Case 2:17-cv-00140-WCB-RSP Document 322 Filed 02/08/19 Page 1 of 21 PageID #: 16857
`
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`MARSHALL DIVISION
`
`CYWEE GROUP LTD.,
`
`Plaintiff
`
`v.
`
`SAMSUNG ELECTRONICS CO., LTD.
`AND SAMSUNG ELECTRONICS
`AMERICA, INC.,
`
`Defendants.
`
`§
`§
`§
`§
`§
`§
`§
`§
`§
`§
`§
`
`
`
`NO. 2:17-CV-00140-WCB-RSP
`
`
`
`DEFENDANTS SAMSUNG ELECTRONICS CO., LTD. AND SAMSUNG
`ELECTRONICS AMERICA, INC.’S MOTION TO EXCLUDE THE OPINIONS AND
`TESTIMONY OF PLAINTIFF’S DAMAGES EXPERT MR. WALTER BRATIC
`
`
`
`

`

`Case 2:17-cv-00140-WCB-RSP Document 322 Filed 02/08/19 Page 2 of 21 PageID #: 16858
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`TABLE OF CONTENTS
`
`
`Page
`
`
`I.
`II.
`III.
`IV.
`
`V.
`
`INTRODUCTION ............................................................................................................. 1
`BACKGROUND ............................................................................................................... 1
`LEGAL STANDARD ........................................................................................................ 2
`ARGUMENT ..................................................................................................................... 3
`A.
`Mr. Bratic Improperly Relied on the Conjoint Survey, Which Was
`Untethered from the Patents-in-Suit ...................................................................... 3
`Mr. Bratic’s 50/50 Split Is Arbitrary and Improper ............................................... 4
`Mr. Bratic’s Opinion Improperly Ignored Non-Infringing Alternatives ............... 6
`Mr. Bratic Failed to Account for Existing Settlement and License
`Agreements for the Patents-in-Suit ........................................................................ 9
`1.
` Settlement Agreement ................................................................... 10
`2.
` License Agreements .............................................. 13
`Mr. Bratic’s Damages Are Based on Impermissible Hindsight Bias................... 14
`E.
`CONCLUSION ................................................................................................................ 15
`
`B.
`C.
`D.
`
`-i-
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`

`

`Case 2:17-cv-00140-WCB-RSP Document 322 Filed 02/08/19 Page 3 of 21 PageID #: 16859
`
`TABLE OF AUTHORITIES
`
`
`Page(s)
`
`
`Cases
`
`Biscotti Inc. v. Microsoft Corp.,
`No. 2:13-CV-01015-JRG-RSP, 2017 WL 2536962 (E.D. Tex. May 18, 2017) ....................5, 6
`
`Commonwealth Sci. & Indus. Research Org. v. Cisco Sys., Inc.,
`809 F.3d 1295 (Fed. Cir. 2015)..................................................................................................4
`
`Daubert v. Merrell Dow Pharms., Inc.,
`509 U.S. 579 (1993) ...............................................................................................................2, 3
`
`Hanson v. Alpine Valley Ski Area, Inc.,
`718 F.2d 1075 (Fed. Cir. 1983)................................................................................................15
`
`Intelligent Verification Sys., LLC v. Microsoft Corp.,
`No. 2:12-CV-525, 2015 WL 1518099 (E.D. Va. Mar. 31, 2015) ..............................................4
`
`Interactive Pictures Corp. v. Infinite Pictures, Inc.,
`274 F.3d 1371 (Fed. Cir. 2001)................................................................................................14
`
`IP Innovation L.L.C. v. Red Hat, Inc.,
`705 F. Supp. 2d 687 (E.D. Tex. 2010) ...............................................................................10, 13
`
`Monsanto Co. v. McFarling,
`488 F.3d 973 (Fed. Cir. 2007)..................................................................................................10
`
`Rembrandt Wireless Techs., LP v. Samsung Elecs. Co.,
`No. 2:13-CV-213-JRG-RSP, 2015 WL 604577 (E.D. Tex. Jan. 29, 2015) .............................12
`
`ResQNet.com, Inc. v. Lansa, Inc.,
`594 F.3d 860 (Fed. Cir. 2010)............................................................................................10, 12
`
`Riles v. Shell Exploration and Production Co.,
`298 F.3d 1302 (Fed. Cir. 2002)........................................................................................8, 9, 14
`
`Sinclair Refining Co. v Jenkins Petroleum Process Co.,
`289 U.S. 689 (1933) .................................................................................................................14
`
`Stragent, LLC v. Intel Corp.,
`No. 6:11-CV-421, 2014 WL 1389304 (E.D. Tex. Mar. 6, 2014) ........................................5, 12
`
`Sundance, Inc. v. DeMonte Fabricating Ltd.,
`550 F.3d 1356 (Fed. Cir. 2008)..................................................................................................2
`
`-ii-
`
`

