throbber
Case 2:19-cv-00209-JRG Document 175 Filed 09/02/20 Page 1 of 22 PageID #: 7765
`
`REDACTED VERSION OF DOCUMENT FILED UNDER SEAL
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`MARSHALL DIVISION
`
`THE HILLMAN GROUP, INC.
`
`Plaintiff,
`
`v.
`
`KEYME, LLC
`
`Defendant.
`
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`
`Civil Action No. 2:19-cv-00209-JRG
`
`REDACTED VERSION OF
`DOCUMENT FILED UNDER SEAL
`
`KEYME’S MOTION TO EXCLUDE THE TESTIMONY OF
`DAMAGES EXPERT W. TODD SCHOETTELKOTTE
`
`

`

`Case 2:19-cv-00209-JRG Document 175 Filed 09/02/20 Page 2 of 22 PageID #: 7766
`
`TABLE OF CONTENTS
`
`Page
`
`I.
`
`II.
`
`INTRODUCTION ...............................................................................................................1
`
`BACKGROUND .................................................................................................................2
`
`A.
`
`B.
`
`Overview And Asserted Patents ..............................................................................2
`
`Mr. Schoettelkotte’s Report And Deposition...........................................................3
`
`III.
`
`LEGAL STANDARD ..........................................................................................................6
`
`ARGUMENT ...................................................................................................................................6
`
`IV.
`
`THE COURT SHOULD STRIKE MR. SCHOETTELKOTTE’S CONCLUSORY
`ROYALTY ..........................................................................................................................6
`
`A.
`
`B.
`
`C.
`
`D.
`
`Mr. Schoettelkotte’s Royalty Rate Is Impermissibly Plucked From Thin
`Air ............................................................................................................................6
`
`Mr. Schoettelkotte Relies On Impermissible Data ................................................10
`
`Mr. Schoettelkotte Ignores Differences Between Patents......................................13
`
`Mr. Schoettelkotte’s Conclusion Illustrates His Methodological Flaws ...............14
`
`V.
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`CONCLUSION ..................................................................................................................15
`
`i
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`

`

`Case 2:19-cv-00209-JRG Document 175 Filed 09/02/20 Page 3 of 22 PageID #: 7767
`
`TABLE OF AUTHORITIES
`
`Cases
`
`Page
`
`Burleson v. Tex. Dep’t of Criminal Justice,
`393 F.3d 577 (5th Cir. 2004) .............................................................................................. 6
`
`Daubert v. Merrell Dow Pharms., Inc.,
`509 U.S. 579 (1993) ............................................................................................................ 6
`
`Exmark Mfg. Co. Inc. v. Briggs & Stratton Power Prod. Grp., LLC,
`879 F.3d 1332 (Fed. Cir. 2018)....................................................................................... 1, 7
`
`Gen. Elec. Co. v. Joiner,
`522 U.S. 136 (1997) ............................................................................................................ 6
`
`GREE, Inc. v. Supercell Oy,
`No. 219CV00070JRGRSP, 2020 WL 4288345 (E.D. Tex. July 27, 2020) ...................... 10
`
`Image Processing Techs., LLC v. Samsung Elecs. Co.,
`No. 220CV00050JRGRSP, 2020 WL 3414675 (E.D. Tex. June 22, 2020) ..................... 10
`
`Koninklijke Philips Elecs. N.V. v. Zoll Lifecor Corp.,
`No. CV 12-1369, 2017 WL 3140798 (W.D. Pa. July 25, 2017)......................................... 9
`
`LaserDynamics, Inc. v. Quanta Computer, Inc.,
`694 F.3d 51 (Fed. Cir. 2012)....................................................................................... 1, 8, 9
`
`Lucent Techs., Inc. v. Gateway, Inc.,
`580 F.3d 1301 (Fed. Cir. 2009)......................................................................................... 14
`
`Meridian Mfg., Inc. v. C & B Mfg., Inc.,
`340 F. Supp. 3d 808 (N.D. Iowa 2018) ............................................................................... 8
`
`Moore v. Ashland Chem. Inc.,
`151 F.3d 269 (5th Cir. 1998) .............................................................................................. 6
`
`NetFuel, Inc. v. Cisco Sys. Inc.,
`No. 5:18-CV-02352-EJD, 2020 WL 1274985 (N.D. Cal. Mar. 17, 2020) ......................... 8
`
`ResQNet.com, Inc. v. Lansa, Inc.,
`594 F.3d 860 (Fed. Cir. 2010)........................................................................................... 11
`
`ROY-G-BIV Corp. v. ABB, Ltd.,
`No. 6:11-CV-622, 2014 WL 12465449 (E.D. Tex. Aug. 1, 2014) ..................................... 8
`
`Speedfit LLC v. Woodway USA, Inc.,
`No. 13CV1276KAMAKT, 2019 WL 1436306 (E.D.N.Y. Mar. 29, 2019) ........................ 7
`
`ii
`
`

