`UNITED STATES PATENT AND TRADEMARK OFFICE
`____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`____________
`
`AMERICAN NATIONAL MANUFACTURING INC.,
`Petitioner,
`v.
`SLEEP NUMBER CORPORATION
`f/k/a SELECT COMFORT CORPORATION,
`Patent Owner.
`____________
`Case No. IPR2019-00514
`Patent No. 5,904,172
`
`
`DECLARATION OF MATTHEW R. LYNDE, Ph.D.
`IN SUPPORT OF PETITIONER’S REPLY TO
`PATENT OWNER’S RESPONSE
`
`
`January 29, 2020
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`TABLE OF CONTENTS
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`I.
`Qualifications ............................................................................................. 1
`II. Assignment and Materials Considered ...................................................... 4
`III. Executive Summary and Conclusions ....................................................... 5
`A. Degen Declaration Analyses ................................................. 5
`
`B.
`
`Summary of Opinions ........................................................... 7
`
`IV. Background ................................................................................................ 9
`A.
`Parties .................................................................................... 9
`
`Sleep Number .................................................................................. 9
`1.
`ANM .............................................................................................. 10
`2.
`Alleged Intellectual Property Use by ANM .................................. 10
`3.
`V. Unit Sales Analysis .................................................................................. 11
`A. Unit Sales Do Not Establish Commercial Success ............. 11
`
`B. Mr. Degen’s Unit Sales Analysis Does Not Establish Any
`Causal Connection Between the Patents and Demand for the
`Products ............................................................................... 13
`
`1.
`
`2.
`
`3.
`4.
`
`The Unit Sales Analysis Does Not Identify the Effect of the ‘172
`Patent ............................................................................................. 15
`The Unit Sales Analysis Cannot Identify the Impacts of the ‘154
`Patent and the ‘747 Patent Without Controlling for Confounding
`Factors ........................................................................................... 16
`Data Considerations ...................................................................... 18
`Confounding Factors ..................................................................... 21
`C.
`Issues With Including Third-Party Sales ............................ 31
`
`1. Major Competitor Exiting the Market ........................................... 32
`2.
`Sporadic Third-Party Controller Sales .......................................... 33
`3.
`Third-Party and Retail Sales Act Differently ................................ 35
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`D. Higher Level of Sales vs. Higher Sales Growth ................. 35
`
`E.
`
`Consumer Information and Valuation ................................ 37
`
`VI. Adoption Rate Analysis ........................................................................... 40
`1. Manifold Adoption Rate ................................................................ 41
`2.
`Software Adoption Rate ................................................................ 42
`3.
`Selling More Accused Pumps/Air Controller than Accused
`Mattresses Does Not Indicate Demand ......................................... 43
`VII. Signature .................................................................................................. 44
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`Qualifications
`I.
`1. My name is Matthew R. Lynde. I am an economist and a Senior Vice
`
`President of Cornerstone Research, an economic and financial consulting firm with
`
`offices in San Francisco; Silicon Valley; Los Angeles; Chicago; Washington, D.C.;
`
`New York; Boston; and London. My work address is Two Embarcadero Center,
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`San Francisco, CA, 94111.
`
`2.
`
`I have over 35 years of experience as a practicing applied economist in
`
`academia, government, and business. I earned both a B.A. and a Ph.D. in economics
`
`from the University of California at Berkeley. As an undergraduate at UC Berkeley,
`
`I studied electrical engineering as well as economics. I also studied at the Université
`
`de Poitiers in France. During the interval between degrees, I worked in the federal
`
`government in Washington, D.C., attached to the President’s Council on Wage and
`
`Price Stability, and at the Brookings Institution.
`
`3.
`
`At Brookings, I worked on studies of small business formation and its
`
`importance to innovation and employment growth. My dissertation research for my
`
`Ph.D. at UC Berkeley concerned an empirical, econometric investigation of the
`
`impact of technological innovation on international competition. At that time, and
`
`continuing to today, UC Berkeley was a center for research on the economics of
`
`innovation, and on the interaction of industrial organization and patent system public
`
`policies.