`

`Case 2:17-cv-00140-WCB-RSP Document 322 Filed 02/08/19 Page 4 of 21 PageID #: 16860
`
`TABLE OF AUTHORITIES
`(continued)
`
`Page(s)
`
`
`TransCore, LP v. Elec. Transaction Consultants Corp.,
`563 F.3d 1271 (Fed. Cir. 2009)................................................................................................11
`
`Uniloc USA, Inc. v. Microsoft Corp.,
`632 F.3d 1292 (Fed. Cir. 2011)..................................................................................................5
`
`VirnetX, Inc. v. Cisco Sys., Inc.,
`767 F.3d 1308 (Fed. Cir. 2014)..............................................................................................4, 5
`
`Rules
`
`Fed. R. Evid. 702 .................................................................................................................1, 2, 3, 9
`
`-iii-
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`

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`Case 2:17-cv-00140-WCB-RSP Document 322 Filed 02/08/19 Page 5 of 21 PageID #: 16861
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`
`
`I.
`
`INTRODUCTION
`
`Plaintiff CyWee’s damages expert, Mr. Walter Bratic, opines that Defendants Samsung
`
`Electronics Co., Ltd. and Samsung Electronics America, Inc. (collectively “Samsung”) owe a
`
`reasonable royalty of
`
`per accused device, amounting to at least
`
` in
`
`damages through mid-2018, with substantial additional amounts to the time of trial, and
`
`potentially through the expiration of the Patents-in-Suit in 2031. Mr. Bratic’s opinions as to
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`alleged damages, however, are flawed and unreliable because they are untethered from the
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`Patents-in-Suit and violate other fundamental principles of patent damages law. Accordingly,
`
`Mr. Bratic’s opinions fail to meet the standard of admissibility for expert testimony set forth in
`
`Federal Rule of Evidence 702 and should be excluded.
`
`II.
`
`BACKGROUND
`
`CyWee asserts that Samsung infringes various claims of U.S. Patent Nos. 8,441,438 (the
`
`“’438 Patent”) and 8,552,978 (the “’978 Patent”) (collectively the “Patents-in-Suit”) (Exs. 1–2).
`
`On October 8, 2018, CyWee served an expert report authored by Drs. Mihajlo Popesku, Thomas
`
`Richardson, and Arvind Raghu (the “Survey Report”), which purported “to determine the price
`
`premium that consumers of Samsung devices are willing to pay for the incremental benefit of
`
`[the Patents-in-Suit].” Ex. 3 ¶ 2. On the same day, CyWee also served the expert report of Mr.
`
`Walter Bratic setting forth his opinions regarding estimated damages for alleged infringement.
`
`Ex. 4 ¶ 2.
`
`Mr. Bratic opines that a reasonably royalty of
`
`per accused device is appropriate,
`
`relying primarily “upon the results of [CyWee’s] Conjoint Survey as an indication of the ‘price
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`premium that consumers of Samsung decides are willing to pay for the incremental benefit’ . . .
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`provided by the Accused Functionality.” Id. ¶ 160. Specifically, Mr. Bratic took the lowest price
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`premium
`
` directly from the Survey Report, subtracted material and incremental
`
`-1-
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`

