Case 2:19-cv-00209-JRG Document 203 Filed 10/02/20 Page 1 of 9 PageID #: 9921
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`FILED UNDER SEAL PURSUANT TO PROTECTIVE ORDER
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`MARSHALL DIVISION
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`THE HILLMAN GROUP, INC.,
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`Case No. 2:19-cv-00209-JRG
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`Plaintiff,
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`v.
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`KEYME, LLC,
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`Defendant.
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`JURY TRIAL DEMANDED
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`FILED UNDER SEAL
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`PLAINTIFF THE HILLMAN GROUP, INC.’S
`SURREPLY IN OPPOSITION TO DEFENDANT KEYME’S MOTION
`TO EXCLUDE THE TESTIMONY OF DAMAGES EXPERT
`W. TODD SCHOETTELKOTTE
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`Case 2:19-cv-00209-JRG Document 203 Filed 10/02/20 Page 2 of 9 PageID #: 9922
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`FILED UNDER SEAL PURSUANT TO PROTECTIVE ORDER
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`EXHIBITS
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`Document
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`December 19, 2017 email from B. Grady to Sales@key.me (KEYME-050218)
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`Excerpted deposition transcript of W. Todd Schoettelkotte
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`Excerpted KeyMe Trial Exhibit List
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`Excerpted Hillman Trial Exhibit List
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`Exhibit
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`1
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`2
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`3
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`4
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`ii
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`Case 2:19-cv-00209-JRG Document 203 Filed 10/02/20 Page 3 of 9 PageID #: 9923
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`FILED UNDER SEAL PURSUANT TO PROTECTIVE ORDER
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`In its Reply KeyMe feigns sruprise at the notion that Mr. Schoettelkotte‘s royalty is
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`anchored by Minute Key’s profitability, claiming that “Mr. Schoettelkotte’s report places no
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`special emphasis on profitability.” D1. 186 at 2. This representation is disingenuous at best. The
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`very first thing Mr. Schoettelkotte states in the royalty section of his report is:_
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`p. 26. 1151.1 Mr. Schoettelkotte then re-emphasizes the point time and again in his expert report:
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`0
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`O
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`O
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`pp. 34-35. 111168-69 (Georgia-Pacific factor 4);
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`” I . at pp. 46-47. 111181-82 Georgia-Pad Ic tactor 5 1
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`I . at p. 55.1196 Georgia-Pad I(‘ actors 8 an 11 ;
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`I . at p. 76.11127 Georgia-Pad IC‘ actor 15 :
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` ” Id. pp. 78-79~ 81-82. 84-8511111130r 135‘ 140.
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`1 In this sur-reply all emphases are added unless otherwise noted.
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`Case 2:19-cv-00209-JRG Document 203 Filed 10/02/20 Page 4 of 9 PageID #: 9924
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`FILED UNDER SEAL PURSUANT TO PROTECTIVE ORDER
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`These are just some of the exemplary references to profitability in Mr. Schoettelkotte’s
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`report. The suirounding text and discussion in his report explains exactly Why. inider the 1n1ique
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`facts of this case. Mr. Schoettelkotte emphasized profitability.
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`In the analysis. KeyMe’s
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`admissions regarding—
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`” Ex. 1.
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`D.I. 179-9. These admissions support Mr. Schoettelkotte’s emphasis 011 forgone
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`profits at the hypothetical negotiation. And KeyMe’s claim that Mr. Schoettelkotte’s focus 011
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`profitability “appears nowhere in his expert report” (D.I. 186 at l) is simply false.2
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`As to the_ KeyMe continues to misconstrue Mr. Schoettelkotte’s
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`opinion. insisting that he relied 011 certain licensing agreements when in fact he did not. To be
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`clear. Mr. Schoettelkotte has not and will not offer—
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`as a comparable license. Rather. Mr. Schoettelkotte relies 011—
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`because it contains objective financial facts—
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`public financials submitted to the
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`2 Consistent with his ex ert re 011. Mr. Schoettelkotte testified at de osition that
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`See also id. at 89. 146. 147,
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`153-54. 158-59. 161. 269-70.
