Accountant (“CPA”). I am
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`also Certified in Financial Forensics (“CFF”). I am a member of the Licensing
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`
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`Executives Society (“LES”) and have received my Certified Licensing Professional
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`(“CLP”) designation, which is granted by the LES to professionals with
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`demonstrated knowledge and experience in the areas of intellectual property and
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`licensing. I have attended and instructed numerous continuing education seminars
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`since the completion of my formal education and have been a speaker on numerous
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`occasions on a variety of financial, economic, accounting, and valuation topics. I
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`have presented to various bar associations and organizations on the issues of
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`intellectual property, financial damages, valuation, financial statement analysis,
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`and other topics.
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`14.
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`I have extensive knowledge and experience in the areas of economic
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`and market analysis as it relates to litigation matters. My experience in intellectual
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`property matters includes the valuation of intellectual property, analysis of
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`objective
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`indicia of nonobviousness, market analysis
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`involving product
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`performance, the determination of damages associated with patent infringement
`
`and other intellectual property (including lost profits, disgorgement, and reasonable
`
`royalty, as applicable), consideration of irreparable harm, analysis of Panduit
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`Factors related to demand for patented features, and market analysis of non-
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`infringing alternatives.
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` I have analyzed damages claims
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`in
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`trademark
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`11
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`infringement, false advertising, and other cases involving the Lanham Act. I have
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`
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`experience
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`in a broad
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`range of
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`industries,
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`including pharmaceuticals,
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`manufacturing, technology, healthcare, communications, construction, extractive,
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`and other industries.
`
`15. My work experience includes analysis of the financial and economic
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`performance of products and the markets for many products involved in
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`manufacturing, construction, technology, and other industries. I have been asked
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`to study and analyze objective indicia of nonobviousness (including commercial
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`success and nexus), consider claims of irreparable harm, determine and quantify
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`damages, perform product pipeline consulting, and assist with licensing and
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`settlement discussions.
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`16.
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`In the course of my work in providing consulting and expert services,
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`I regularly analyze and review market data, internal and external financial
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`statements, management reports, correspondence among customers and suppliers,
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`industry journals, articles, and other relevant information. I have been called upon
`
`to analyze and provide expert opinions on such data and information on numerous
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`occasions. I have been qualified as an expert in economics, finance, and
`
`accounting and have specifically been asked to testify as an expert on issues
`
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`involving secondary considerations of nonobviousness, including commercial
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`success and nexus on numerous occasions.
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`17. Among the numerous projects on which I have worked involving
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`objective indicia of nonobviousness, I have been engaged by the USPTO and
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`Office of the Solicitor on projects as an expert to analyze and testify on issues
`
`involving objective indicia of nonobviousness, including commercial success and
`
`nexus related to proceedings in which the Honorable David Kappos, Under
`
`Secretary of Commerce for Intellectual Property and former Director of the
`
`USPTO, and the Honorable Michelle Lee, in her official capacity as Under
`
`Secretary of Commerce for Intellectual Property and Director of the USPTO, were
`
`defending the USPTO’s denial of certain patent applications.
`
`18.
`
`I also have extensive experience in analyzing, calculating and
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`determining damages and other financial and economic issues in various dispute
`
`settings. I have been designated as a testifying expert in federal and state courts,
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`Chancery Court, the United States International Trade Commission, the Patent
`
`Trial and Appeal Board, and on matters before various domestic and international
`
`arbitration panels. I have analyzed damages involving intellectual property
`
`disputes, breach of contract claims, shareholder disputes, insurance recovery, class
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`actions, and others. I also have experience assessing claims of irreparable harm in
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`connection with temporary restraining order and preliminary injunction hearings,
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`and determining whether financial damages are calculable. My full curriculum
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`vitae and testimony for the past four years is included as EX. 1019.
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`III. Documents reviewed
`
`19.
`
`In formulating my opinions, I have considered all of the documents
`
`cited herein, including the following documents:
`
`Paper No./Exhibit
`Paper 1
`
`Paper 7
`Paper 14
`Paper 20
`Paper 29
`1001
`1006
`1007
`
`1008
`1009
`
`1010
`
`1015
`1016
`1017
`1018
`
`Document
`Petition for Inter Partes Review of U.S. Patent No.
`7,626,349
`Revised Petition for Inter Partes Review of U.S. Patent
`No. 7,626,349
`Patent Owner’s Preliminary Response
`Decision Institution of Inter Partes Review
`Patent Owners’ Response (Sealed)
`U.S. Patent No. 7,626,349
`U.S. Patent No. 5,410,230
`“Electronic Control of Torque Ripple in Brushless
`Motors” by Peter Franz Kocybik
`Excerpts from Paul C. Krause et al, Analysis of Electric
`Machinery and Drive Systems (2nd ed. 2002)
`Expert Declaration of Dr. Mark Ehsani
`Complaint filed in Nidec Motor Corporation v. Broad
`Ocean Motor LLC et al., Civil Action No. 4:13-CV-
`01895-JCH (E.D. Mo.)