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`costs
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` and assumed that the parties would have agreed to a 50/50 split of the
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`incremental value
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`—yielding his royalty rate of
`
`per device. Id. ¶¶ 162–170. Mr.
`
`Bratic did not rely on any of the existing settlement agreements or license agreements covering
`
`the Patents-in-Suit to arrive at this royalty rate. Mr. Bratic also did not make any adjustments to
`
`the “price premium” to apportion between patented features and unpatented features (i.e., non-
`
`infringing alternatives). Instead, his royalty rate was manufactured from and depends entirely on
`
`the purported price premium set forth in the Survey Report.
`
`Mr. Bratic’s opinions suffer from a number of fatal defects. First, because the purported
`
`“price premium” of the Survey Report is not tied directly to the patented technology as required,
`
`his opinions based on that price premium are likewise untethered from the patented features and
`
`must be excluded. Second, Mr. Bratic’s 50/50 split of the supposed incremental value is entirely
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`arbitrary. Third, Mr. Bratic ignores the existence of non-infringing alternatives, which he admits
`
`exist. Fourth, Mr. Bratic disregards the most probative evidence of the appropriate royalty rate:
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`settlement agreement
`
` and its license agreements with
`
`
`
` Finally, Mr. Bratic’s opinions impermissibly rely upon hindsight to apply
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`perfect foreknowledge of financial and market data that could not have been known to the parties
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`at the hypothetical negotiation. Any one of these flaws would warrant exclusion of Mr. Bratic’s
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`opinions and testimony as flawed and unreliable; together, they make clear that his opinions fall
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`well short of the requirements of Federal Rule of Evidence 702 and must be excluded.
`
`III. LEGAL STANDARD
`
`“Expert evidence can be both powerful and quite misleading.” Daubert v. Merrell Dow
`
`Pharms., Inc., 509 U.S. 579, 595 (1993) (citation omitted). Thus, district courts “are charged
`
`with a ‘gatekeeping role,’ the objective of which is to ensure that expert testimony admitted into
`
`evidence is both reliable and relevant.” Sundance, Inc. v. DeMonte Fabricating Ltd., 550 F.3d
`
`-2-
`
`

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`1356, 1360 (Fed. Cir. 2008); Daubert, 509 U.S. at 597. Federal Rule of Evidence 702 provides
`
`that a witness who is “qualified . . . by knowledge, skill, experience, training, or education[,]”
`
`may provide opinion testimony if that testimony will assist the trier of fact and “(b) the testimony
`
`is based upon sufficient facts or data; (c) the testimony is the product of reliable principles and
`
`methods; and (d) the [witness] has reliably applied the principles and methods to the facts of the
`
`case.” Fed. R. Evid. 702.
`
`IV. ARGUMENT
`A. Mr. Bratic Improperly Relied on the Conjoint Survey, Which Was
`Untethered from the Patents-in-Suit
`
`CyWee’s Survey Report purported “to determine the price premium that consumers of
`
`Samsung devices are willing to pay for the incremental benefit of [the Patents-in-Suit].” Ex. 3
`
`¶ 2. Based on the Conjoint Survey, the Survey Report opines that consumers would be willing to
`
`pay a price premium of
`
` for that incremental benefit. Id. ¶¶ 7, 88. Mr. Bratic states that
`
`he “relied upon the results of the Conjoint Survey as an indication of” the price premium. Ex. 4
`
`¶ 160. In fact, Mr. Bratic simply took the lowest price premium
`
` directly from
`
`the Survey Report and used it as the primary basis for his reasonable royalty damages opinions.
`
`Id. ¶¶ 162–173.
`
`As explained in a separate motion to exclude the Conjoint Survey and opinions and
`
`testimony based thereon, the purported “price premium” Mr. Bratic relied upon is not tied
`
`directly to the patented technology since the Conjoint Survey measured the value of “Sensor
`
`Fusion Technology” generally versus no sensor fusion whatsoever, as opposed to the incremental
`
`benefit of the particular sensor fusion approach (or algorithms) claimed in the Patents-in-Suit
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`versus prior art or other approaches (or algorithms). See Motion to Exclude the Conjoint Survey
`
`of Dr. Mihajlo Popesku et al. Mr. Bratic’s damages opinions, which are wholly dependent on the
`
`-3-
`
`