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`Case 2:19-cv-00209-JRG Document 203 Filed 10/02/20 Page 5 of 9 PageID #: 9925
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`FILED UNDER SEAL PURSUANT TO PROTECTIVE ORDER
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`Securities and Exchange Commission. It would be improper for a damages expert to ignore such
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`evidence. That
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`—using multiple different methodologies and considerations, only one of which
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`resembles a Georgia-Pacific comparable license analysis—is an objective fact that should be
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`considered at the hypothetical negotiation. This does not mean that Mr. Schoettelkotte performed
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`or adopted any of
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` let alone the comparables
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`methodology. Nor does it mean that his entire opinion should somehow rise or fall based on the
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`admissibility of the objective, contemporaneous financial facts
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`. Mr. Schoettelkotte merely concludes, properly, that “the royalty rate
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` provides a data point that the parties would consider at the hypothetical negotiations.”
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`D.I. 170-2 at p. 67, ¶113; see also id. at pp. 65-66, ¶¶ 111-112.
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` contains salient financial facts—a
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` Hillman’s $156
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`million acquisition of Minute Key. Given the highly relevant nature of these facts, it is no
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`surprise that both KeyMe and Hillman placed
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` on their respective
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`trial exhibit lists. See Ex. 3 at DTX-0156; Ex. 4 at PTX-0572. Both parties agree that the
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`document should be admitted into evidence—which, if the Court permits, means that the fact
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`witnesses would address the objective financial facts of record during trial and the jury would
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`consider those facts in deliberations. Yet KeyMe still contends that Mr. Schoettelkotte—the
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`actual expert on economic damages—should be wholly precluded from testifying merely
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`because he acknowledges that those same salient, contemporaneous financial facts would be
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`considered by the parties to the hypothetical negotiation. There is no merit to KeyMe’s
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`irreconcilable positions.
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`3
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`Case 2:19-cv-00209-JRG Document 203 Filed 10/02/20 Page 6 of 9 PageID #: 9926
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`FILED UNDER SEAL PURSUANT TO PROTECTIVE ORDER
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`As to
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` for which Mr. Schoettelkotte does opine as to comparability,
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`KeyMe simply ignores that the comparability of the agreement is properly established by
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`testimony from a technical expert, not Mr. Schoettelkotte. Specifically, Dr. Phinney opines that
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`D.I. 179-7 at p. 29, ¶ 74. Once again, given its highly relevant nature, both KeyMe and Hillman
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`include
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` on their respective trial exhibit lists. Ex. 3 at DTX-0124; Ex. 4 at
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`PTX-0212. As to this particular agreement—the only agreement which Mr. Schoettelkotte offers
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`as comparable—“[t]he degree of comparability of the [] license agreement[] as well as any
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`failure on the part of [the] expert to control for certain variables are factual issues best addressed
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`by cross-examination and not by exclusion.” ActiveVideo Networks, Inc. v. Verizon Commc’ns,
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`Inc., 694 F.3d 1312, 1333 (Fed. Cir. 2012).3
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`Finally, the only additional case law KeyMe cites in its Reply is inapposite. KeyMe cites
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`IEX Corp. v. Blue Pumpkin contending that there, the district court excluded an expert damages
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`opinion despite that “the expert recited the Georgia-Pacific factors as well as facts and data
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`within them.” D.I. 186 at 1 (citing IEX Corp. v. Blue Pumpkin Software, Inc., No. 4:01CV16,
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`2005 WL 6426934, at *4 (E.D. Tex. Dec. 14, 2005)). But in IEX the purported “expert” was not
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`3 KeyMe likewise persists with its argument that alleged factual disputes regarding the relative
`technical importance of the asserted patents should preclude Mr. Schoettelkotte from offering his
`opinion on damages. D.I. 186 at 3-4. While KeyMe focuses on alleged factual disputes relating
`to
` KeyMe cannot dispute that Hillman’s experts and fact
`witnesses have uniformly advanced the view that each of the patents-in-suit are core and
`fundamental inventions that are necessary for successful implementation of commercial self-
`service key-cutting kiosks. D.I. 179 at p. 15. Any factual disputes that KeyMe may have
`regarding these issues go to the merits of the entire case; they should be addressed through cross-
`examination and contrary evidence, not exclusion of the damages expert.
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`4
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`Case 2:19-cv-00209-JRG Document 203 Filed 10/02/20 Page 7 of 9 PageID #: 9927
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`an expert at all—she was the vice president and general manager of the plaintiff. Id. at *1. The
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`Court noted that “[t]he question presented here is whether someone with limited or little patent
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`or finance background can be permitted to testify on matters which appear to be largely based on
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`financial considerations.” Id. at *5. Not only had she never before performed a Georgia-Pacific
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`analysis (or any kind of reasonable royalty analysis), but as a party witness she was not even
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`permitted to review the defendants’ financial data due to the governing Protective Order. Id.
