Case 2:17-cv-00513-JRG Document 274 Filed 01/09/19 Page 1 of 12 PageID #: 18230
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`MARSHALL DIVISION
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`AGIS SOFTWARE DEVELOPMENT LLC,
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` Plaintiff,
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`v.
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`HUAWEI DEVICE USA INC., et al.,
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` Defendants.
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`AGIS SOFTWARE DEVELOPMENT LLC,
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` Plaintiff,
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`v.
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`APPLE INC.,
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` Defendant.
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`§
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`§
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`Civil Action No. 2:17-CV-513-JRG
`(LEAD CASE)
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`
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`Civil Action No. 2:17-CV-516-JRG
`(CONSOLIDATED CASE)
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`REPLY IN SUPPORT OF APPLE INC.’S DAUBERT MOTION TO EXCLUDE THE
`OPINIONS OF MR. ALAN RATLIFF RELATING TO DAMAGES (DKT. 231)
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`Case 2:17-cv-00513-JRG Document 274 Filed 01/09/19 Page 2 of 12 PageID #: 18231
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`TABLE OF CONTENTS
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`Pages
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`INTRODUCTION ...............................................................................................................1
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`ARGUMENT .......................................................................................................................1
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`A.
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`B.
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`C.
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`D.
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`Mr. Ratliff’s “Technical Apportionment” Is Arbitrary and Unsupported. ..............1
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`Mr. Ratliff’s Reliance On The Third-Party Family Tracker App To
`Establish A Hypothetical “Market Price” Is Unreliable. .........................................4
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`Mr. Ratliff’s
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` Is Arbitrary and Unsupported .............5
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`AGIS Should Be Precluded From Introducing Evidence Regarding
`Apple’s Overall Profits Or Revenues For The Accused Devices ............................6
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`I.
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`II.
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`i
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`Case 2:17-cv-00513-JRG Document 274 Filed 01/09/19 Page 3 of 12 PageID #: 18232
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`
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`Cases
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`TABLE OF AUTHORITIES
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`Pages
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`Chrimar Holding Co., LLC v. ALE USA Inc.,
` 732 F. App’x 876 (Fed. Cir. 2018). ................................................................................... 3
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`LaserDynamics, Inc. v. Quanta Computer, Inc.,
`694 F.3d 51 (Fed. Cir. 2012)............................................................................................... 7
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`ROY-G-BIV Corp. v. ABB, Ltd.,
`No. 6:11-cv-622, 2014 WL 12465449 (E.D. Tex. Aug. 1, 2014) ................................... 2, 3
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`Stragent, LLC v. Intel Corp.,
`No. 6:11-CV-421, 2014 WL 1389304 (E.D. Tex. Mar. 6, 2014) ....................................... 5
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`Uniloc USA, Inc. v. Microsoft Corp.,
`632 F.3d 1292 (Fed. Cir. 2011)........................................................................................... 7
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`Rules
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`Fed. R. Evid. 702 ........................................................................................................................ 1, 3
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`ii
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`Case 2:17-cv-00513-JRG Document 274 Filed 01/09/19 Page 4 of 12 PageID #: 18233
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`TABLE OF EXHIBITS
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`Exhibit Number
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`Description
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`Ex. 1
`Ex. 2
`Ex. 3
`Dkt. No. 231
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`Dkt. No. 231, Mot.,
`Ex. 1
`Dkt. No. 231, Mot.,
`Ex. 4
`Dkt. No. 231, Mot.,
`Ex. 5
`Dkt. No. 231, Mot.,
`Ex. 8
`Dkt. No. 231, Mot.,
`Ex. 9
`Dkt. No. 231, Mot.,
`Ex. 11
`Dkt. No. 231, Mot.,
`Ex. 13
`Dkt. No. 250
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`Trial Testimony of Chrimar’s Technical Expert (“Chrimar Trial Tr.”)
`Family Tracker Download Data (“Download Data”)
`Deposition of Rahul Zingde, Aug. 29, 2018 (“Zingde Tr.”)
`Apple’s Daubert Motion to Exclude the Opinions of Mr. Alan Ratliff
`Relating to Damages (“Mot.”)
`Damages Expert Report of Alan Ratliff (“Ratliff Rep.”)
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`Infringement Expert Report of Joseph McAlexander (“McAlexander
`Rep.”)
`Deposition of Alan Ratliff, Dec. 7, 2018 (“Ratliff Tr.”)