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`4.
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`Following my doctorate, I was on the faculty of the City University of New
`
`York where I continued my research on innovation economics as well as teaching
`
`microeconomics, trade, corporate finance, and econometrics courses. I also taught
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`intersession courses at the Universidad Interamericana de Puerto Rico.
`
`5.
`
`In 1992, I joined Price Waterhouse in New York as a senior economist. I
`
`worked on litigation support assignments, including coordinating valuation matters
`
`across practices and with the London office. As a partner in the firm, I was
`
`responsible for leading the intellectual property practice in San Francisco and Menlo
`
`Park.
`
`6.
`
`In 2001, I joined Cornerstone Research as the founding partner for its San
`
`Francisco office. I have served the firm as head of that office and in various
`
`managerial functions, as well as heading up the intellectual property practice for a
`
`number of years. I have served on the advisory boards of both UC Berkeley Law’s
`
`Center for Law and Technology and Stanford Law’s Program in Law, Science, and
`
`Technology. I spearheaded the firm’s research efforts as one of the founding
`
`supporters of the Stanford Intellectual Property Clearinghouse in conjunction with
`
`Professor Mark Lemley, and serve as an advisor to its primary descendant, the
`
`LexMachina intellectual property database firm.
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`7.
`
`As a consultant and expert witness, I specialize in the applied economic,
`
`financial, and statistical analyses of complex business and regulatory matters. Since
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`1992, I have been involved in advising clients on securities valuation, antitrust, and
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`intellectual property valuation and licensing issues, as well as supporting experts and
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`providing expert analysis of damages and liability questions in complex commercial
`
`litigation, including contract, securities, antitrust, and intellectual property issues. I
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`have testified as an expert witness in both state and federal courts, in deposition and
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`trial, on patent, copyright, trademark, and trade secret damages, contract breach
`
`damages,
`
`false advertising and
`
`securities
`
`fraud damages, and unfair
`
`competition/antitrust liability and damages. I have also provided expert reports on
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`commercial success as a secondary indicia of non-obviousness in patent
`
`infringement cases. I have served as, and supported, the expert witness on economic
`
`issues in Tokyo District Court and the International Court of Arbitration in Paris and
`
`Geneva. For patent cases alone, I have been involved in over three hundred matters
`
`over the course of my career, testifying at trial or arbitration on over 30 occasions I
`
`have long been a regular speaker at various legal seminars on the subject of patent
`
`damages and reasonable royalties.
`
`8.
`
`I am also a member of the American Economic Association, the National
`
`Association of Business Economists, and the American Statistical Association. I
`
`was admitted to membership in the Licensing Executive Society in 1997 and have
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`been an active member of that organization. My curriculum vitae, including
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`publications within the last ten years, and testimony given in at least the last four
`
`years, is attached as Appendix 1.
`
`9.
`
`Cornerstone Research is paid $850 per hour for my time spent on this matter.
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`My analysis is supported by colleagues at Cornerstone Research whose time is billed
`
`at customary hourly rates. Neither my compensation, nor that of Cornerstone
`
`Research, is dependent on the outcome of this matter.
`
`II. Assignment and Materials Considered
`I have been asked by Counsel for ANM to provide my opinions in response
`10.
`
`to the Declaration of Carl G. Degen, dated October 23, 2019 (the “Degen
`
`Declaration”) filed in this Inter Partes Review (“IPR”). In his Declaration, Mr.
`
`Degen evaluates the commercial success of three challenged patents (“the patents”
`
`or “the patented technology at issue”) that have been previously asserted against
`
`ANM by Sleep Number Corporation (“Sleep Number”).
`
`11.
`
`In this Declaration, I review the methodology and execution of each of Mr.