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`Because of her abject inexperience, and her inability to even consider the relevant financial
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`information, the Court found her “minimal consideration of the Georgia-Pacific factors” to be
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`wholly deficient. Id. at *7. Specifically, the Court found that she “does not understand how the
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`company accounts for revenue and this lack of understanding undermines her ability to render an
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`opinion on what a reasonable royalty is.” Id. at *6. The Court held that her “‘analysis’ of the
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`Georgia-Pacific factors is [] deficient in addressing factors 12 through 15 . . . she fails to address
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`13 in any respect. The shortcomings in her analysis of the Georgia-Pacific factors lie in her
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`failure to address the financial considerations mandated.” Id. at *7. There are no parallels with
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`Mr. Schoettelkotte’s exhaustive and well-informed opinion here. KeyMe’s representation that the
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`excluded expert in IEX addressed “the Georgia-Pacific factors as well as facts and data within
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`them” (D.I. 186 at 1) is false—the opinion is clear that the “expert” in IEX was not even privy to
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`the “facts and data,” and that she failed to address the Georgia-Pacific factors. Even a cursory
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`reading of IEX demonstrates that it has no bearing on a situation where a qualified economic
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`damages expert provides a thorough analysis of all Georgia-Pacific factors against full
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`consideration of the specific facts of the case.
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`Case 2:19-cv-00209-JRG Document 203 Filed 10/02/20 Page 8 of 9 PageID #: 9928
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`FILED UNDER SEAL PURSUANT TO PROTECTIVE ORDER
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`DATED: September 29, 2020
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`Of Counsel:
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`Christopher P. Isaac (admitted pro hac vice)
`Ryan P. O’Quinn (admitted pro hac vice)
`FINNEGAN, HENDERSON, FARABOW,
`GARRETT & DUNNER, L.L.P.
`1875 Explorer Street, Suite 800
`Reston, VA 20190
`(571) 203-2700
`(202) 408-4400 (fax)
`chris.isaac@finnegan.com
`oquinnr@finnegan.com
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`Gerald F. Ivey (admitted pro hac vice)
`John M. Williamson (admitted pro hac vice)
`Kelly C. Lu (admitted pro hac vice)
`Cara E. Regan (admitted pro hac vice)
`FINNEGAN, HENDERSON, FARABOW,
`GARRETT & DUNNER, L.L.P.
`901 New York Avenue, N.W.
`Washington, DC 20001
`(202) 408-4000
`(202) 408-4400 (fax)
`gerald.ivey@finnegan.com
`john.williamson@finnegan.com
`kelly.lu@finnegan.com
`cara.regan@finnegan.com
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`Respectfully submitted,
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`/s/Eric H. Findlay
`Eric H. Findlay (Bar No. 00789886)
`FINDLAY CRAFT, P.C.
`102 North College Avenue, Suite 900
`Tyler, TX 75702
`(903) 534-1100
`(903) 534-1137 (fax)
`efindlay@findlaycraft.com
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`Attorney for Plaintiff
`The Hillman Group, Inc.
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`6
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`Case 2:19-cv-00209-JRG Document 203 Filed 10/02/20 Page 9 of 9 PageID #: 9929
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`FILED UNDER SEAL PURSUANT TO PROTECTIVE ORDER
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`CERTIFICATE OF SERVICE
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`This is to certify that on September 29, 2020, all counsel of record were served with the
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`foregoing document via electronic mail. I also hereby certify that all counsel of record who have
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`consented to electronic service are being served with a notice of filing this document, under seal,
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`pursuant to L.R. CV-5(a)(7) on September 29, 2020.
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`/s/ Eric H. Findlay
`Eric H. Findlay
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`CERTIFICATE OF AUTHORIZATION TO FILE UNDER SEAL
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`I hereby certify that this document is being filed under seal pursuant to KeyMe’s Motion
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`to Exclude the Testimony of Damages Expert W. Todd Schoettelkotte, filed in this matter as D.I.
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`170, and pursuant to the terms of the Protective Order, filed in this matter as D.I. 94.
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`/s/ Eric H. Findlay
`Eric H. Findlay
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`7
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