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`Deposition of Malcolm Beyer, Vol. I, Oct. 22, 2018 (“Beyer Tr.”)
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`Deposition of Navin Suparna, Aug. 10, 2018 (“Suparna Tr.”)
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`Deposition of Joseph McAlexander, Dec. 7, 2018 (“McAlexander Tr.”)
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`Ratliff Rep., Workpaper 19 (“WP 19”)
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`Plaintiff AGIS Software Development LLC’s Opposition to Apple
`Inc.’s Daubert Motion to Exclude the Opinions of Mr. Alan Ratliff
`Relating to Damages (“Opp.”)
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`Case 2:17-cv-00513-JRG Document 274 Filed 01/09/19 Page 5 of 12 PageID #: 18234
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`I.
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`INTRODUCTION
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`AGIS’s damages model makes an apples-to-oranges comparison between the “Accused
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`Apps”—which Apple distributes on its devices for free—and a third-party app that requires an
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`upfront fee to download. See Dkt. 231 [Daubert Motion (“Mot.”)] at 1-2. AGIS argues that Apple
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`indirectly derives value from the Accused Apps because it uses them to “entic[e]” consumers to
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`buy Apple’s products and that it monetizes the Accused Apps through “increased device sales,”
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`“advertising,” and “other ways.” Dkt. 250 [AGIS Opposition (“Opp.”)] at 1, 3. But AGIS does
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`not identify any evidence showing that Apple made a single additional sale, received a single
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`additional dollar in “advertising” revenue, or received a single additional dollar in any “other
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`way[]” that is attributable to the Accused Apps—let alone the allegedly infringing features.
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`Instead, AGIS’s damages expert, Mr. Ratliff, devised a damages model based on the
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`upfront cost of the “Family Tracker” app without showing that it is a reliable substitute for the
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`alleged “ecosystem” value of the Accused Apps. Mr. Ratliff then assigned an arbitrary
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`between the allegedly patented and unpatented features based solely on AGIS’s technical expert’s
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`qualitative, conclusory statements. Mr. Ratliff next inflated his damages figure by attributing a
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` to Apple device purchasers who may never use the Accused Apps.
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`Finally, Mr. Ratliff attempted to justify his result by comparing it to Apple’s overall operating
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`profits—in direct violation of the entire market value rule. To be clear, Apple does not contend
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`that the Accused Apps have no value. But Mr. Ratliff’s opinions are unsupported, unreliable, and
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`legally improper, and should therefore be excluded under Fed. R. Evid. 702.
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`II.
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`ARGUMENT
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`A. Mr. Ratliff’s “Technical Apportionment” Is Arbitrary and Unsupported.
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`Mr. Ratliff’s two-paragraph technical apportionment opinion—based solely on the opinion
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`Case 2:17-cv-00513-JRG Document 274 Filed 01/09/19 Page 6 of 12 PageID #: 18235
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`of AGIS’s technical expert Mr. McAlexander—is unsupported by objective facts. Mot. at 4-5;
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`ROY-G-BIV Corp. v. ABB, Ltd., No. 6:11-cv-622, 2014 WL 12465449, at *3 (E.D. Tex. Aug. 1,
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`2014) (rejecting damages expert’s two-paragraph apportionment opinion because it “fail[ed] to
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`show thorough analysis and merely state[d] [the expert’s] conclusions” and was based solely on
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`discussions with named inventors, technical witnesses, and technical expert).1
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`AGIS attempts to justify Mr. Ratliff’s reliance on Mr. McAlexander’s flimsy technical
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`apportionment opinion by citing various portions of Mr. McAlexander’s report that are more
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`directly relevant to infringement. But Mr. McAlexander’s technical apportionment analysis—
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`comparing the relative importance of the allegedly patented and unpatented features—consists of
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`Based solely on Mr. McAlexander’s conclusory opinion that
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`” Mr. Ratliff takes “the final step” of assigning an arbitrary
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` between the
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`allegedly patented and unpatented technology. Opp. at 6. Yet it is precisely this “final step”—
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`translating Mr. McAlexander’s conclusory qualitative opinion into a
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`—that is the black
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`box in Mr. Ratliff’s analysis. Mr. McAlexander’s conclusory testimony does not provide sufficient
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`analytic support for Mr. Ratliff to draw that quantitative conclusion, rendering Mr. Ratliff’s
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`1 AGIS attempts to supplement Mr. Ratliff’s damages opinion with a new expert opinion,
`masquerading as a “declaration,” over two months after serving his damages report. See Opp., Ex.