`Deposition Testimony of Dr. Mark Ehsani
`Deposition Testimony of Christopher J. Bokhart
`Energy.Gov Office of Energy Efficiency and Renewable
`Energy Chapter 3
`USPTO Patent Assignments for U.S. Patent 7,626,349
`
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`14
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`Document
`Curriculum vitae and testimony of Ivan T. Hofmann,
`CPA/CFF, CLP
`Declaration of Ge Hu
`Deposition Testimony of John Filla (Rough Draft)
`Deposition Testimony of Mark Carrier (Rough Draft)
`AHRI Shipments for Central Air Conditioners and Air-
`Source Heat Pumps
`AHRI Shipments for Gas Furnaces
`Nidec Motor Corporation v. Broad Ocean Motor, LLC et
`al. Complaint (Case No. 2:15-cv-00443)
`Declaration of Alan Kessler
`Declaration of Mark E. Carrier
`Goodman Business Alignment Technology Meeting
`Presentation
`Variable Speed Motor Program Update
`Declaration of John Filla, Director of Product
`Management for Commercial and Residential Motors for
`Nidec
`Copy of OEM Aftermarket Distribution
`U.S. Patent No. 6,498,449
`Declaration of Christopher J. Bokhart, dated May 7, 2015
`(Sealed)
`Declaration of Christopher J. Bokhart (Tabs) (Sealed)
`About Us (Nidec-Motor.com)
`Company History (Nidec-Motor.com)
`Company Overview (Nidec-Motor.com)
`Broad Ocean Public Company Profile
`Broad Ocean Company Profile (broad-ocean.com)
`Rescue EcoTech Direct Drive Blower Motor Presentation
`U.S. Patent No. 7,342,379
`
`Paper No./Exhibit
`1019
`1020
`1022
`1023
`1024
`1025
`1027
`1028
`2003
`2004
`2005
`
`2006
`
`2007
`2009
`2010
`2011
`2012
`2013
`2015
`2016
`2017
`2024
`3001
`
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`IV. HVAC blower motor market overview
`
`
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`20. The general HVAC market
`
`includes air-conditioning systems,
`
`furnaces, heat pumps, and other various motors. The general HVAC market is
`
`divided into the residential segment and non-residential segment. I understand that
`
`the Practicing Nidec Motors are utilized within the residential HVAC market,
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`primarily by OEMs and to a lesser extent for aftermarket repairs. In 2008 the
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`domestic gas residential furnace market was primarily comprised of seven U.S.
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`manufacturers as illustrated below: EX. 1017, p. 14-15.
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`21.
`
`I understand that HVAC Blower Motors are divided into two main
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`
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`categories: permanent split capacitor (“PSC”) motors and ECMs. EX. 1017, p. 31.
`
`I further understand that ECMs are sometimes divided into two sub-categories of
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`constant-torque ECMs (referred to as X13), and constant-circulation ECMs,
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`referred to simply as ECMs. EX. 1017, p. 31. Throughout this declaration, I refer
`
`to residential PSC motors and ECMs (including X13), collectively, as “HVAC
`
`Blower Motors”.
`
`22. The United States Department of Energy (“DOE”) performed a
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`market and technology assessment in order to analyze energy conservation
`
`standards for residential furnace fans (the “DOE Market Assessment”). EX. 1017,
`
`p.1. In performing this analysis, the DOE Market Assessment presents the relative
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`distribution across the motor types that comprise the residential furnace portion of
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`the overall market for HVAC Blower Motors. EX. 1017, p. 33.
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`V. The definition of commercial success and nexus relative to objective
`indicia of nonobviousness
`
`23.
`
`It is my understanding that “commercial success” is a legal construct
`
`that has been established through case law. Analysis of commercial success is
`
`premised on the concept that if a product is economically successful, it may
`
`provide objective evidence of nonobviousness.
`
`24.
`
`I further understand that the commercial success of the product must
`
`be attributable to the alleged novel features of the claimed invention. I understand
`
`this to mean that, to support a finding of nonobviousness, any alleged commercial
`
`success requires that the success of the claimed product must have resulted from
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`the merits of the claimed invention as opposed to the prior art or other extrinsic
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`
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`factors. In other words, there must be a causal correlation, or “nexus,” between the
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`unique merit of the claimed invention and the success of the product. I also
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`understand that if purported commercial success is due to an element in the prior
`
`art, no nexus exists. In essence, I understand that if the feature that drives the
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`commercial success was known in the prior art, such success is not pertinent.