`

`Case 2:19-cv-00209-JRG Document 175 Filed 09/02/20 Page 4 of 22 PageID #: 7768
`
`United Servs. Auto. Ass'n v. Wells Fargo Bank, N.A.,
`No. 218CV00366JRGRSP, 2019 WL 7041725 (E.D. Tex. Dec. 20, 2019) ..................... 10
`
`Virnetx, Inc. v. Cisco Sys., Inc.,
`767 F.3d 1308 (Fed. Cir. 2014)......................................................................................... 15
`
`Whitserve, LLC v. Computer Packages, Inc.,
`694 F.3d 10 (Fed. Cir. 2012)............................................................................................... 7
`
`Local Rule CV-5(a)(3) .................................................................................................................. 17
`
`Rules
`
`iii
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`

`

`Case 2:19-cv-00209-JRG Document 175 Filed 09/02/20 Page 5 of 22 PageID #: 7769
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`EXHIBIT LIST
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`Exhibit
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`Document
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`1
`
`2
`
`3
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`4
`
`5
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`6
`
`7
`
`8
`
`9
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`Expert Report of W. Todd Schoettelkotte
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`Excerpted Deposition Transcript of W. Todd Schoettelkotte
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`Valuation document (HGTX00583424)
`
`Supply Agreement (KEYME-029169)
`
`Excerpted Deposition Transcript of Brad Weinshenker
`
`Excerpted Deposition Transcript (Rough) of Joseph Rakow
`
`Excerpted Rebuttal Expert Report of Joseph Rakow
`
`Excerpted Rebuttal Expert Report of Dan Schonfeld
`
`KEYME-262015 (error detection report)
`
`iv
`
`

`

`Case 2:19-cv-00209-JRG Document 175 Filed 09/02/20 Page 6 of 22 PageID #: 7770
`
`I.
`
`INTRODUCTION
`
`Pursuant to the Court’s Docket Control Order (Dkt. No. 136), Defendant KeyMe LLC
`
`(“KeyMe)” respectfully moves the Court to preclude the testimony and opinions of W. Todd
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`Schoettelkotte, the damages expert for plaintiff The Hillman Group, Inc. (“Hillman”),
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`concerning reasonable royalty damages.
`
`Mr. Schoettelkotte has disclosed a speculative opinion that the reasonable royalty for all
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`three asserted patents in this case is
`
` per key. Yet he does not explain how he arrived at
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`that number. Instead, he simply recites each Georgia-Pacific factor (and various facts within
`
`them), and with no path or explanation, announces his
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` conclusion. This opacity blocks the
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`Court from executing its gatekeeper role in determining whether the analysis is reliable—
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`because no analysis is provided. And it would be difficult, if not impossible, to cross-examine
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`Mr. Schoettelkotte on his method for reaching
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` because no method is disclosed. His royalty
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`rate, offered without disclosure of any analytical path used get there, is inadmissible as a matter
`
`of law. “It is not enough for an expert to simply assert that a particular royalty rate is reasonable
`
`in light of the evidence without tying the proposed rate to that evidence.” Exmark Mfg. Co. Inc.
`
`v. Briggs & Stratton Power Prod. Grp., LLC, 879 F.3d 1332, 1351 (Fed. Cir. 2018).
`
`Included in this lack of analysis is the absence of any discernible apportionment between
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`patented and non-patented features. Given ample chance both through his report and at
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`deposition, Mr. Schoettelkotte did not explain whether or how the
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` royalty resulted from
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`apportionment, and further was at a loss to explain what portion of Hillman’s own profits owe to
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`the patented technology vs. non-patented elements. Courts regularly exclude damages opinions
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`for offering unsubstantiated apportionment figures, see, e.g., LaserDynamics, Inc. v. Quanta
`
`Computer, Inc., 694 F.3d 51, 69 (Fed. Cir. 2012), but here Mr. Schoettelkotte provides no
`
`apportionment figure at all.
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`1
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`