`C. Apple intends to move to strike Mr. Ratliff’s new opinions. Mr. Ratliff’s untimely declaration
`should not be considered.
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`2
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`Case 2:17-cv-00513-JRG Document 274 Filed 01/09/19 Page 7 of 12 PageID #: 18236
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`opinion inadmissible under Rule 702. ROY-G-BIV, 2014 WL 12465449, at *3.2
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`The primary case on which AGIS relies is distinguishable because the damages expert
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`relied on far more objective evidence to arrive at his conclusions than Mr. Ratliff did here. Opp.
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`at 7; Chrimar Holding Co., LLC v. ALE USA Inc. 732 F. App’x 876, 887-88 (Fed. Cir. 2018).
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`First, the damages expert’s analysis in Chrimar was primarily based on a range of royalty rates
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`from licenses the parties had previously entered. Id. at 887. Mr. Ratliff did not rely on the parties’
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`comparable licenses—indeed, those licenses show that Mr. Ratliff’s damages are drastically more
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`than Apple has ever paid for comparable technology. Mot. at 3. Second, Chrimar involved
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`standards-essential patents where the damages expert (1) compared the accused infringer’s
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`products with and without the standardized functionality to remove the value of non-standardized
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`features and (2) apportioned out the value of the unpatented standardized features from the
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`allegedly patented standardized features based on their relative importance as described in the
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`standard itself. Id at 887-8; Ex. 1 [Chrimar Trial Tr.] at J.A. 5887.
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`AGIS also failed to account for several critical technologies in the Accused Apps, including
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` AGIS excuses its failure by arguing that those features are not relevant. Opp.
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`at 8. But AGIS ignores sworn testimony demonstrating that the features Mr. Ratliff overlooked
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`are valuable. See, e.g.,
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`2 AGIS fails to distinguish ROY-G-BIV. In that case, the court rejected the damages expert’s two-
`paragraph apportionment opinion because—as here—it relied in part on the technical expert’s
`qualitative reasoning and failed to provide sufficient analytic support. ROY-G-BIV, 2014 WL
`12465449, at *3. Further, the cases AGIS cites at page 4 of its response do not reveal the evidence
`the expert relied on and are therefore inapposite to the facts of this case. Opp. at 4.
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`.3 And AGIS cannot credibly argue that it accounted for the value of Apple’s
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`patented technology—none of AGIS’s experts addressed those Apple patents or features.
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`B. Mr. Ratliff’s Reliance On The Third-Party Family Tracker App To Establish
`A Hypothetical “Market Price” Is Unreliable.
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`AGIS provides no objective evidence correlating the price of the third-party Family
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`Tracker app to the alleged “ecosystem” value of the Accused Apps. AGIS argues that it was forced
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`to devise its dubious damages model because “Apple did not produce any financial information
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`reflecting the value of the Accused Apps during discovery. . . .” Opp. at 1; see also id. at 9.
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` But AGIS
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`bears the burden of proving damages and the absence of its preferred data does not justify using
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`an arbitrary and unsupported model.
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`AGIS further criticizes Apple for not providing download data for the Family Tracker app.
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`But AGIS did not identify the Family Tracker app as the basis for its damages model until Mr.
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`Ratliff submitted his expert report—after the close of fact discovery. At AGIS’s invitation, Apple
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`obtained download data for the current version of Family Tracker—
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`—through the most recent quarter available.
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` And in fact, the existence of any sales of
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`Family Tracker is at odds with AGIS’s entire damages model. If every Apple device already
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`provides the allegedly infringing features by including the Accused Apps, no one would buy
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`Family Tracker for those same features. Therefore, based on AGIS’s own assertions, the price of
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`Family Tracker must reflect value different from and in addition to the features offered by the
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`Accused Apps. Consumers would not pay for what they allegedly already have.
