Case 5:19-cv-00036-RWS Document 478 Filed 08/03/20 Page 1 of 11 PageID #: 26048
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`MAXELL, LTD.,
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`v.
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`APPLE INC.,
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`TEXARKANA DIVISION
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`Plaintiff,
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`Case No. 5:19-cv-00036-RWS
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`JURY TRIAL DEMANDED
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`Defendant.
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`MAXELL, LTD.’S SUR-REPLY IN OPPOSITION TO APPLE INC.’S DAUBERT
`MOTION TO EXCLUDE THE OPINIONS AND TESTIMONY OF PLAINTIFF’S
`DAMAGES EXPERT MS. CARLA MULHERN
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`Case 5:19-cv-00036-RWS Document 478 Filed 08/03/20 Page 2 of 11 PageID #: 26049
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`TABLE OF CONTENTS
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`I.
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`II.
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`MS. MULHERN’S CALCULATION OF A LUMP SUM ROYALTY IS
`RELIABLE AND SUPPORTED ....................................................................................... 1
`PRIOR LICENSES, CONSIDERED IN FULL, SUPPORT RELIANCE ON
`MAXELL’S STANDARD RATE ..................................................................................... 2
`III. MS. MULHERN’S APPORTIONMENT METHODOLOGY, CONSIDERED IN
`FULL, IS SOUND ............................................................................................................. 3
`APPLE’S CONFLATION OF THE ALTERNATIVE CONCEPTS DOES NOT
`WARRANT EXCLUSION ................................................................................................ 4
`MS. MULHERN PROPERLY RELIES ON APPLE’S PUBLIC-FACING
`COMMENTS REGARDING THE BEST ESTIMATE OF THE VALUE OF ITS
`IOS UPGRADES ............................................................................................................... 5
`VI. MS. MULHERN’S APPLICATION OF DR. ERDEM’S SURVEY RESULTS IS
`RELIABLE AND PERMITTED ....................................................................................... 5
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`IV.
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`V.
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`Case 5:19-cv-00036-RWS Document 478 Filed 08/03/20 Page 3 of 11 PageID #: 26050
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`Cases
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`TABLE OF AUTHORITIES
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`Page(s)
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`Hughes Aircraft Co. v. United States, 31 Fed. Cl. 481, 487-88 (1994) .......................................... 3
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`Laser Dynamics, Inc. v. Quanta Comput., 694 F.3d 51, 69 (Fed. Cir. 2012) ................................. 5
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`Statutes
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`Federal Rule of Evidence 702 ......................................................................................................... 1
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`Case 5:19-cv-00036-RWS Document 478 Filed 08/03/20 Page 4 of 11 PageID #: 26051
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`Apple’s Reply underscores the weaknesses of its motion. First, Apple’s motion is not based
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`on failure to meet reliability requirements, but Apple’s preferences. Second, Apple cherry-picks
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`portions of Ms. Mulhern’s methodology and supporting evidence, conflates principles, and then
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`argues that the incomplete and misleading picture it presents requires exclusion. But, as set forth
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`in Maxell’s Opposition, when Ms. Mulhern’s methodology, opinions, and underlying support are
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`considered, as presented and in their totality, they easily satisfy the requirements of Rule 702.
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`I.
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`Ms. Mulhern’s Calculation of a Lump Sum Royalty Is Reliable and Supported
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`Apple’s motion seeks exclusion of Ms. Mulhern’s opinion because she allegedly ignored
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`. Mot. at 5-6. Recognizing now that Ms. Mulhern did provide for a
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`lump sum royalty (Opp. at 1-2), Apple instead argues that the fact Ms. Mulhern provided her
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`ultimate opinion as a lump sum “is irrelevant” and “misconstrues Apple’s argument.” Reply at 1.
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`Apple
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` newly alleges that Ms. Mulhern’s
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`calculation is unreliable because “instead of rendering it based on the lump structure,” Ms.
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`Mulhern based her damages amount on a running royalty. But, as Maxell has already shown, the
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`evidence in the record supports a calculation arrived at using a running royalty. Opp. at 2-4.
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` no limit on how a lump sum
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`would have been derived during a hypothetical negotiation. As stated previously,
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`is support in the record that
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`1
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`. Id. at 3. Meanwhile, there
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`Case 5:19-cv-00036-RWS Document 478 Filed 08/03/20 Page 5 of 11 PageID #: 26052
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`The evidence is not overridden by Apple’s unsupported attorney argument. And Apple’s
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`cited case is no more applicable now than when presented as part of its motion. Maxell already
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`admitted the difference between lump sum and running royalty agreements and acknowledged that
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`Courts have cautioned against the unsupported or unexplained use of running royalty agreements
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`as a basis to award lump-sum damages. Id. at 4-5. But such concern is not pertinent here where
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`Ms. Mulhern provided her full methodology. Id.