`

`Case 2:19-cv-00209-JRG Document 175 Filed 09/02/20 Page 7 of 22 PageID #: 7771
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`
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`Beyond Mr. Schoettelkotte’s failure to support his final conclusion, the inputs he
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`purportedly used are improper bases for a damages analysis. He cites to a commercial supply
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`agreement
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`; but Mr.
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`Schoettelkotte admits that he has not identified any patents licensed under that agreement, and at
`
`any rate,
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`. He relies on several other licenses as comparable but
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`openly admits that he did not assess their comparability. And the similarity between his royalty
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`figure (
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`) and his calculated lost profits to Hillman (
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` or
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`, depending on retailer)
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`suggests an improper attempt to recover lost profits without meeting the Panduit factors. Mr.
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`Schoettelkotte’s opinions on reasonable royalty should be excluded.
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`II.
`
`BACKGROUND
`
`A.
`
`Overview And Asserted Patents
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`KeyMe’s nearly 4,000 self-service key duplication machines are located in retailers
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`throughout the country such as 7-11, Safeway, Kroger, and Menards. Presented with a
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`customer’s key, the kiosk is configured to image the key and determine what it looked like when
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`it was cut at the factory, before any wear and tear from use. If the kiosk has an appropriate key
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`blank in its inventory, it cuts that blank into a new key designed to work more effectively than
`
`the key that was inserted. If the kiosk does not contain a matching key blank,
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`
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`
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`Hillman, through its purchase of Minute Key, offers a competing self-service key
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`duplicating machine, branded as the Minute Key kiosk.1 Hillman claims to have over 6,000
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`1 In 2018, Hillman purchased Minute Key. Hillman still operates “Minute Key” branded
`kiosks.
`
`2
`
`

`

`Case 2:19-cv-00209-JRG Document 175 Filed 09/02/20 Page 8 of 22 PageID #: 7772
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`Minute Key kiosks across the country. The kiosk cuts only brass keys and
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`
`
`
`
` The Minute Key kiosk does not feature mail-order and does not copy
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`car keys. Another Hillman product, the KeyKrafter, duplicates keys and does not require a
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`locksmith but is a tabletop machine with no internal inventory of key blanks.
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`
`
`
`
`
`
`In this action, Hillman asserts 12 claims from three patents: U.S. Pat. Nos. 8,979,446;
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`9,914,179; and 10,400,474. Only the ’474 patent includes claims directed at transponder keys.
`
`B.
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`Mr. Schoettelkotte’s Report And Deposition
`
`Mr. Schoettelkotte’s report on damages, served July 20, 2020, sets forth his opinions
`
`purporting to justify both lost profits and a reasonable royalty as damages in this case. As to lost
`
`profits, Mr. Schoettelkotte states that KeyMe has displaced Hillman in multiple retailers,
`
`including
`
`, but seeks lost profits (of
`
` per key)
`
`only as to keys cut by KeyMe at
`
`. Although his analysis is flawed, KeyMe does not
`
`seek to preclude Mr. Schoettelkotte’s testimony on lost profits.
`
`For all keys cut by KeyMe other than through kiosks at
`
`, Mr. Schoettelkotte
`
`seeks damages on a reasonable-royalty basis only. In his reasonable royalty analysis, he opines
`
`that
`
`opines that
`
`
`
`. Ex. 1 (Report) at 27. He
`
`
`
`
`
`
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` These data points include (see generally Ex. 1 at 29-77):
`
`3
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`

`

`Case 2:19-cv-00209-JRG Document 175 Filed 09/02/20 Page 9 of 22 PageID #: 7773
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`
`
`
`
`
`
`
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`;
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`
`
` 
`
`
`
`
`
`
`
`
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`After identifying these and other items as data points in his analysis (and dismissing
`
`certain unfavorable inputs, such as
`
`
`
`), Mr. Schoettelkotte states the following by way of conclusion as to the ’446 patent:
`
`
`
`
`
`
`
`
`
`
`
`
`
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`Ex. 1 at 80. There is nothing connecting the
`
` to any of the previously described inputs,
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`other than the statement that they have been taken “into account.” Mr. Schoettelkotte provides
`
`4
`
`