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`AGIS also suggests that any deficiencies in Mr. Ratliff’s analysis should be excused
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`because Mr. Ratliff was “conservative.” Opp. at 10. Apple disagrees that Mr. Ratliff was
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`conservative (Mot. at 11), but, in any case, simply saying “I was conservative” is no excuse for
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`using unreliable or unsupported methods. Stragent, LLC v. Intel Corp., No. 6:11-CV-421, 2014
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`WL 1389304, at *4 (E.D. Tex. Mar. 6, 2014), order clarified, No. 6:11-CV-421, 2014 WL
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`12611339 (E.D. Tex. Mar. 12, 2014) (“[A] conservative opinion . . . does not equate to a scientific
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`one.”) (internal quotations omitted).5
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`C. Mr. Ratliff’s
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` Is Arbitrary and Unsupported
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`AGIS nonsensically argues that the
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` of Apple device purchasers who
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`may never use the Accused Apps nevertheless derive a
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` from the Accused
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`Apps. But there is no evidence connecting the price of insurance to the alleged benefits of the
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`patented features. And there is no evidence that any user decided to forego purchasing insurance—
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`5 AGIS similarly fails to rebut Apple’s other arguments. Regarding the $2 difference in price
`between the iPhone and iPad versions of Family Tracker, AGIS fails to specify how this difference
`in price is in any way attributable to the asserted patents. Nor does AGIS explain how the $1.99
`upgrade cost is attributable to any benefits of the patents-in-suit (particularly where the primary
`alleged benefit— “geofencing”—is admittedly prior art (
`)).
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`Case 2:17-cv-00513-JRG Document 274 Filed 01/09/19 Page 10 of 12 PageID #: 18239
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`thereby saving the cost of insurance—because of the Accused Apps.6 For the reasons set forth in
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`Apple’s motion, Mr. Ratliff’s “insurance adjustment” should be excluded.
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`D.
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`AGIS Should Be Precluded From Introducing Evidence Regarding Apple’s
`Overall Profits Or Revenues For The Accused Devices
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`AGIS should be precluded from introducing evidence suggesting a royalty rate as a
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`percentage of Apple’s overall revenues or profits. AGIS concedes that there is no evidence
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`showing that the allegedly patented features drive demand for the accused Apple devices.
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`he calculated to Apple’s overall operating profits. Mot., Ex. 1 [Ratliff Rep.] ¶ 146. Mr. Ratliff
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`. Yet Mr. Ratliff impermissibly compares the royalty rate
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`supports his opinion by citing
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`The entire market value rule prevents patent owners from introducing evidence of an
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`accused infringer’s overall revenues or profits because presentation of such evidence to the jury
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`may “artificially inflate the jury’s damages calculation beyond that which is ‘adequate to
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`compensate for the infringement.’” LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51,
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`68 (Fed. Cir. 2012) (quoting Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1320 (Fed. Cir.
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`2011)). AGIS should not be permitted to introduce evidence of Apple’s overall profits or revenues
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`under the guise of Mr. Ratliff’s Georgia-Pacific analysis.
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`6
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`6
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`Case 2:17-cv-00513-JRG Document 274 Filed 01/09/19 Page 11 of 12 PageID #: 18240
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`Dated: January 7, 2019
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`By: Respectfully submitted:
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`
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`/s/ Melissa R. Smith
`Melissa Richards Smith
`State Bar No. 24001351
`GILLAM & SMITH, LLP
`303 South Washington Ave.
`Marshall, TX 75670
`Tel: (903) 934-8450
`Fax: (903) 934-9257
`melissa@gillamsmithlaw.com
`
`John M. Desmarais
`Paul A. Bondor
`Michael P. Stadnick
`Ameet A. Modi
`Cosmin Maier
`Kerri-Ann Limbeek
`Brian Matty
`Tom BenGera
`Kathryn Bi
`Francesco Silletta
`DESMARAIS LLP
`230 Park Avenue
`New York, NY 10169
`Telephone: (212) 351-3400
`Facsimile: (212) 351-3401
`Email: jdesmarais@desmaraisllp.com
`Email: pbondor@desmaraisllp.com
`Email: mstadnick@desmaraisllp.com
`Email: amodi@desmaraisllp.com
`Email: cmaier@desmaraisllp.com
`Email: klimbeek@desmaraisllp.com
`Email: bmatty@desmaraisllp.com
`Email: tbengera@desmaraisllp.com
`Email: kbi@desmaraisllp.com
`Email: fsilletta@desmaraisllp.com
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`ATTORNEYS FOR DEFENDANT
`APPLE INC.
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`Case 2:17-cv-00513-JRG Document 274 Filed 01/09/19 Page 12 of 12 PageID #: 18241
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`CERTIFICATE OF SERVICE
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`The undersigned certifies that the foregoing document was filed electronically in
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`compliance with Local Rule CV-5(a). Plaintiff’s counsel of record were served with a true and
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`correct copy of the foregoing document by electronic mail on January 7, 2019.
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`/s/ Melissa R. Smith
`Melissa R. Smith
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