`
`Degen’s analyses. Additionally, I evaluate whether these economic and statistical
`
`analyses are reasonable and reliable methods for supporting his conclusions
`
`regarding commercial success for the patents.
`
`12.
`
`In preparing this Declaration, I have reviewed the Petition, the Response, the
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`Degen Declaration, the January 8, 2020 deposition of Mr. Degen in this IPR (“Degen
`
`Deposition”), and underlying ANM unit sales data, among other relevant documents.
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`Additionally, I have had conversations with ANM personnel including ANM
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`President Craig Miller and Director of Operations Ric Jansen.
`
`13. The opinions in this declaration are based on the information that has been
`
`provided to me to date. To the extent that relevant new information should come to
`
`my attention, I reserve the right to amend my declaration as permitted by the Board.
`
`I am prepared to answer any questions about these opinions under oath, including at
`
`a deposition.
`
`III. Executive Summary and Conclusions
`A. Degen Declaration Analyses
`
`14. Mr. Degen opines on the commercial success of three patents held by Sleep
`
`Number: U.S. Patent No. 5,904,172 (“the ‘172 Patent”); U.S. Patent No. 9,737,154
`
`(“the ‘154 Patent”); and U.S. Patent No. 8,769,747 (“the ‘747 Patent”). To analyze
`
`the commercial success of the patents, Mr. Degen defines four different time periods
`
`based on alleged infringement of one or more of the patents. He then reaches
`
`conclusions regarding the commercial success of these patents based on statistics
`
`calculated during these periods. Specifically, Mr. Degen performs two analyses:
`
`a.
`
`ANM unit sales data are considered. Mr. Degen shows that ANM
`
`achieved different average accused pump/air controller sales levels and
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`trends across different periods. He concludes that statistically
`
`significant increases in unit sales occur when ANM moved to using the
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`technology related to two of the patents, and a non-statistically
`
`significant increase of unit sales occurs when ANM moved away from
`
`using them, indicating demand and commercial success of these
`
`patents.1
`
`
`1 Declaration of Carl G. Degen, October 23, 2019 (“Degen Declaration”), ¶25 (“It
`
`is my opinion that the statistically significant increases in ANM’s average monthly
`
`unit sales of accused pumps/air controllers during Period 2 and Period 4 (when
`
`ANM adopted source code asserted to read on Sleep Number’s ‘154 Patent and
`
`‘747 Patent)—along with ANM’s stagnating sales during Period 3 (when ANM
`
`moved away from source code asserted to read on Sleep Number’s ‘154 and ‘747
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`Patents)—indicate that significant demand exists for the source code asserted to
`
`read on Sleep Number’s ‘154 Patent and ‘747 Patent.”);Degen Declaration, ¶29 (“I
`
`believe to a reasonable degree of certainty that there is clear evidence of
`
`commercial success based on: the statistically significant positive impact on unit
`
`sales of accused pumps/air controllers that ANM realized from using technologies
`
`Sleep Number asserts read on Sleep Number’s ‘172 Patent, ‘154 Patent, and/or
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`‘747 Patent;”).
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`b.
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`Two adoption rates are considered: one for the accused manifolds and
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`the other for the accused source code. For each period, Mr. Degen
`
`calculates the ratio between sales of controllers containing accused
`
`manifolds and sales of accused mattresses, which he terms the manifold
`
`“adoption rate.” He also calculates the ratio between sales of
`
`controllers containing accused source code and sales of accused
`
`mattresses, which he terms the source code “adoption rate.” Mr. Degen
`
`concludes that the virtually one-to-one ratio between accused controller
`
`sales and accused mattress sales indicates “near universal adoption”
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`and thus commercial success.
`
`15. Based primarily on these two analyses, Mr. Degen concludes that “there is
`
`clear evidence of commercial success” for the patents.2
`
`B.
`
`Summary of Opinions
`
`16.
