Case 4:23-cv-01147-ALM Document 101 Filed 03/11/25 Page 1 of 6 PageID #: 6572
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`SHERMAN DIVISION
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`R2 Solutions LLC,
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` Plaintiff,
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`v.
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`Databricks, Inc.,
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` Defendant.
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`Civil Action No. 4:23-cv-01147-ALM
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`Jury Trial Demanded
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`PLAINTIFF R2 SOLUTIONS LLC’S SUR-REPLY IN OPPOSITION TO
`DATABRICKS’ MOTION TO COMPEL R2 TO PRODUCE FINANCIAL DOCUMENTS
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`Case 4:23-cv-01147-ALM Document 101 Filed 03/11/25 Page 2 of 6 PageID #: 6573
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`Databricks’ reply demonstrates why its motion to compel R2’s financial documents fails.
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`The reply mischaracterizes R2’s position, effectively abandons Databricks’ primary arguments
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`directed to Georgia-Pacific factors 5 and 12, and declines to contest the fact that Databricks only
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`raised this issue in order to mitigate its own discovery misconduct. Moreover, Databricks’
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`recently-served expert report on validity guts Databricks’ entire basis for requesting R2’s
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`financials in the first place by effectively admitting that the date of first infringement places
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`Yahoo!, not R2, in the hypothetical negotiation. Databricks’ motion should be denied.
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`I.
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`R2’S FINANCIALS ARE NOT RELEVANT TO THE HYPOTHETICAL
`NEGOTIATION.
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`In its reply, Databricks says, “R2 does not dispute that its financial condition and
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`obligations are relevant to determining the parties’ relative bargaining powers.” ECF 96 at 1. This
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`mischaracterizes R2’s position. R2’s salient points are that its financials are irrelevant to each and
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`every Georgia-Pacific factor—and, thus, the hypothetical negotiation overall—and that the
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`requested financials are cumulative of all of the information R2 has already provided in the form
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`of admissions and licenses. See ECF 89 at 2-4. Indeed, Databricks already knows that R2 does not,
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`and has not, sold any products or services since acquiring its patent portfolio in April 2020 (the
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`same time period for which Databricks requests financial statements). And Databricks already has
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`all of R2’s licenses and assignment agreements, which reflect precisely how much R2 expended
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`to acquire the portfolio and precisely how much licensing revenue R2 has generated (which, as
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`Databricks knows, is R2’s sole source of revenue). As such, R2’s additional financial information
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`reflects nothing of relevance with respect to determining a reasonable royalty rate, which is clear
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`from the fact that R2’s financials are not implicated under any Georgia-Pacific factor (as
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`elucidated in R2’s response brief).
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`Specifically with respect to Georgia-Pacific, Databricks seemingly now concedes the
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`Case 4:23-cv-01147-ALM Document 101 Filed 03/11/25 Page 3 of 6 PageID #: 6574
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`irrelevance of R2’s financials to factor 5, as it does not dispute R2’s points on this issue. And while
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`factor 12 considers “[t]he portion of the profit or of the selling price that may be customary in the
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`particular business or in comparable businesses to allow for the use of the invention or analogous
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`inventions,” Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y.
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`1970), R2 does not sell (and has not sold) the inventions and is not otherwise a comparable business
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`to Databricks. See TV Interactive Data Corp. v. Sony Corp., 929 F. Supp. 2d 1006, 1017 (N.D.
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`Cal. 2013) (stating Factor 12 “expressly requires some degree of comparability between the
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`businesses”); see also Dataquill Ltd. v. High Tech Computer Corp., No. 08cv543, 2012 U.S. Dist.
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`LEXIS 53164, at *19 (S.D. Cal. Apr. 16, 2012) (“The inquiry under factor 12 is ‘whether there is
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`a customary royalty rate for analogous inventions in this industry.’”). This means that R2’s
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`financials offer nothing informative to factor 12. Moreover, Databricks offers only a cursory
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`citation to a 2006 Michigan case in which the plaintiff practiced the invention and had records of
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`related sales, marketing expenses, costs, and pricing structures. See Utica Enterprises v. Federal
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`Broach and Mach. Co., No. 01-CV-74655-DT, 2006 WL 8095265, at *3-4 (E.D. Mich. Jan. 13,
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`2006). R2 has no such documents.
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`Further, rather than continue arguing why R2’s financial statements are relevant to any of
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`the Georgia-Pacific factors, Databricks’ position has become much more convoluted. Databricks
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`claims it needs R2’s financial statements so that it can determine R2’s overarching costs as a
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`company. This, in turn, would allow Databricks to assess R2’s financial condition and would
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`purportedly reflect on R2’s bargaining position. Understanding R2’s bargaining position would,
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`then, impact the reasonable royalty analysis. This dizzying argument is flawed.