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`flawed and unreliable “price premium” derived from the Conjoint Survey, should likewise be
`
`excluded. See VirnetX, Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1327 (Fed. Cir. 2014) (alteration
`
`in original) (citation omitted) (“[A] reasonable royalty analysis requires a court to . . . carefully
`
`tie proof of damages to the claimed invention’s footprint in the market place.”). In fact, Mr.
`
`Bratic’s opinions have previously been excluded for failing to do just that. In Intelligent
`
`Verification Systems, Mr. Bratic’s opinions were excluded where his alleged value was “not [tied
`
`to] the value of the patented feature” and “Mr. Bratic did not use the royalty rate to account for
`
`the value of the patented feature within the accused product”). Intelligent Verification Sys., LLC
`
`v. Microsoft Corp., No. 2:12-CV-525, 2015 WL 1518099, at *7 (E.D. Va. Mar. 31, 2015). See
`
`also Commonwealth Sci. & Indus. Research Org. v. Cisco Sys., Inc., 809 F.3d 1295, 1304 (Fed.
`
`Cir. 2015) (noting that the “patent holder should only be compensated for the approximate
`
`incremental benefit derived from his invention . . . .”).
`
`B. Mr. Bratic’s 50/50 Split Is Arbitrary and Improper
`
`Mr. Bratic opines that the parties to the hypothetical negotiation would have agreed to a
`
`50/50 split of the incremental value of the Patents-in-Suit, and essentially halved the purported
`
` per device “price premium” from the Survey Report to arrive at his reasonable royalty rate
`
`of
`
`. Ex. 4 ¶ 170. Mr. Bratic provides no explanation for his split other
`
`than the assumption that “CyWee would have been willing to accept [it]” and that “Defendants
`
`would have recognized . . . CyWee was making a concession to Defendants.” Id. ¶ 169. In other
`
`words, the parties would have agreed to it because they would have agreed to it. While Mr.
`
`Bratic lists a number of bullet points that purport to represent the parties’ “bargaining positions,”
`
`(Id. ¶ 154), he provides zero analysis of how his list of factors (even if they were true) cut for or
`
`against his split. He instead summarily concludes that “CyWee would have demanded at least
`
`50% of the economic value attributable to the Accused Functionality . . . and that a 50% sharing
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`-4-
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`

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`of the value solely attributable to the asserted claims of the Patents-in-Suit is a conservative
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`approach to the determination of a reasonable royalty for the Patents-in-Suit.” Id. ¶ 169. Such
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`hand-waving is insufficient to meet the requirements for admissible expert testimony.
`
`Both the Federal Circuit and this Court are clear that arbitrary damages conclusions of
`
`this sort cannot stand. See Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1315 (Fed. Cir.
`
`2011) (ordering a new trial on damages where the expert used the 25% rule of thumb since it did
`
`not “tie a reasonable royalty base to the facts of the case at issue”); VirnetX, 767 F.3d at 1331–34
`
`(vacating a damages award where the damages expert applied the Nash Bargaining Theorem as a
`
`rule of thumb to support a 50/50 split, since the expert did not actually apply the facts of the case
`
`to arrive at that split); Biscotti Inc. v. Microsoft Corp., No. 2:13-CV-01015-JRG-RSP, 2017 WL
`
`2536962, at *5 (E.D. Tex. May 18, 2017) (excluding expert testimony where the proposed 40/60
`
`split was “arbitrary”); Stragent, LLC v. Intel Corp., No. 6:11-CV-421, 2014 WL 1389304, at *4
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`(E.D. Tex. Mar. 6, 2014) (excluding expert testimony that relied on “arbitrary assumptions that
`
`have no basis in the facts of this case . . .”).
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`The Federal Circuit’s VirnetX case is highly analogous. There, the expert assumed a
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`50/50 baseline split supported solely by the Nash Bargaining Theorem. 767 F.3d at 1331–34. He
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`then made a 10% deviation from that baseline, determining it was appropriate “to reflect the fact
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`that Apple would have an additional bargaining power over VirnetX back in . . . 2009.” Id. at
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`1333 (alteration in original). The court found that this assertion was “conclusory” and “cannot
`
`form the basis of a jury’s verdict.” Id. This is essentially identical to Mr. Bratic’s vague
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`assertions of “bargaining power” to support his 50/50 split. Accordingly, Mr. Bratic’s opinions
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`are likewise arbitrary and should be excluded.
`
`-5-
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`