`

`Case 2:19-cv-00209-JRG Document 175 Filed 09/02/20 Page 10 of 22 PageID #: 7774
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`similar conclusions on the other two patents. and for the ’474 patent also presents a royalty-
`
`per vehicle key that is similarly unsupported. Id. at 83. 87.
`
`At deposition. counsel repeatedly pressed Mr. Schoettelkotte to provide any infonnation
`
`on the analytical path he used to arrive at-. Mr. Schoettelkotte_
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`The following exchange. copied verbatim. is illustrative:
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`

`

`Case 2:19-cv-00209-JRG Document 175 Filed 09/02/20 Page 11 of 22 PageID #: 7775
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`
`
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`
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`
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`
`
`
`
`
`
`
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`Ex. 2 at 45:9-48:9; see also id. at 48:21-49:23. Pressed to explain how he would explain to the
`
`jury why he landed at
`
` instead of, for example,
`
`, Mr. Schoettelkotte
`
`
`
` Id. at 49:24-59:18; see also id. at 143:21-144:12, 151:19-161:11.
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`III.
`
`LEGAL STANDARD
`
`Federal Rule of Evidence 702 “assign[s] to the trial judge the task of ensuring that an
`
`expert’s testimony both rests on a reliable foundation and is relevant to the task at hand.”
`
`Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 597 (1993). A court may “rightfully
`
`exclude expert testimony where a court finds that . . . there is ‘too great an analytical gap
`
`between the data and the opinion proffered.’” Burleson v. Tex. Dep’t of Criminal Justice, 393
`
`F.3d 577, 587 (5th Cir. 2004) (quoting Gen. Elec. Co. v. Joiner, 522 U.S. 136, 146 (1997)). The
`
`proponent of the expert testimony bears the burden of demonstrating reliability and relevancy.
`
`Moore v. Ashland Chem. Inc., 151 F.3d 269, 276 (5th Cir. 1998) (en banc).
`
`ARGUMENT
`
`IV.
`
`THE COURT SHOULD STRIKE MR. SCHOETTELKOTTE’S CONCLUSORY
`ROYALTY
`
`A.
`
`Mr. Schoettelkotte’s Royalty Rate Is Impermissibly Plucked From Thin Air
`
`As a matter of law, damages experts must explain the path taken to arrive at their
`
`proposed reasonable royalty. “It is not enough for an expert to simply assert that a particular
`
`royalty rate is reasonable in light of the evidence without tying the proposed rate to that
`
`6
`
`

`

`Case 2:19-cv-00209-JRG Document 175 Filed 09/02/20 Page 12 of 22 PageID #: 7776
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`evidence.” Exmark, 879 F.3d at 1351. Although “mathematical precision is not required, some
`
`explanation of both why and generally to what extent the particular factor impacts the royalty
`
`calculation is needed.” Whitserve, LLC v. Computer Packages, Inc., 694 F.3d 10, 27 (Fed. Cir.
`
`2012). An expert must explain the methodology used to arrive at that figure, not least to enable
`
`the Court to “determine, as it is required to, whether the expert reasonably applied the
`
`methodology to the facts of the case.” Speedfit LLC v. Woodway USA, Inc., No.
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`13CV1276KAMAKT, 2019 WL 1436306, at *8 (E.D.N.Y. Mar. 29, 2019).
`
`For instance, in Speedfit, the plaintiff’s damages expert “discussed each of the Georgia-
`
`Pacific factors and, for the most part, applied them to the facts of the case,” and also indicated
`
`which “direction” each factor would have on the royalty rate. Id. at 8. The expert then
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`announced a royalty rate of 8% “without further discussion or explication.” Id. The court noted
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`that the expert came up with a dozen other royalty figures, calculated using different methods,
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`but that “there is no basis articulated in the Report from which the court can determine why the
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`8% royalty rate was reasonable, or why the twelve other rates he calculated were not.” Id. On
`
`that ground, the court struck the opinion on reasonable royalty. Id.
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`Speedway is not alone in excluding expert damages opinions for failing to provide a
`
`cogent explanation of how the facts support a particular royalty rate. For example, in Exmark,
`
`the Federal Circuit explained it was “troubled by the expert’s analysis because, even assuming
`
`she properly considered this record evidence, she failed to explain how the evidence factored
`
`into the proposed royalty rate. She merely addressed the Georgia–Pacific factors in light of the
`
`facts and then plucked the 5% royalty rate out of nowhere.” Exmark, 879 F.3d at 1351. The
`
`court therefore ruled that “the district court erred by not excluding Exmark’s damages expert’s
`
`opinion and abused its discretion by denying [defendant] a new trial on damages based on
`
`7
`
`