`
`VI. The claimed market share and alleged pricing premium claimed in the
`Bokhart Declaration are flawed and do not provide objective indicia of
`nonobviousness
`
`A.
`
`The Bokhart Declaration relies on speculative and unsupported estimates
`and projections rather than actual historical data
`
`25. The market share analysis in the Bokhart Declaration is based on data
`
`supplied by Mr. Filla, (the “Filla Market Data”), which is speculative and
`
`unsupported. Specifically, the Filla Market Data is inherently flawed in three
`
`areas: (a) the HVAC Blower Motor market; (b) the assumption regarding the
`
`portion of the HVAC Blower Motor market comprised of ECMs; and (c) the use of
`
`unreliable forecast data. I describe each of these areas in more detail below.
`
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`19
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`a. The Filla Market Data contains Nidec estimates rather than actual
`historical results for the HVAC Blower market
`
`
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`
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`28.
`
`I understand that the AHRI annually publishes statistics regarding
`
`monthly and annual shipments and is generally accepted by the industry. When
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`performing my analysis of market share of the Practicing Nidec Motors (described
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`20
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`in more detail below), I used this publicly available AHRI historical data from
`
`
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`
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`2005 to 2014, as an unbiased and independent source for my analysis of the overall
`
`HVAC Blower Motor market (which includes, central air conditioners and air-
`
`source heat pumps as well as gas warm air furnaces). EX. 1024 and EX. 1025.
`
`29.
`
` Furthermore,
`
`the Bokhart Declaration
`
`includes Nidec sales
`
`projections for the Practicing Nidec Motors for the years 2015 through 2016.
`
`These speculative and unreliable sales projections are self-serving and lack
`
`independent support.
`
`
`
` The
`
`assumption of this level of growth is speculative and does not represent objective
`
`market data regarding actual performance.
`
`30. The reliance on forecast information in the Bokhart Declaration is
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`speculative and an inappropriate measure of claimed market share or purported
`
`commercial success of the Practicing Nidec Motors. Claims of commercial
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`success should be based on objective data, such as actual market reaction and
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`response to the availability of patented products. It is inappropriate, speculative,
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`and unreliable to claim commercial success based on forecasts and hoped for sales
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`levels, particularly when such forecasts are outdated and unreliable. Nidec’s
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`aspirations for future sales of the Nidec Practicing Motors are unsupported and do
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`not provide objective indicia of nonobviousness.
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`b. The Filla Market Data utilizes unsupported assumptions regarding the
`portion of the HVAC Blower Motor market comprised of ECMs
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`31.
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` In reality, according to the
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`DOE Market Assessment, ECM shipments represent approximately 44 percent of
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`the total HVAC Blower Motor market.2 EX. 1017, p.33. For my analysis of
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`market share (discussed in more detail below), I utilized the DOE Market
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`Assessment as an independent, unbiased source of data.
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` The portion of the HVAC Blower Motor market which reflects ECM sales is the
`combination of ECMs (34 percent) and X13 (10 percent) motors.
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`B.
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`The market for HVAC Blower Motors is the correct market to evaluate the
`Practicing Nidec Motors
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`32. The Bokhart Declaration measures claimed market share and
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`performance which only includes ECMs. This is improper and inconsistent with
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`my understanding of the HVAC Blower Motor market as evidenced by:
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`a. The Declaration of Alan Kessler (the “Kessler Declaration”);
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`b. The Declaration of Ge Hu (the “Hu Declaration”);
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`c. My discussions with industry participants;
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`d. The DOE Market Assessment;
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`e. Nidec’s own marketing presentation materials.
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`33. The Kessler Declaration describes that while PSC motors themselves
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`are on average less efficient than ECMs, PSC motors are still utilized as blower
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`motors in high efficiency HVAC systems. EX. 1028, p.8.
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`34. The Hu Declaration, which is from a former Goodman employee,
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`describes that Goodman worked closely with Emerson Electric Company (now
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`Nidec) to manufacture a four wire communicating ECM system. EX. 1020, p. 4.
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`As part of the process, Goodman allowed the use of either PSCs or ECMs for this
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`system on Project Authorization Requests (“PARs”). EX. 1020, p.4. Goodman did
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`not limit the project to ECMs. The PARs (prepared in the normal course of
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`business by one of the largest OEMs/purchasers of blower motors) are further
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`evidence that the market should not be limited to ECMs.