`
`It is my opinion that Mr. Degen’s analyses fail to establish commercial
`
`success of the patents.
`
`17. As a matter of economics, unit sales levels or growth do not determine
`
`profitability (which would be an indication of commercial success). Even if that
`
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`2 Degen Declaration, ¶29 (“I believe to a reasonable degree of certainty that there
`
`is clear evidence of commercial success…”).
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`were possible, Mr. Degen’s unit sales analysis cannot demonstrate a causal
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`relationship between the use of the patents and unit sales level or trend changes,
`
`because his regression analysis does not consider and control for any confounding
`
`factors impacting sales apart from the supposed timing of infringing products.
`
`18. Mr. Degen’s unit sales analysis is not reliable because it omits common
`
`confounding factors, such as a growth trend. Leaving this out introduces model
`
`specification error. There is also evidence that advertising spending, supply-side
`
`factors and competing product exiting from the market impacted ANM’s sales.
`
`Without considering and controlling for these confounding factors, his regression
`
`estimates suffer from “omitted variable bias.” Mr. Degen mistakenly attributes the
`
`impact of these relevant but omitted variables to the patented technologies at issue.
`
`19. Unfortunately, Mr. Degen’s sales trend and adoption rate analyses both suffer
`
`from errors in the data during the first period. A careful review of the records reveals
`
`missing controller unit sales. It must be the case that, through the retail “Inner Co”
`
`channel of distribution, the ratio of controllers to mattresses is close to one-to-one,
`
`since every airbed requires a controller/pump (with minor exceptions for
`
`repair/replacement). But during that Period 1, controllers were not listed as separate
`
`line items even though they were included in each sale. I have confirmed this with
`
`Mr. Miller. Correcting this data error reverses the basis for most of Mr. Degen’s
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`conclusions.
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`20. Mr. Degen’s adoption rate analyses are not economically meaningful. In his
`
`analyses manifold (or source code) “adoption rate” is calculated as the ratio between
`
`pumps/controllers containing accused manifold (or source code) and mattresses
`
`accused by Sleep Number. His “adoption rate” therefore only measures the extent
`
`to which an accused controller is attached to or sold together with an accused
`
`mattress. After correcting for the undercounting of Period 1 unit sales of accused
`
`controllers, Mr. Degen’s manifold “adoption rate” is close to 1 across all four
`
`periods, since manifolds are accused across all four periods. His source code
`
`“adoption rate” is either close to 0 in periods when the software code is not accused,
`
`or near 1 in periods when the software code is accused. This ratio calculation does
`
`not reflect ANM’s choices of what technology to adopt, nor consumers’ demand for
`
`the patented technology at issue.
`
`IV. Background
`Parties
`A.
`
`1.
`
`Sleep Number
`
`21. The Patent Owner is the Sleep Number Corporation, a vertically integrated
`
`mattress company. 3 Sleep number specializes in air-supported mattresses, which
`
`unlike traditional mattresses, can be adjusted after the initial purchase. The vast
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`3 Sleep Number 10-K, pp. 3–4.
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`majority of Sleep Number’s revenue is generated through physical retail locations.4
`
`In 2018, Sleep Number operated 579 retail locations, which reported over $1.4
`
`billion in revenue (92%). In comparison, it generated $116 million (8%) from online
`
`sales, and $13.8 million (<1%) in revenue categorized as “wholesale” or “other.”
`
`2.
`
`ANM
`
`22. American National is a manufacturing company with over 40 years of
`
`experience in Radio Frequency welding and sewing for a variety of applications
`
`based
`
`in Corona, California. American National’s expertise
`
`includes
`
`manufacturing complex components out of various types of thermoplastic, vinyl,
`
`and other similar materials which are used in a variety of applications in consumer
`
`products, medical products and other industries.