`

`Case 2:19-cv-00209-JRG Document 175 Filed 09/02/20 Page 13 of 22 PageID #: 7777
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`
`
`inadmissible evidence.” Id. Similarly, in Meridian Mfg., Inc. v. C & B Mfg., Inc., 340 F. Supp.
`
`3d 808, 850 (N.D. Iowa 2018), the court excluded a damages opinion where the expert “listed the
`
`factors and discussed what was included in those categories but did not complete the crucial step
`
`of explaining how those factors would influence the parties in a hypothetical negotiation to reach
`
`agreement as to his proposed reasonable royalty rates.”
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`Here, Mr. Schoettelkotte’s analysis is as flawed as those rejected by the courts above.
`
`Like the expert in Speedfit,
`
`
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` Ex. 2 (Schoettelkotte Dep.) at 26:1-20, 36:15-18. As in Speedfit, Mr.
`
`Schoettelkotte posited a host of potential royalty figures—
`
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`
`
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`
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` see, e.g., Ex. 2 at 93:14-96:7—but
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`articulates no basis that enables anyone to understand how those inputs led to his
`
`
`
`Courts have also regularly excluded testimony where an expert has “plucked out of thin
`
`air” a figure reflecting the apportionment between patented and unpatented elements. See, e.g.,
`
`LaserDynamics, 694 F.3d at 69 (Fed. Cir. 2012) (rejecting a one-third apportionment that
`
`“appears to have been plucked out of thin air based on vague qualitative notions”); ROY-G-BIV
`
`Corp. v. ABB, Ltd., No. 6:11-CV-622, 2014 WL 12465449, at *3 (E.D. Tex. Aug. 1, 2014)
`
`(“Lacking any objective or even substantial qualitative analysis to demonstrate why 70% is the
`
`proper apportionment, Mr. Nawrocki’s 70% is reminiscent of the rejected 25% rule of thumb.”);
`
`NetFuel, Inc. v. Cisco Sys. Inc., No. 5:18-CV-02352-EJD, 2020 WL 1274985, at *7 (N.D. Cal.
`
`Mar. 17, 2020) (“[A]n expert witness must follow some discernable methodology, and may not
`
`8
`
`

`

`Case 2:19-cv-00209-JRG Document 175 Filed 09/02/20 Page 14 of 22 PageID #: 7778
`Case 2:19-cv-00209-JRG Document 175 Filed 09/02/20 Page 14 of 22 PageID #: 7778
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`be a ‘a black box into which data is fed at one end and from which an answer emerges at the
`
`other.’”); Karlinklijke Philips Elecs. N. V. v. 20]] Lifecor Corp. . No. CV 12-1369. 2017 WL
`
`3140798. at *4 (W.D. Pa. July 25. 2017) (“Indeed Mr. Jarosz offers no objective support for his
`
`50% apportionment rate and. therefore. will not be permitted to testify regarding same”).
`
`Here. Schoettelkotte goes beyond asseiting an tulsupported or indiscemible “black box“
`
`apprronenrm figure-—
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`— See, e...g Ex. 2 (Schoettelkotte pep.) at 88:22-
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`86:2(*—
`
`—”): Ex. 1 (Schoertelkone Repon) at 69-75
`
`—>- Mr. reroererone rarer
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`to reremrne—
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`_ See, e.g., Ex. 1 at 69—75: Ex. 2 at 164:1-176:l8; LaserDvnamics, 694 F.3d at 67
`
`(quoting Gau‘etson v. Clark, 111 US. 120. 121 (1884) (“[T]he patentee .
`
`.
`
`. must in every case
`
`give evidence tending to separate or apportion the defendant’s profits and the patentee’s damages
`
`between the patented featlu'e and the unpatented features. and such evidence must be reliable and
`
`tangible. and not conjectural or speculative”). He says only that—-
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`— Ex. 2 at 166m 167:13-169224.
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`Likewise. Mr. Schoettelkotte supplies neither suppon nor apportionment for his—
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`—. When asked how he’d arrived at the number. he gave a response. spam1ing
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`several transcript pages.—
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`