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` 16866
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`Mr. Bratic’s opinions are also foreclosed by a highly analogous Eastern District of Texas
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`case. In Biscotti, the expert applied a 40/60 split which the court rejected as conclusory. 2017
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`WL 2536962, at *5. In doing so, the Court noted that the expert’s opinion about the royalty rate
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`was supported only by the conclusion “that ‘Microsoft might hold a slightly greater proportion of
`
`the bargaining strength’ and settling on a 40/60 split . . . .” Id. (citation omitted). Likewise, Mr.
`
`Bratic’s 50/50 split is supported only by his conclusory assumption that CyWee had more
`
`“bargaining power” and would have “demanded at least 50%.” Ex. 4 ¶ 169. The Federal Circuit
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`and this Court are clear that arbitrary conclusions of this sort should be excluded.
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`C. Mr. Bratic’s Opinion Improperly Ignored Non-Infringing Alternatives
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`Mr. Bratic’s opinions are also flawed and unreliable because they fail to take into account
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`non-infringing alternatives that indisputably existed at the time of the hypothetical negotiation.
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`Mr. Bratic asserted that “Dr. LaViola does not know of any available, acceptable, non-infringing
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`alternatives to the Patents-in-Suit at the time of the hypothetical negotiation in this matter . . . .”
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`Ex. 4 ¶ 134. According to Mr. Bratic, this would have an “upward effect on a negotiated royalty
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`between the parties.” Id. ¶ 141. Not only does Mr. Bratic fail to explain how precisely this
`
`impacts his reasonable royalty analysis, he ignores established non-infringing alternatives to the
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`patented technology.
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`The ’438 Patent itself describes at least some alternatives, as it admits that sensor fusion
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`approaches using accelerometers and gyroscopes to calculate orientation were known in the prior
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`art, and that the patent relates to “an improved pointing device with [an] enhanced calculating or
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`comparison method . . . .” Ex. 1 at 2:38–3:15; 3:51–4:2 (emphasis added). The patent’s
`
`prosecution history confirmed this. During prosecution, the Applicant consented to an
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`Examiner’s Amendment to all independent claims to obtain allowance over the prior art. Ex. 5.
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`Specifically, the Examiner made clear that all limitations of every then-pending independent
`
`-6-
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`

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` 16867
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`claim were taught by the prior art, and thus the claims were not allowable unless limitations were
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`added requiring the “predicted measurements” to be obtained “based on the first signal set
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`without using any derivatives of the first signal set” and requiring the “predicted axial
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`accelerations” to be based on measured angular velocities “without using any derivatives of the
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`measured angular velocities . . . .” Ex. 6 at 2–12. The Applicant provided no argument in
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`response, effectively conceding the then-pending claims were not allowable, and agreed to make
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`the requested amendments to obtain allowance. Thus, one undeniable non-infringing alternative
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`is a sensor fusion approach which lacks that limitation, as in the prior art that the Applicant
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`overcame by way of those amendments.
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`The ’978 Patent is a continuation-in-part of a continuation-in-part of the ’438 Patent.
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`Like the ’438 Patent, the ’978 Patent acknowledges that sensor fusion approaches to calculate
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`orientation were known in the prior art, and that the patent relates to “an improved device with
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`[an] enhanced calculating or comparison method . . . .” Ex. 2 at 2:41–3:19; 3:53–4:11 (emphasis
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`added). Indeed, the Applicant’s own cited prior art included U.S. Patent No. 7,414,611, which is
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`titled “3D Pointing Devices with Orientation Compensation and Improved Usability,” and which
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`discloses a “handheld system [that] senses motion using one or more sensors 901, e.g., rotational
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`sensor(s), gyroscopes(s), accelerometer(s), magnetometer(s), optical sensor(s), camera(s) or any
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`combination thereof.” Ex. 1 at 2:38–3:15; Ex. 2 at 2:41–3:19; see also Ex. 7 at 16:16–18:14.
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`Thus, another non-infringing alternative is a sensor fusion approach following the teachings of
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`U.S. Patent No. 7,414,611 to Liberty.
`
`CyWee’s technical expert Dr. Thomas LaViola confirmed in his expert report that “[t]he
`
`patents teach an ‘enhanced comparison method’ for fusing data from different sensors in order
`
`to minimize errors and noises.” Ex. 8 ¶ 22 (emphasis added). Dr. LaViola further confirmed in
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`-7-
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`

