Case 5:19-cv-00036-RWS Document 472 Filed 08/03/20 Page 1 of 8 PageID #: 25949
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`TEXARKANA DIVISION
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`MAXELL, LTD.,
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`Plaintiff,
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`Civil Action No. 5:19-cv-00036-RWS
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`v.
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`APPLE INC.,
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`Defendant.
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`JURY TRIAL DEMANDED
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`APPLE INC.’S SURREPLY TO MAXELL’S MOTION TO STRIKE
`MR. GUNDERSON’S USE OF OFFERS MADE IN LICENSING NEGOTIATIONS
`AND EXCLUDE TESTIMONY REGARDING THE SAME
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`Case 5:19-cv-00036-RWS Document 472 Filed 08/03/20 Page 2 of 8 PageID #: 25950
`Case 5:19-cv-00036-RWS Document 472 Filed 08/03/20 Page 2 of 8 PageID #: 25950
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`I.
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`INTRODUCTION
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`The. offers Maxell seeks to strike do not fall under the ambit of Rule 408. Maxell
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`itself said the offers were made in the context of a potential “business transaction.” -
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`— iftheywere
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`made wider the threat of litigation, the Federal Circuit has endorsed their use for the exact
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`pmposes on which they are relied by Mr. Gunderson.
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`II.
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`ARGUMENT
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`Maxell needed to show that the offers (1) were made lmder threat of litigation and (2) are
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`used for an inadmissible purpose under Rule 408. It has done neither.
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`A.
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`There Was No Threat Of Liti ation
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`Maxell has now had two oppommities to show that it made a litigation threat either
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`before 01‘ at the time the parties exchanged offers- and has failed to do so both times.
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`Maxell never threatened Apple with litigation, Maxell resolved it when it called the negotiations
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`. If there was ever any doubt that
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`D.I. 403-2 at l34:21—135:8.
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`D1. 430 at 2|
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`Case 5:19-cv-00036-RWS Document 472 Filed 08/03/20 Page 3 of 8 PageID #: 25951
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`(emphasisadded).—
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`I 5255<Lolldemuwecw—
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`— m.
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`The cases Maxell does cite to asseit that the undisputed circumstances smrounding the
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`negotiations constitute a “threat of litigation” are both easily distinguished. In Pioneer Corp. 1‘.
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`Samsung SDI Co.. No. 2:06-CV-3 84-DF. 2008 WL 11348480 (ED. Tex. Oct. 15. 2008). the comt
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`excluded evidence of settlement negotiations where the patentee provided “tangible evidence of
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`[defendant‘s] infn'ngement.” and both paities then engaged outside counsel. Id. at *2. But it
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`admitted negotiations between plaintiff and an accused infringer who engaged “in an anus-length
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`business transaction," even though “the parties ‘disputed both the validity and infringement claims
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`regarding each other‘s respective patents.” Id. at *3. Pioneer thus confmns Apple’s view: I
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`— cams
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`these negotiations are admissible. And Cornell Research Fonnd., Inc. v. Hewlett-Packard Co..
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`No. 5:01-CV-l974 (NAM/DEF), 2007 WL 4349135 (N.D.N.Y. Jan. 31, 2007), which Maxell
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`cites for the proposition that “the time that transpired between the offers and the lawsuit is
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`iirelevant” (D1. 430 at 3), says nothing of the kind. To the contraiy, the court in Cornell held
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` D.I. 430-2 at 106: 15-25.
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`Case 5:19-cv-00036-RWS Document 472 Filed 08/03/20 Page 4 of 8 PageID #: 25952
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`that it was unnecessary for it “to stake out a position on [the] thorny issue” of “whether a threat
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`of litigation was made and had advanced sufficiently, at the time of the negotiations,” because
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`the challenged negotiations were admissible for reasons other than those prohibited by Rule 408.
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`2007 WL 4349135 at *17‒18.
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`Maxell does nothing to distinguish Apple’s cases that confirm the facts here support a
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`finding of no litigation threat. In Big O Tire Dealers, Inc. v. Goodyear Tire & Rubber Co.,
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`contrary to what Maxell insinuates in a footnote (D.I. 430 at n.2), the court actually admitted
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`evidence of negotiations that had not crystallized into threats of litigation. 561 F.2d 1365, 1373
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`(10th Cir. 1977). In Deere & Co. v. Int’l Harvester Co., the Federal Circuit confirmed that Rule
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`408 is not applicable to “an offer, albeit one ultimately rejected, to license an, as yet, uncontested
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`patent,” made three years before a lawsuit was filed. 710 F.2d 1551, 1556–57 (Fed. Cir. 1983).
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`And in Datatreasury Corp. v. Wells Fargo & Co., the court acknowledged that factors it had
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`previously considered to exclude litigation-related license evidence, e.g., in Cybergym, go to
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`weight rather than admissibility. No. 2:06-CV-72 DF, 2010 WL 903259, at *1‒2 (E.D. Tex.
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`Mar. 4, 2010) (citing ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 872 (Fed. Cir. 2010)).
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`These cases are directly on point here, and compel denying Maxell’s motion.
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`B. Mr. Gunderson Relies On The Offers For Admissible Purposes
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`Even if Maxell had established that the offers were made under threat of litigation (it has
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`not), they are still admissible for the purposes for which Mr. Gunderson uses them.
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` D.I. 430 at 4. But the law
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`confirms that amounts are admissible for a proper damages analysis. See Lucent Techs., Inc. v.