`
`23. One of the major product segments for American National is the
`
`manufacturing and development of specialty sleep surfaces, specifically consumer
`
`air adjustable mattresses and medical air mattresses. American National has been
`
`manufacturing and offering consumer air adjustable mattresses since 1988.
`
`3.
`
`Alleged Intellectual Property Use by ANM
`
`24. Three Sleep Number patents are being challenged and are at issue in this case:
`
`U.S. Patent No. 5,904,172 (“the ‘172 Patent”); U.S. Patent No. 9,737,154 (“the ‘154
`
`
`4 Sleep Number 10-K, p. 28.
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`Patent”); and U.S. Patent No. 8,769,747 (“the ‘747 Patent”). The’172 patent is
`
`entitled “improved valve enclosure Assembly” and states that it “relates to an
`
`improved valve enclosure assembly used to control the pressure in [an] inflatable
`
`mattress and method to inflate the mattress.” The ’747 patent and ‘154 patent are
`
`both entitled “System and Method for Improved Pressure Adjustment,” and relate
`
`generally to improving the air pump system response time and effectiveness of
`
`inflating and deflating air chambers, or bladders, of an air bed, for example. ANM
`
`was requested to, and did provide, its product sales data with an indication of
`
`“accused” products as identified in a previous District Court patent infringement
`
`case.
`
`V. Unit Sales Analysis
`A. Unit Sales Do Not Establish Commercial Success
`
`25. Mr. Degen asserts that unit sales growth of accused controllers represents
`
`demand, and indicates commercial success.5 First, unit sales growth do not, as a
`
`
`5 Degen Declaration, ¶25 (“I understand that the demand represented by increased
`
`sales ANM experienced when using source code asserted to read on Sleep
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`Number’s ‘154 Patent and ‘747 Patent is a relevant factor to consider regarding
`
`commercial success of ANM’s accused pumps/air controllers.”).
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`matter of economics, establish commercial success. Growth of unit sales may or
`
`may not result in higher profits. It’s usually possible, for instance, to increase unit
`
`sales by reducing prices and that may also reduce profits. In my opinion, price and
`
`profit margins should be factored in when evaluating commercial success. While
`
`ANM’s price and margin data was not supplied to Mr. Degen, his declaration does
`
`not mention the potential importance of these factors; or its inconsistency with his
`
`other work or standard economic analysis. Even without ANM data, Mr. Degen
`
`could have used Sleep Number’s own sales, price, and profit margin data since I
`
`understand Sleep Number’s products practice the patent in this IPR and the two other
`
`related IPRs. In fact, in another PTAB case, Polygroup Limited (MCO) v. Willis
`
`Electric Company, Limited, Mr. Degen has analyzed sales, price and profit margin
`
`data of Willis, to evaluate the commercial success of Willis’s at issue patents.6
`
`
`6 Exhibit 2084 Degen Declaration (redacted) IPR2016-0612.pdf. Polygroup
`
`Limited (MCO) v. Willis Electric Company, Limited, Case IPR2016-01612. Mr.
`
`Degen has provided analysis to defend the validity of Willis’s patents under
`
`secondary considerations. To establish the commercial success of the patents, he
`
`has used the patent owner, Willis Electric Company, Limited’s sales and profit
`
`margin data, compared price and per-unit margin for Willis’s products which use
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`B. Mr. Degen’s Unit Sales Analysis Does Not Establish Any Causal
`
`Connection Between the Patents and Demand for the Products
`
`26. Mr. Degen concludes that there is a causal impact of the patents on ANM’s
`
`unit sales, and it demonstrates demand for these patents.7 For Mr. Degen’s
`
`arguments to hold, unit sales growth has to represent demand growth, and it must be
`
`linked to and caused by ANM’s use of the patents. As discussed in the previous
`
`section, unit sales growth does not necessarily indicate demand growth. But even if
`
`that were the case, Mr. Degen’s analysis does not establish a causal relationship
`
`between the use of the patents and consumer demand for the products using the
`
`patents.