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`deposition that someone could use non-infringing sensor fusion algorithms (i.e., the patent
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`claims do not cover all sensor fusion algorithms or “Sensor Fusion Technology” generally). See
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`Ex. 9 at 84:7–11.
`
`
`
`Even Mr. Bratic recognized that the Patents-in-Suit only cover certain particular sensor
`
`fusion approaches (or algorithms), versus other approaches (or algorithms) that existed in the
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`prior art: “The ’438 Patent discloses an enhanced sensor fusion technology . . . . The ’978 Patent
`
`discloses another enhanced sensor fusion process for calculating orientation. Generally, the
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`functionalities claimed by the Patents-in-Suit combine the data observed by several different
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`sensors in an effort to produce an enhanced orientation calculation . . . .” Ex. 4 ¶ 130 (emphasis
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`added). Indeed, Mr. Bratic recognized that the ’438 Patent “is essentially an optimal recursive
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`estimator, such as an extended Kalman filter (“EKF”).” Id. ¶ 23. Dr. LaViola has confirmed that
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`EKFs “were well-known in the art at the time of the . . . invention of the ’438 Patent.” Ex. 14 at
`
`42:18–25. It necessarily follows that the ’438 Patent merely covers a particular type (or types) of
`
`EKF, and that other types were available at the time of the hypothetical negotiation.
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`Therefore, there is clear evidence—including admissions in the Patents-in-Suit, in their
`
`prosecution histories, and by CyWee’s own experts—that there are non-infringing alternatives. It
`
`is established law that Mr. Bratic’s reasonably royalty opinions must take into account at least
`
`those admitted non-infringing alternatives (putting aside the numerous additional non-infringing
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`alternatives described by Samsung’s technical expert Dr. Ray Mercer, which Mr. Bratic similarly
`
`ignored in forming his opinions). In Riles v. Shell Exploration and Production Co., the Federal
`
`Circuit vacated a reasonable royalty damages award where it failed to account for non-infringing
`
`alternatives in the hypothetical negotiation. The court stated:
`
`[I]n the hypothetical negotiation that characterizes the reasonable
`royalty calculation, Shell may have had non-infringing alternatives
`
`-8-
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`

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` 16869
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`to installing with temporary pilings. Thus, under the constraints of
`the hypothetical negotiation, the market could not award Riles a
`royalty for his method divorced of all relation to a potential non-
`infringing alternative method. The economic relationship between
`the patented method and [those] non-infringing alternative
`methods, of necessity, would limit the hypothetical negotiation.
`
`298 F.3d 1302, 1312 (Fed. Cir. 2002) (emphasis added). Mr. Bratic’s opinion likewise commits
`
`the fatal error of ignoring established non-infringing alternatives, and is therefore unreliable and
`
`should be excluded. Moreover, because this opinion is contrary to the law the jury must apply, it
`
`is not only flawed and unreliable, but further fails to “help the trier of fact . . . determine a fact in
`
`issue . . . .” Fed. R. Evid. 702.
`
`To the extent CyWee argues that Mr. Bratic’s opinion was justified since it was based on
`
`Dr. LaViola’s opinion that there were no “available, acceptable non-infringing alternatives to the
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`Patents-in-Suit,” (Ex. 4 ¶ 134), that argument fails. Mr. Bratic is required under the Federal
`
`Rules of Evidence to provide testimony that is “based on sufficient facts or data” and that “is the
`
`product of reliable principles and methods.” Fed. R. Evid. 702(b)–(c). Mr. Bratic’s opinions here,
`
`however, are internally inconsistent and therefore inherently flawed and unreliable. As discussed
`
`above, Mr. Bratic knew the ’438 Patent was “essentially” an EKF—technology that Dr. LaViola
`
`opined was available at the time of the hypothetical negotiation. Mr. Bratic further knew that the
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`Patents-in-Suit merely claimed an “enhanced” sensor fusion approach (or algorithm). It was not
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`reasonable or reliable for Mr. Bratic to take the self-contradictory position that there were no
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`available non-infringing alternatives, which led Mr. Bratic to further overvalue the Patents-in-
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`Suit. Mr. Bratic’s reasonable royalty opinions should be excluded accordingly.
`
`D. Mr. Bratic Failed to Account for Existing Settlement and License
`Agreements for the Patents-in-Suit
`
`Mr. Bratic dismissed multiple relevant agreements out of hand, in favor of his reasonable
`
`royalty opinions based on the Conjoint Survey. This flies in the face of established damages law.
`
`-9-
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`