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`Gateway, Inc., 580 F.3d 1301, 1326 (Fed. Cir. 2009) (admitting evidence of amounts as relevant
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`to “the question of whether the licensor and licensee would have agreed to a lump-sum payment
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`3
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`Case 5:19-cv-00036-RWS Document 472 Filed 08/03/20 Page 5 of 8 PageID #: 25953
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`or instead to a running royalty based on ongoing sales or usage”).
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`Maxell also concedes that Mr. Gunderson uses the offers it challenges only to set outer
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`bounds, but then asks the Court to ignore the Federal Circuit’s precedent that offers are
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`admissible for precisely that purpose as part of the hypothetical negotiation, notwithstanding
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`Rule 408. Maxell has no credible way to distinguish those cases.
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`Maxell argues that Fromson v. Advance Offset Plate Inc., 837 F.2d 1097, 1987 WL
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`24566, at *2 (Fed. Cir. 1987) “never even reached the issue of what constitutes a permissible
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`purpose.” D.I. 430 at 5 n.7. But that’s not correct. The Federal Circuit directly addressed this
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`question, overruling the plaintiff’s objection that license negotiations should have been excluded
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`under Rule 408 and holding that “[t]he court permissibly found [] that these were not offers to
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`compromise but merely opening gambits in an expected negotiation.” 1987 WL 24566, at *2.
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`To distinguish Hughes Aircraft Co. v. United States, 31 Fed. Cl. 481, 488 (1994), where
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`the court held that “historical licensing offers” were “highly significant” to place a “ceiling” on
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`the royalty rate because “a royalty arrived at through the hypothetical negotiation process must
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`fall below the universally rejected level of the offers made by [the Plaintiff],” Maxell ignores the
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`facts and tries to reframe the case as discussing “indicia of reliability.” D.I. 430 at 4‒5. But the
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`parties in Hughes were not disputing reliability—they were disputing whether the offers were
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`“inadmissible in light of Rule 408.” 31 Fed. Cl. at 487. The court thus found that the patentee’s
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`license offers “met the criteria of both the ‘otherwise discoverable’ and ‘another purpose’
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`exceptions” to Rule 408. Id.
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`And in Studiengesellschaft Kohle, m.b.H. v. Dart Indus., Inc., the Federal Circuit
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`affirmed the district court’s decision to lower the floor of the parties’ negotiations based on
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`consideration of a litigation settlement. 862 F.2d 1564, 1570 (Fed. Cir. 1988). The special
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`master erred by disregarding the settlement and setting a “floor rate” higher than the rate in the
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`4
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`settlement. Id. at 1570—71. The Federal Circuit agreed that the court should “create a reasonable
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`royalty from as many facts as possible, id. at 1573, without regard to Maxell’s distinction
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`regarding the timing of the settlement at issue. D.I. 430 at 5.
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`C.
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`Mr. Gunderson’s Reliance On Real Valuations Is Permissiblr
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`Maxell’s one-sided picture of the parties’ negotiations would not only
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`cause undue prejudice, but is also explicitly forbidden. W/Iitserve, LLC v. Computer Packages,
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`Inc, 694 F.3d 10 (Fed. Cir. 2012).
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`110: 1 1—16.
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`D.I. 362-9 at 241219-23; D.I. 403-2 at
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`See
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`Whitserve, 694 F.3d at 30.
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`III.
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`CONCLUSION
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`For the reasons above and in Apple’s Opposition (D.I. 403). Maxell’s motion to strike
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`should be denied.
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`'JI
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`Case 5:19-cv-00036-RWS Document 472 Filed 08/03/20 Page 7 of 8 PageID #: 25955
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`July 30, 2020
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`/s/ Luann L. Simmons
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`
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`Luann L. Simmons (Pro Hac Vice)
`lsimmons@omm.com
`O’MELVENY & MYERS LLP
`Two Embarcadero Center
`28th Floor
`San Francisco, CA 94111
`Telephone: 415-984-8700
`Facsimile: 415-984-8701
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`Xin-Yi Zhou (Pro Hac Vice)
`vzhou@omm.com
`O’MELVENY & MYERS LLP
`400 S. Hope Street
`Los Angeles, CA 90071
`Telephone: 213-430-6000
`Facsimile: 213-430-6407
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`Marc J. Pensabene (Pro Hac Vice)
`mpensabene@omm.com
`Laura Bayne Gore (Pro Hac Vice)
`lbayne@omm.com
`O’MELVENY & MYERS LLP
`Times Square Tower, 7 Times Square
`New York, NY 10036
`Telephone: 212-326-2000
`Facsimile: 212-326-2061
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`Melissa R. Smith (TX #24001351)
`melissa@gilliamsmithlaw.com
`GILLIAM & SMITH, LLP
`303 South Washington Avenue
`Marshall, Texas 75670
`Telephone: (903) 934-8450
`Facsimile: (903) 934-9257
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`Attorneys for Defendant Apple Inc.
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`6
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`Case 5:19-cv-00036-RWS Document 472 Filed 08/03/20 Page 8 of 8 PageID #: 25956
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`CERTIFICATE OF SERVICE
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`The undersigned hereby certifies that all counsel of record who are deemed to have
`consented to electronic service are being served with a copy of this docmnent via the Coufl's
`CM/ECF system per Local Rule CV—5(a)(3) on July 30, 2020.
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`/s/ Melissa R. Smith
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`Melissa R. Smith
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