`
`
`the patented technology with products, and looked at the market share growth of
`
`the products using the patented technology.
`
`7 Degen Declaration, ¶29-30 (“I believe to a reasonable degree of certainty that
`
`there is clear evidence of commercial success based on: the statistically significant
`
`positive impact on unit sales of accused pumps/air controllers that ANM realized
`
`from using technologies Sleep Number asserts read on Sleep Number’s ‘172
`
`Patent, ‘154 Patent, and/or ‘747 Patent;” “These analyses demonstrate that demand
`
`for technologies that read on Sleep Number’s ‘172 Patent, ‘154 Patent, and ‘747
`
`Patent exists.”).
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`27. To demonstrate a causal relationship between them from the available data, at
`
`a minimum there must be variation of the use of the patents, and some kind of control
`
`for confounding factors that could impact the unit sales change completely apart
`
`from the patents.
`
`28. Mr. Degen’s unit sales analysis cannot establish a causal relationship because
`
`he has not considered and controlled for any confounding factors that could impact
`
`sales in his regression analysis. Without controlling for any confounding factors,
`
`his regression estimates include omitted variable bias, exaggerating the impact of
`
`the factors his includes. These confounding factors could include a growth trend,
`
`ANM (or its retailer’s) advertising spending, supply-side factors, other product
`
`features, and competitors entering/exiting the market, among many others. Mr.
`
`Degen has stated in his deposition that he was not supplied with any such
`
`confounding factor information, but some such information was potentially
`
`available to him at the time of his declaration. Mr. Degen could have included a
`
`time trend in his regression specification. Mr. Degen could have used publicly
`
`available Sleep Number sales, marketing, and profit information; or requested
`
`detailed such information from Sleep Number itself. In any case, Mr. Degen’s
`
`declaration does not discuss confounding factors. However, Mr. Degen did
`
`acknowledge in his deposition that he would consider such information should it be
`
`made available.
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`1.
`
`The Unit Sales Analysis Does Not Identify the Effect of the ‘172 Patent
`
`29. Mr. Degen repeatedly claims that his unit sales analysis identifies the impact
`
`of all three patents—including the ‘172 Patent. For example, he writes the following
`
`in his declaration:
`
`a. “My analyses address two questions: 1) Did ANM’s use/changes
`
`regarding technologies that Sleep Number asserts read on Sleep
`
`Number’s ‘172 Patent, ‘154 Patent, and ‘747 Patent impact ANM’s
`
`average monthly unit sales of accused pumps/air controllers;”8
`
`b. “Based upon my analyses detailed above, I believe to a reasonable
`
`degree of certainty that there is clear evidence of commercial success
`
`based on: the statistically significant positive impact on unit sales of
`
`accused pumps/air controllers
`
`that ANM realized from using
`
`technologies Sleep Number asserts read on Sleep Number’s ‘172
`
`Patent, ‘154 Patent, and/or ‘747 Patent;”9
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`30. However, Mr. Degen’s declaration identifies the ‘172 Patented technology as
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`being used in manifold products in all four periods.10 This is notable, as the unit
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`8 Degen Declaration, ¶18
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`9 Degen Declaration, ¶29
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`10 Degen Declaration, ¶19
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`sales analysis is time period comparative by nature. In such a regression analysis,
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`in order to identify the effect of one variable (e.g. use of accused technology), it is
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`necessary to observe variation in this variable in the data, which may correlate with
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`change in another variable (e.g. unit sales). As there is no variation in the data to
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`allow him to identify the impact of using the ‘172 Patent on unit sales, reaching any
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`conclusion about the ‘172 Patent based on the unit sales analysis would be improper,
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`as there is no comparative period. When asked to clarify this in his Deposition, Mr.
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`Degen admitted that he did not attempt to isolate the ‘172 Patent within his unit sales
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`analysis and referred, instead, to the first part of his adoption rate analysis.11
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`2.