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`35. Consistent with the Hu Declaration, based on my discussions with
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`various OEMs, including the current Vice President of Engineering at
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` if efficiency specifications in the overall HVAC system can be
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`achieved, then ECM and PSC motors clearly compete. I understand that regulatory
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`standards and end user standards have placed more focus on overall efficiency of
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`the HVAC system, which is not limited to the type of blower motor, but rather the
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`efficiency of the HVAC system as a whole. For example, I understand some end
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`users install a PSC motor inside the home and an ECM outside of the home while
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`still achieving an acceptable level of efficiency.
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`36.
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`In addition, the DOE Market Assessment includes PSC, ECM, and
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`X13 motors together as available technology for HVAC Blower Motors. EX. 1017,
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`p. 33.
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`37.
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`Indeed, even Nidec itself compares the Practicing Nidec Motors to
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`PSC motors in presentations to OEMs.
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`38. By analyzing claimed market share using only ECMs, the Bokhart
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`Declaration uses a narrow and improper market definition. Based on my analysis,
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`the HVAC Blower Motor market includes PSCs, which are a significant portion of
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`the market. The exclusion of PSCs from the market share analysis contained in the
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`Bokhart Declaration renders the opinions and conclusions unreliable and
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`misleading.
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`C.
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`The Practicing Nidec Motors are not a commercial success in the market
`for HVAC Blower Motors
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`39. As discussed above, PSC motors represent approximately 56 percent
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`of the HVAC Blower Motor market. By excluding PSC motors when analyzing
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`market share (among other reasons), the Bokhart Declaration significantly
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`overstates Nidec’s purported market share.
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`40.
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`In order to calculate accurate market share of the Practicing Nidec
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`Motors, I began with the data from the AHRI, which includes air conditioners, heat
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`pumps and gas furnaces. Mr. Filla provided this information for the years 2005-
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`2011. [NIDEC00008] I independently obtained the AHRI data for 2005-2014.3
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`41. Using the AHRI data, I divided the total Practicing Nidec Motor unit
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`sales by the total market unit sales to calculate Nidec’s market share for the
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`Practicing Nidec Motors for the years 2005 through 2014. EX. 1026. The table
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`below details my calculations of the market share.
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`43. The relatively weak market share of the Practicing Nidec Motors does
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`not support a finding of commercial success.
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` The overstated, unreliable, and inaccurate market share percentages claimed
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`in the Bokhart Declaration are inconsistent with AHRI data and Nidec’s own data
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`and do not support the claimed commercial success.
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`D. Even considering only the sales of ECMs, the market share of the
`Practicing Nidec Motors does not support a finding of commercial success
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`44. Even if it was appropriate for the Bokhart Declaration to only analyze
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`market share as a proportion of ECMs (which it is not), the Nidec proportion of
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`ECM sales does not support a finding that the Practicing Nidec Motors are a
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`commercial success.
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`45.
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` As described above, the claimed Nidec market share for the
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`Practicing Nidec Motors in the Bokart Declaration relies on the speculative
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`projections from Mr. Filla regarding the number of ECMs sold. Furthermore, the
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`assumption regarding the portion of the HVAC Blower Motor market comprised of
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`ECMs is inaccurate and significantly understates the number of ECMs actually
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`sold. The significant understatement of the volume of ECMs sold, coupled with
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`the use of overstated projections for the number of Practicing Nidec Motors sold,
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`results in a significantly overstated market share of the Practicing Nidec Motors
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`claimed in the Bokhart Report.
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`46.
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`I calculated Nidec’s share of ECMs sold using a similar methodology
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`to the calculations performed with respect to the overall HVAC Blower Motor
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`market described above. I applied 44 percent to the total market units in order to
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`arrive at total ECM units sold based on the DOE Market Assessment. I divided
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`total ECM unit sales by total Practicing Nidec Motor unit sales and calculated
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`Nidec’s share of ECM sales for the years 2009 through 2014. The table below
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`details my calculations of Nidec share of ECM sales.
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`48. Based upon my analysis, even if it was appropriate to analyze Nidec
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`share using the narrow market definition of only ECMs claimed in the Bokhart
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`Declaration (which it is not), the Practicing Nidec Motors have only achieved
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`minimal share of ECM sales. The overstated, unreliable, and inaccurate market
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`share percentages claimed in the Bokhart Declaration are inconsistent with the
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`DOE Market Assessment and Nidec’s own data and do not support a finding of
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`commercial success.
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`E.
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`The Bokhart Declaration ignores changes in the portfolio of products
`offered by Nidec after launch of the Practicing Nidec Motors in 2007.
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`49. The Bokhart Declaration fails to address the changes in the portfolio
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`of products offered by Nidec over time. Specifically, the change in the Nidec
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`portfolio of products impacts (a) the