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` 16870
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`A reasonable royalty calculation utilizing the Georgia-Pacific factors “must consider licenses
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`that are commensurate with what the defendant has appropriated. If not, a prevailing plaintiff
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`would be free to inflate the reasonable royalty analysis with conveniently selected licenses
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`without an economic or other link to the technology in question.” ResQNet.com, Inc. v. Lansa,
`
`Inc., 594 F.3d 860, 872 (Fed. Cir. 2010). Just as the Federal Circuit warned in ResQNet, Mr.
`
`Bratic’s wholesale dismissal of relevant agreements left him free to choose an approach—i.e.,
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`the Conjoint Survey— that dramatically inflated the reasonable royalty.
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`The Federal Circuit and this Court have repeatedly confirmed that excluding comparable
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`licenses from a reasonably royalty damages analysis is improper. IP Innovation L.L.C. v. Red
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`Hat, Inc., 705 F. Supp. 2d 687, 691 (E.D. Tex. 2010) (precluding a damages expert’s testimony
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`where he failed to “inaugurate[] his analysis with reference to the existing licenses to the patents-
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`in-suit.”); Monsanto Co. v. McFarling, 488 F.3d 973, 978–79 (Fed. Cir. 2007) (citation omitted)
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`(noting that “[a]n established royalty is usually the best measure of a ‘reasonable’ royalty for a
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`given use of an invention because it removes the need to guess at the terms to which parties
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`would hypothetically agree”). Mr. Bratic, however, erroneously disregards multiple comparable
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`agreements, warranting exclusion of his opinions and testimony.
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`1.
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`Settlement Agreement
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` entered into a Settlement and Licensing agreement (
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`10. The
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` Agreement included
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`. Ex.
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`. Mr. Bratic’s wholesale exclusion of this license from
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`his reasonable royalty analysis is improper and warrants exclusion.
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`Specifically, in the
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` Agreement,
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`granted to
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`:
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`-10-
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`

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`Case 2:17-cv-00140-WCB-RSP Document 322 Filed 02/08/19 Page 15 of 21 PageID #:
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` 16871
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`1.
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`2.
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`3.
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`4.
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`e
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`This agreement and its license to the Patents-in-Suit provides highly relevant evidence that must
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`inform the determination of a reasonable royalty for Samsung’s alleged infringement.
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`Mr. Bratic ignored the
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`Agreement, however, offering two justifications. First, Mr.
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`Bratic erroneously stated that the
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`Agreement is not comparable because
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`
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`have stated that settlement agreements may be relevant in the determination of a reasonable
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` Ex. 4 ¶ 100. In reality, the Federal Circuit and this Court
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`-11-
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`