`

`Case 2:19-cv-00209-JRG Document 175 Filed 09/02/20 Page 15 of 22 PageID #: 7779
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`
`
`. Ex. 2 at 227:8-232:17. But despite the lengthy
`
`testimony, he failed to explain in his deposition (just as he failed to do in his report) how
`
`
`
`
`
`. Like his
`
` figure,
`
` is merely plucked
`
`from thin air, supported by no articulation of how to reach it and no articulation of any
`
`apportionment applied. As such, both figures are inadmissible as a matter of law.
`
`For these reasons, Mr. Schoettelkotte’s opinions on reasonable royalty should be
`
`excluded from trial.
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`B.
`
`Mr. Schoettelkotte Relies On Impermissible Data
`
`Setting aside Mr. Schoettelkotte’s failure to justify his proposed royalty rates, his stated
`
`inputs for his analysis are faulty and provide an independent basis to exclude his royalty analysis.
`
`1.
`
`Georgia-Pacific Factor 12: Mr. Schoettelkotte Did Not Assess The
`Comparability Of His Purported Comparable Licenses
`
`As this District has repeatedly recognized, “[f]or an expert to introduce other licenses,
`
`agreements, negotiations, or the like to support the expert’s theory surrounding the hypothetical
`
`negotiation, the Federal Circuit requires a showing of comparability. A showing of comparability
`
`requires showing that the other data point is comparable, both technologically and economically,
`
`to the hypothetical negotiation between the parties.” United Servs. Auto. Ass'n v. Wells Fargo
`
`Bank, N.A., No. 218CV00366JRGRSP, 2019 WL 7041725, at *1 (E.D. Tex. Dec. 20, 2019); see
`
`also Image Processing Techs., LLC v. Samsung Elecs. Co., No. 220CV00050JRGRSP, 2020 WL
`
`3414675, at *3 (E.D. Tex. June 22, 2020) (striking opinion where the expert “provides no
`
`technological comparison” between the prior licenses and the asserted patents); GREE, Inc. v.
`
`Supercell Oy, No. 219CV00070JRGRSP, 2020 WL 4288345, at *4 (E.D. Tex. July 27, 2020)
`
`(recognizing that to rely on the royalty amount from a prior license, the proponent must first
`
`establish comparability); ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 869-74 (Fed. Cir.
`
`10
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`

`

`Case 2:19-cv-00209-JRG Document 175 Filed 09/02/20 Page 16 of 22 PageID #: 7780
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`2010) (vacating a damages award where the proponent of allegedly comparable licenses failed to
`
`demonstrate their comparability).
`
`Here, not only did Mr. Schoettelkotte fail to demonstrate comparability, he did not even
`
`assess it. He merely adopted, without scrutiny, a comparables analysis prepared for accounting
`
`purposes.
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`Mr. Schoettelkotte relied on these licenses, applying
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` range to KeyMe’s
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`average revenue per key
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` to imply a royalty rate
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`
`
`Ex. 1 (Report) at 80; Ex. 2 (Schoettelkotte Dep.) at 192:4-23. But he admitted at deposition that
`
` Ex. 2 (Schoettelkotte Dep.) at 200:5-10; id.
`
`
`
`at 201:3-9 (
`
`that
`
`Mr. Schoettelkotte testified that
`
`
`
` Id. at 197:20-198:13.
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`). He also admitted
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` Id. at 202:2-204:20.
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`11
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`Case 2:19-cv-00209-JRG Document 175 Filed 09/02/20 Page 17 of 22 PageID #: 7781
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` Id. at 196:6-21. There was nothing
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`preventing Mr. Schoettelkotte from
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` He simply chose not to.
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`2.
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`Georgia-Pacific Factor Two (Keyline agreement)
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`The second Georgia-Pacific factor is: “The rates paid by the licensee for the use of other
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`patents comparable to the patents in suit.” Under this factor, Mr. Schoettelkotte improperly
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`points to a
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`12
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`Case 2:19-cv-00209-JRG Document 175 Filed 09/02/20 Page 18 of 22 PageID #: 7782
`Case 2:19-cv-00209-JRG Document 175 Filed 09/02/20 Page 18 of 22 PageID #: 7782
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`C.
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`Mr. Schoettelkotte Ignores Differences Between Patents
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`As finther evidence of his lack of analytical ligor, Mr. Schoettelkotte an‘ives at the same
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`royalty figure for all three patents despite clear and acknowledged differences in both patent
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`scope and the circumstances of the hypothetical negotiation.—
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`||'9
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`Case 2:19-cv-00209-JRG Document 175 Filed 09/02/20 Page 19 of 22 PageID #: 7783
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`D. Mr. Schoettelkotte’s Conclusion Illustrates His Methodological Flaws
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`The unrealistic nature of the
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` figure further corroborates the methodological
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`deficiencies in Mr. Schoettelkotte’s opinion. Taking, for example,
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` it is clear that KeyMe would never have agreed
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`to pay that amount. See Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1325 (Fed. Cir.
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`2009) (“The hypothetical negotiation tries, as best as possible, to recreate the ex ante licensing
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`negotiation scenario and to describe the resulting agreement.”).
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`From the ’446 patent, Hillman asserts only claims 70 and 71, which involve automatic
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`detection and reporting of an error in the vacuum system. Mr. Schoettelkotte opines that KeyMe
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`would have paid
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` per key for the right to license these features. Mr. Schoettelkotte ignores
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`the limited nature of these claims,
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`Report) at 78.
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` Ex. 1 (Schoettelkotte
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`14
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`Case 2:19-cv-00209-JRG Document 175 Filed 09/02/20 Page 20 of 22 PageID #: 7784
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`Given that a royalty must reflect “only those damages attributable to the infringing
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`features,” Virnetx, Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1326 (Fed. Cir. 2014), the notion that
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`KeyMe would pay
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` per key to license a minor feature, that Hillman itself had not yet
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`bothered to implement and that is trivial to KeyMe, is facially ridiculous and a corroboration of
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`the points made above demonstrating the unreliable nature of Mr. Schoettelkotte’s opinion.
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`V.
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`CONCLUSION
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`For the foregoing reasons, KeyMe respectfully requests the Court grant KeyMe’s motion.
`
`15
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`