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`Indeed, per Databricks, the Georgia-Pacific factors already account for bargaining strength
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`in the context of the hypothetical negotiation and reasonable royalty analyses. ECF 83 at 6
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`Case 4:23-cv-01147-ALM Document 101 Filed 03/11/25 Page 4 of 6 PageID #: 6575
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`(“Indeed, information regarding a party’s bargaining strength is specifically contemplated in
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`multiple Georgia-Pacific factors, including the fifth factor … and the twelfth factor ... These
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`factors allow for consideration of the financial condition of a party, including the revenue, costs,
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`and profits of its business.”). This is why Databricks originally couched its argument in terms of
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`factors 5 and 12. But now Databricks pretends that “bargaining strength” is some separate catch-
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`all factor that allows it to discover any and all financial information about R2 even though R2 has
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`never sold the invention or otherwise participated in the relevant marketplace. Despite how
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`Databricks tries to muddy the waters, the fact remains that Databricks cannot articulate how the
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`requested financials are relevant to a single one of the actual Georgia-Pacific factors. And
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`Databricks cannot point to a single case suggesting that a plaintiff’s costs are relevant when the
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`plaintiff has never sold the patented invention. In short, Databricks has failed to carry its burden
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`to show why R2’s financial statements are discoverable.
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`II.
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`DATABRICKS RECOGNIZED IN EXPERT REPORTING THAT THE DATE OF
`FIRST INFRINGEMENT PLACES YAHOO! IN THE HYPOTHETICAL
`NEGOTIATION.
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`Databricks’ justification for claiming that R2’s financial statements are relevant is tied to
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`the parties’ dispute over the date of first infringement. Databricks points to certain source code
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`cited in R2’s infringement contentions to suggest that 2023 is the date of first infringement, making
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`R2 the party to the hypothetical negotiation. In other words, Databricks alleges that the
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`functionality R2 accuses of infringement did not exist until 2023. R2 counters that the date of first
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`infringement is in June 2015, when Databricks first began including SortMergeJoin functionality
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`with its platform. This places Yahoo!, not R2, at the negotiation table.
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`In its Opposition, R2 did not contest the discoverability of R2’s financial records on the
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`basis that it was Yahoo! and not R2 at the hypothetical negotiating table because the parties
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`Case 4:23-cv-01147-ALM Document 101 Filed 03/11/25 Page 5 of 6 PageID #: 6576
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`disagreed about that fact. See ECF 89 at 4. However, Databricks has now directly contradicted
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`itself in its expert report on validity. Its expert stated unequivocally that “SortMergeJoin.scala
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`[available in the 2015 version of Spark] has the same or substantially similar functionality as the
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`functionality R2 accuses within SortMergeJoinEvaluatorFactory.scala [available in the 2023
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`version of Spark].” See Ex. A, ¶ 1126; see also id., ¶¶ 1125, 1080 (“This [SortMergeJoin]
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`functionality ... was first committed [to Apache Spark] on April 15, 2015.”). This is precisely R2’s
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`point. Databricks has now taken the position (for self-serving reasons) that the infringing
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`functionality that R2 has identified was, indeed, present in 2015. So it now appears undisputed that
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`the date of first infringement coalesces around June 2015, when Yahoo! owned the ’610 Patent.
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`Databricks cannot argue any longer that R2’s financials are relevant to the hypothetical
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`negotiation, as there is no scenario in which it would be R2 participating in such negotiation in
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`2015.
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`III. CONCLUSION
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`The requested financial documents are not relevant to the hypothetical negotiation
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`framework, or any other issue in this case. Thus, the Court should deny Databricks’ motion to
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`compel.
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`Dated: March 4, 2025
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`Respectfully Submitted,
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`Case 4:23-cv-01147-ALM Document 101 Filed 03/11/25 Page 6 of 6 PageID #: 6577
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`By: /s/ Edward R. Nelson III
`Edward R. Nelson III
`State Bar No. 00797142
`Christopher G. Granaghan
`State Bar No. 24078585
`John P. Murphy
`State Bar No. 24056024
`Carder W. Brooks
`State Bar No. 24105536
`Nelson Bumgardner Conroy PC
`3131 West 7th Street, Suite 300
`Fort Worth, Texas 76107
`817.377.9111
`ed@nelbum.com
`chris@nelbum.com
`murphy@nelbum.com
`carder@nelbum.com
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`COUNSEL FOR
`PLAINTIFF R2 SOLUTIONS LLC
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`CERTIFICATE OF SERVICE
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`I hereby certify that on March 4, 2025, I electronically filed the foregoing instrument with
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`the Clerk of the Court using the CM/ECF system, which will send notification of such filing to all
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`counsel of record.
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`/s/ Edward R. Nelson III
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`CERTIFICATE OF AUTHORIZATION
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`I hereby certify that under local rule CV-5(a)(7), the foregoing document is filed under seal
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`pursuant to the Court’s Protective Order entered in this matter.
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`/s/ Edward R. Nelson III
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