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`Apple continues to criticize Ms. Mulhern’s decision not to rely on Apple’s licenses in
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`determining the outcome of the hypothetical negotiation, asserting that the “post hoc excuses…is
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`(sic) contradicted by Ms. Mulhern herself.” Reply at 2. Ms. Mulhern, however, fully explained her
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`decision, including: “I relied both on the fact that Apple had not identified any of these licenses as
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`technologically comparable and the fact that we do in this case have a rich record of licenses that
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`involve the asserted patents and the portfolio at issue … that we know that by definition are
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`technologically comparable. And so I thought that was sufficient information on which to base my
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`opinions.” Ex. 3, Mulhern Dep. Tr. at 118:3-12; see also Opp. at 5.
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`Apple’s motion requests exclusion of Ms. Mulhern’s analysis for ignoring evidence, but
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`Apple has not shown that she ignored anything. All Apple demonstrated is that its attorneys prefer
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`calculating damages in a different way. That is not a basis to exclude damages opinions.
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`II.
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`Prior Licenses, Considered in Full, Support Reliance on Maxell’s Standard Rate
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`Apple seems to submit that only explicitly stated royalty rates matter. Not only is this
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`unsupported, it conflicts with the hypothetical negotiation construct, which assumes a license that
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`conveys one-way, naked patent rights. See Ex. 1, Mulhern Rpt. ¶ 69.
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`Case 5:19-cv-00036-RWS Document 478 Filed 08/03/20 Page 6 of 11 PageID #: 26053
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` Apple has provided no evidence contradicting this position.
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`Proposed, but unaccepted licenses have been deemed unreliable because they present the
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`risk of a patentee artificially inflating a royalty by making outrageous offers. Mot. at 8. But
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`, demonstrating that such reliability concerns do not apply here. Ms.
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`Mulhern’s reliance on Maxell’s standard rate as an upper bound is proper. See, e.g., Hughes
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`Aircraft Co. v. United States, 31 Fed. Cl. 481, 487-88 (1994) (holding that an offer that reflected
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`a patentees’ “normal royalty rate” could place a ceiling on the consideration of royalty rate).
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`III. Ms. Mulhern’s Apportionment Methodology, Considered in Full, is Sound
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`It is not bizarre for Ms. Mulhern’s patent values to change based on hardware component
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`costs when the hardware is required for the operation of the accused features. Apple does not
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`challenge that the components relied upon by Ms. Mulhern are implicated by the patents, only that
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`she does not account for the non-patented features.1 But Ms. Mulhern does take this into account.
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`Apple relies on an incomplete consideration of Ms. Mulhern’s methodology. Opp. at 8-10.
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`Although Apple pays lip service to Maxell’s argument, it still fails to acknowledge the significance
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`of the portfolio rates Ms. Mulhern used. Apple’s strategic ignorance of Ms. Mulhern’s full
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`methodology is displayed by Apple’s offering in its Reply of an incomplete (and misleading) quote
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`from Maxell and Ms. Mulhern. Ms. Mulhern’s portfolio rates do not simply “capture[] the value
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`1 Apple’s attack on the desk analogy continues to ignore the fact that a changed cost of component would also
`impact the overall cost of the desk, thus keeping the component share value fairly constant.
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`Case 5:19-cv-00036-RWS Document 478 Filed 08/03/20 Page 7 of 11 PageID #: 26054
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`of the overall mobile device;” they “capture[] the value of the overall mobile device associated
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`with the Hitachi/Maxell patented technology.” Ex. 1, Mulhern Rpt. ¶ 261 (emphasis added). In
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`other words, the portfolio rates already “account[] for the contribution of Hitachi/Maxell patents
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`to the overall functionality of the mobile device.” Opp. at 10. Thus Ms. Mulhern’s analysis was an
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`apportionment of the portfolio rate (which already accounted for the apportioned value of the
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`portfolio) down to the value attributable to the patented technology. Ms. Mulhern then additionally
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`considered the downward impact of G-P Factor 13. Opp. at 9.
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`Apple’s cited cases require apportionment in certain circumstances. But Ms. Mulhern does
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`apportion. She implemented apportionment in the royalty rate (via the portfolio rate) and royalty
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`base (via the component share calculation). Opp. at 8-9.
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`IV. Apple’s Conflation of the Alternative Concepts Does Not Warrant Exclusion
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`Ms. Mulhern and Dr. Erdem employed different concepts of acceptable non-infringing
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`alternatives versus next best alternatives. Opp. at 12. Dr. Erdem is not an economic expert and
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`provides no evaluation of damages in this case. She used terminology similar to that used by Ms.
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`Mulhern, but that does not magically render the concepts identical. Dr. Erdem was considering
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`“what was the non-infringing way of doing something similar” (Reply at 4 (emphasis added))
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`whereas Ms. Mulhern considered whether there was a technically feasible and commercially
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`acceptable alternative way to provide the same accused functionality. Opp. at 12.