`

`Case 2:19-cv-00209-JRG Document 175 Filed 09/02/20 Page 21 of 22 PageID #: 7785
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`DATED: August 31, 2020
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`By /s/ Sean S. Pak
`Deron R. Dacus (Bar No. 00790553)
`The Dacus Firm, PC
`821 ESE Loop 323
`Suite 430
`Tyler, TX 75701
`Tel. 903.705.1177
`Fax 903.581.2543
`ddacus@dacusfirm.com
`
`Sean S. Pak
`Jeffrey W. Nardinelli
`Zachary C. Flood
`QUINN EMANUEL URQUHART &
`SULLIVAN, LLP
`50 California Street, 22nd Floor
`San Francisco, CA 94111-4788
`Telephone: (415) 875-6600
`Facsimile: (415) 875-6700
`seanpak@quinnemanuel.com
`jeffnardinelli@quinnemanuel.com
`zackflood@quinnemanuel.com
`
`David A. Nelson
`QUINN EMANUEL URQUHART &
`SULLIVAN, LLP
`191 N. Wacker Drive, Suite 2700
`Chicago, IL 60606-1881
`Telephone: (312) 705-7400
`Facsimile: (312) 705-7401
`davenelson@quinnemanuel.com
`
`Eric Hui-chieh Huang
`QUINN EMANUEL URQUHART &
`SULLIVAN, LLP
`51 Madison Avenue, 22nd Floor
`New York, NY 10010-1601
`Telephone: (212) 849-7000
`Facsimile: (212) 849-7100
`erichuang@quinnemanuel.com
`
`Attorneys for Defendant KeyMe, LLC
`
`16
`
`

`

`Case 2:19-cv-00209-JRG Document 175 Filed 09/02/20 Page 22 of 22 PageID #: 7786
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`CERTIFICATE OF SERVICE
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`I hereby certify that all counsel of record who are deemed to have consented to electronic
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`service are being served on this 31st day of August, 2020, with a copy of this document via the
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`Court’s CM/ECF system per Local Rule CV-5(a)(3). Any other counsel of record will be served
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`by electronic mail, facsimile transmission and/or first class mail on this same date.
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` /s/ Zachary Flood
`Zachary Flood
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`CERTIFICATE OF AUTHORIZATION TO FILE UNDER SEAL
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`I hereby certify that the foregoing document and all supporting declarations and exhibits
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`thereto are being filed under seal pursuant to the terms of the Protective Order (Dkt. 94).
`
` /s/ Zachary Flood
`Zachary Flood
`
`17
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`

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