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`Case 2:17-cv-00140-WCB-RSP Document 322 Filed 02/08/19 Page 16 of 21 PageID #:
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` 16872
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`royalty. See, e.g., ResQNet.com, 594 F.3d at 872 (noting that “the most reliable license in this
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`record arose out of litigation”); Rembrandt Wireless Techs., LP v. Samsung Elecs. Co., No. 2:13-
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`CV-213-JRG-RSP, 2015 WL 604577, at *2 (E.D. Tex. Jan. 29, 2015), adopted, No. 2:13-CV-
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`213-JRG-RSP, 2015 WL 627949 (E.D. Tex. Feb. 6, 2015) (finding an agreement arising from
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`litigation was relevant to damages where it included the patents-in-suit); Stragent, 2014 WL
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`1389304, at *3 (holding that a settlement agreement was relevant to damages where it covered
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`the patents-in-suit).
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`The
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`Agreement is particularly relevant here because it was entered very near the
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`time of the hypothetical negotiation (only one and a half years later), it involved the same two
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`Patents-in-Suit, and
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` were in very similar competitive positions during that
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`time frame. Further, any concern that the
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`Agreement would somehow skew the results of
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`the hypothetical negotiation is belied by Mr. Bratic’s own admissions. For example, Mr. Bratic
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`stated that validity was less in question in
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` case since
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`had not initiated inter partes
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`review and since the Court’s claim construction in that case was very favorable to
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`. Ex. 4
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`¶¶ 105–108. Mr. Bratic further stated that at the time of the hypothetical negotiation
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` There is no evidence that
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` financial position at the time of the
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`Agreement,
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`, would have been any different. It was therefore unreasonable for Mr.
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`Bratic to exclude from his reasonably royalty analysis the
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`Agreement merely because it
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`was a settlement agreement.
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`Second, Mr. Bratic simply sweeps aside the
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`Agreement based on his claim that it
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`was
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`-12-
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`

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`Case 2:17-cv-00140-WCB-RSP Document 322 Filed 02/08/19 Page 17 of 21 PageID #:
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` 16873
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` Id. ¶ 100. But Mr. Bratic provides no support for this statement and entirely
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`ignores the fact that the
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`Agreement granted a license to the Patents-in-Suit. Even if Mr.
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`Bratic were correct that some (or most) of the consideration
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`paid was attributable to
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` that should decrease the value of the license to the Patents-in-Suit. His wholesale
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`dismissal of this highly relevant agreement was improper.
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`2.
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` License Agreements
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` entered into license agreements with
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`which included
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`.
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`Exs. 11–12. Both licenses were entered into within one year of the hypothetical negotiation. Id.
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`Yet Mr. Bratic dismisses these agreements because
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`¶¶ 88–96. That explanation is unavailing since
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`. Ex. 4
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` Id. ¶ 88. Thus, Mr. Bratic’s exclusion of
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`these licenses runs afoul of established authority. See IP Innovation, 705 F. Supp. 2d at 691
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`(excluding damages opinion where the expert ignored “several license agreements that involved
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`one or more of the patents-in-suit” in favor of “general market studies”). Just like the damages
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`expert in IP Innovation, Mr. Bratic improperly dismissed what he admits
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` in favor of the Conjoint Survey, which is not tied directly to the patented
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`technology and is untethered from the Patents-in-Suit.
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`Mr. Bratic further claims that these licenses are not applicable because they
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` Ex. 4 ¶ 95. This concern, however, would only decrease the value
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`that the licensees
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` paid for their inherent licenses to the Patents-in-Suit.
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`Rather than making a downward adjustment in his reasonable royalty analysis, however, Mr.
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`-13-
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`Case 2:17-cv-00140-WCB-RSP Document 322 Filed 02/08/19 Page 18 of 21 PageID #:
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` 16874
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`Bratic entirely rejected these licenses in favor of his reliance on the Conjoint Survey. His opinion
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`is therefore not the product of reliable principles and methods and should be excluded.
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`E. Mr. Bratic’s Damages Are Based on Impermissible Hindsight Bias
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`Mr. Bratic’s damages opinions are not based on information regarding the value of the
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`patented technology that was available to the parties at the time of the hypothetical negotiation,
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`but exclusively on present facts—including the alleged incremental value of the Patents-in-Suit
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`to consumers in the present day and the exact number of Accused Products actually sold. More
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`specifically, Mr. Bratic’s damages opinion relies primarily on a purported “price premium” per
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`device derived from the Conjoint Survey discussed above, which was conducted around March,
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`2018 (Ex. 13 at 15:6–13), which he adjusted slightly based on present cost data and then applied
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`to Samsung’s actual sales of Accused