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`Although Apple asserts that the fact alternatives relied on by Dr. Erdem in some instances
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`match those proposed by Apple supports its conflation of the concepts, it actually demonstrates
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`the opposite. Whereas Maxell’s technical experts may have found one of Apple’s proposals to be
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`adequate as a next best alternative for Dr. Erdem’s purposes, they did not believe the proposals to
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`qualify as acceptable non-infringing alternatives for Ms. Mulhern’s purposes. And Maxell’s
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`technical experts were clear in this regard—they explicitly opined that Apple’s proposed non-
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`Case 5:19-cv-00036-RWS Document 478 Filed 08/03/20 Page 8 of 11 PageID #: 26055
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`infringing alternatives were not shown to be technically feasible or commercially acceptable. Ex.
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`33 (Maxell Tech. Expert Rpt. Excerpts).
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`V. Ms. Mulhern Properly Relies on Apple’s Public-Facing Comments Regarding the
`Best Estimate of the Value of its iOS Upgrades
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`That Apple raises questions regarding the reliability of its own financial statements is
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`surprising. Apple’s 10-K (not Maxell) explicitly states that the ESPs “reflect the Company’s best
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`estimates of what the selling prices of elements would be” and are regularly revised as such
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`estimates change. Mot. at Ex. 15 (MAXELL_ APPLE0271851-52). Ms. Mulhern may rely on
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`Apple’s “best estimate.” And Maxell does not miss the point that the ESPs are not tied directly to
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`features. If that were true, Ms. Mulhern would not have performed an apportionment of the ESPs
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`to features included in the upgrades based on an analysis of what features were highlighted by
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`Apple and third parties. Although Apple asserts that Maxell cites nothing that ties the dollar value
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`of the ESPs to the features, Ms. Mulhern’s analysis has done just that. See Opp. at 14. Apple cannot
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`simply ignore the analysis and call the methodology unreliable as a result.
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`VI. Ms. Mulhern’s Application of Dr. Erdem’s Survey Results is Reliable and Permitted
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`Maxell’s Opposition described how Ms. Mulhern utilized the survey results here to
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`demonstrate Apple’s mischaracterization of her analysis as employing an improper comparison of
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`unrelated measurements. Opp. at 15. Apple cites no case or evidence demonstrating that the
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`analysis is unreliable. As discussed in connection with Apple’s motion to exclude Dr. Erdem’s
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`survey results, the only case Apple cites, Laser Dynamics, Inc. v. Quanta Comput., 694 F.3d 51,
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`69 (Fed. Cir. 2012), did not concern a survey or hold that survey results regarding measures of
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`relative importance cannot be relevant or used to determine monetary value. See D.I. 399 at 9.
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`For the reasons set forth in Maxell’s Opposition and above, Apple’s motion should be
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`denied.
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`Case 5:19-cv-00036-RWS Document 478 Filed 08/03/20 Page 9 of 11 PageID #: 26056
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`Dated: July 30, 2020
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`By:
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`6
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`/s/ Jamie B. Beaber
`Geoff Culbertson
`Kelly Tidwell
`Patton, Tidwell & Culbertson, LLP
`2800 Texas Boulevard (75503)
`Post Office Box 5398
`Texarkana, TX 75505-5398
`Telephone: (903) 792-7080
`Facsimile: (903) 792-8233
`gpc@texarkanalaw.com
`kbt@texarkanalaw.com
`
`Jamie B. Beaber
`Alan M. Grimaldi
`Kfir B. Levy
`James A. Fussell, III
`William J. Barrow
`Baldine B. Paul
`Tiffany A. Miller
`Michael L. Lindinger
`Saqib J. Siddiqui
`Bryan C. Nese
`Alison T. Gelsleichter
`Clark S. Bakewell
`MAYER BROWN LLP
`1999 K Street, NW
`Washington, DC 20006
`Telephone: (202) 263-3000
`Facsimile: (202) 263-3300
`jbeaber@mayerbrown.com
`agrimaldi@mayerbrown.com
`klevy@mayerbrown.com
`jfussell@mayerbrown.com
`wbarrow@mayerbrown.com
`bpaul@mayerbrown.com
`tmiller@mayerbrown.com
`mlindinger@mayerbrown.com
`ssiddiqui@mayerbrown.com
`bnese@mayerbrown.com
`agelsleichter@mayerbrown.com
`cbakewell@mayerbrown.com
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`Robert G. Pluta
`Amanda Streff Bonner
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`Case 5:19-cv-00036-RWS Document 478 Filed 08/03/20 Page 10 of 11 PageID #: 26057
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`MAYER BROWN LLP
`71 S. Wacker Drive
`Chicago, IL 60606
`(312) 782-0600
`rpluta@mayerbrown.com
`asbonner@mayerbrown.com
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`Counsel for Plaintiff Maxell, Ltd.
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`Case 5:19-cv-00036-RWS Document 478 Filed 08/03/20 Page 11 of 11 PageID #: 26058
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`CERTIFICATE OF SERVICE
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`The undersigned certifies that all counsel of record who are deemed to have consented to
`electronic service are being served this 30th day of July 2020, with a copy of this document via
`electronic mail pursuant to Local Rule CV-5(d).
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`/s/ Jamie B. Beaber
`Jamie B. Beaber
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