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`The Unit Sales Analysis Cannot Identify the Impacts of the ‘154 Patent
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`and the ‘747 Patent Without Controlling for Confounding Factors
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`31. Mr. Degen asserts that an increase of unit sales in periods when ANM’s
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`products allegedly read on the ‘154 and ‘747 Patents indicates “significant demand
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`exists” for the source code related to these two patents.12 He claims a causal effect
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`11 Degen Deposition.
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`12 Degen Declaration, ¶25 (“It is my opinion that the statistically significant
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`increases in ANM’s average monthly unit sales of accused pumps/air controllers
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`during Period 2 and Period 4 (when ANM adopted source code asserted to read on
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`Sleep Number’s ‘154 Patent and ‘747 Patent)—along with ANM’s stagnating sales
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`of these patents on ANM’s unit sales, by stating in his Declaration that “there is clear
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`evidence of commercial success based on: the statistically significant positive impact
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`on unit sales of accused pumps/air controllers that ANM realized from using
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`technologies Sleep Number asserts read on Sleep Number’s ‘172 Patent, ‘154 Patent,
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`and/or ‘747 Patent”.13
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`32. Mr. Degen provides no evidence that the change in unit sales data is caused
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`by the patents, since he has not considered or controlled for any other economic
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`factors which could cause changes to sales.
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`33. Many confounding factors could be correlated with the period identification
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`variables Mr. Degen uses to capture the alleged use of the patented technology at
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`during Period 3 (when ANM moved away from source code asserted to read on
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`Sleep Number’s ‘154 and ‘747 Patents)—indicate that significant demand exists
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`for the source code asserted to read on Sleep Number’s ‘154 Patent and ‘747
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`Patent.”).
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`13 Degen declaration, ¶29 (“I believe to a reasonable degree of certainty that there
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`is clear evidence of commercial success based on: the statistically significant
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`positive impact on unit sales of accused pumps/air controllers that ANM realized
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`from using technologies Sleep Number asserts read on Sleep Number’s ‘172
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`Patent, ‘154 Patent, and/or ‘747 Patent;”).
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`issue. This is because many relevant market conditions could change at the same
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`time when ANM used or moved away from using the patents. These confounding
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`factors could include a growth trend, ANM (or its retailer’s) advertising spending,
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`supply-side factors, other product features, competitor entering/exiting the market,
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`among others. Without considering and controlling for these confounding factors,
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`Mr. Degen mistakenly attributes the effects of those relevant variables on unit sales
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`to the use of the patented technology at issue.
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`3.
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`Data Considerations
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`34. Before moving to more detailed discussion of the confounding factors, it is
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`important to note two points related to the raw data. Unless otherwise specified,
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`both considerations are accounted for in all my analysis.
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`a. Medical Sales
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`35.
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`In his adoption rate analysis, Mr. Degen excludes medical sales. He notes that
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`“sales of accused pumps/air controllers are sporadic and of limited quantities (only
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`5.6 percent of accused pumps/air controllers).”14 I agree with this exclusion, and in
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`addition to Mr. Degen’s reasoning, believe it is not appropriate to combine these
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`markedly different sale types. However, despite noting the existence of sales to
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`medical institutions in his Declaration, and excluding these observations from his
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`14 Degen Declaration, ¶26.
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`adoption rate analysis, Mr. Degen includes these observations in his unit sales
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`analysis. My analyses exclude these sporadic medical sales, instead filtering to only
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`“Consumer” observations.
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`b.
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`Period 1 Data Correction
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`36. Mr. Degen’s analyses suffer from errors in the data during the first period.
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`His unit sales and adoption rate analyses both undercount the number of accused
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`pumps/air controllers in Period 1. In Period 1 there appears to be many more accused
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`mattresses than accused controllers in the data for the “Inner-co”, “Consumer”
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`category, while the ratio of controllers to mattresses must be clos