Case 6:12-cv-00799-JRG Document 265-1 Filed 01/26/15 Page 1 of 5 PageID #: 9483
`Case 6:12—cv—00799—JRG Document 265-1 Filed 01/26/15 Page 1 of 5 Page|D #: 9483
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`EXHIBIT A
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`EXHIBIT A
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`

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`Case 6:12-cv-00799-JRG Document 265-1 Filed 01/26/15 Page 2 of 5 PageID #: 9484
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`DLA Piper LLP (US)
`1000 Louisiana Street, Suite 2800
`Houston, Texas 77002-5005
`www.dlapiper.com
`
`Claudia Wilson Frost
`claudia.frost@dlapiper.com
`T 713.425.8450
`F 713.300.6050
`
`January 26, 2015
`
`The Honorable Rodney Gilstrap
`U.S. District Court for the Eastern District of Texas
`211 W. Ferguson
`Tyler, Texas 75702
`
`Re:
`
`C.A. No. 6:12-cv-799-JRG; Invensys Sys., Inc. v. Emerson Elec. Co., et al.
`
`Dear Judge Gilstrap:
`
`Invensys respectfully submits this letter brief for permission to file a Daubert motion
`regarding Defendants’ damages expert, Keith R. Ugone, on the following issues:
`
`Dr. Ugone’s Hypothetical Negotiation Methodology Is Flawed And Should
`I.
`Be Excluded. Reasonable royalty methodology requires that an expert ground his opinions on
`certain assumed facts, including validity and infringement of the patents-in-suit and the existence
`of a willing licensee in the hypothetical negotiation. Affinity Labs of Tex., LLC v. BMW N. Am.,
`LLC, 783 F. Supp. 2d 891, 898 (E.D. Tex. 2011). Dr. Ugone ignores these assumptions. First,
`Dr. Ugone improperly considers Defendants’ non-infringement and invalidity positions in his
`reasonable royalty analysis. See, e.g., Ugone Rep., ¶¶ 134-35 (e.g., ¶ 134(f)(ii), “Micro Motion
`would assert that it does not infringe upon Claim 23 of the ’062 Patent”); Ugone Dep. Tr. at
`297:10-18, 299:17-20, 300:2-7 (opining that, at hypothetical negotiation, Micro Motion would
`assert that most claims of patents-in-suit are not infringed by Accused Products or are not
`necessary for accurate operation of Coriolis flowmeter under entrained air or batching
`conditions, which would place significant downward pressure on to-be-negotiated royalty
`payment); Ugone Rep., ¶ 131 & n.305 (noting his understanding that certain Micro Motion
`patents cover claimed functionality). As previously noted by the Eastern District of Texas:
`“[E]very expert who has appeared in this court for Plaintiffs and Defendants, has told the jury
`that as part of the hypothetical negotiation they are required to assume that the patent has been
`infringed and that the patent is valid. None of the Georgia-Pacific factors suggests that at the
`time of the negotiation, the parties would have weighed the possibility that the patent was invalid
`or that the accused product might not infringe.” Ariba, Inc. v. Emptoris, Inc., 567 F. Supp. 2d
`914, 917 (E.D. Tex. 2008). An expert cannot purport to presume the patents-in-suit are valid and
`infringed while incorporating doubts as to these very points in his analysis of the parties’
`respective positions in the hypothetical negotiation, as Dr. Ugone has done here. Monsanto Co.
`v. Bayer Biosci. N.V., No. 00-CV-1915, 2005 WL 5989796, at *14 (E.D. Mo. Oct. 28, 2005)
`(finding expert’s analysis flawed because “although at first glance it appears that Mr. Cahoon
`assumes the patent is valid and infringed, Mr. Cahoon’s improper infusion of ‘real world factors’
`undermines this basic assumption”). Second, Dr. Ugone improperly questions whether Emerson
`would have been a “willing licensee.” See, e.g., Ugone Rep., ¶ 10 n.28; Ugone Dep. Tr. at
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`Case 6:12-cv-00799-JRG Document 265-1 Filed 01/26/15 Page 3 of 5 PageID #: 9485
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`16:25-17:1 (“I view this case as dealing with Micro Motion.”), 108:21-25. Regardless of a
`party’s actual willingness to license, willingness is a legal fiction required by hypothetical
`negotiation analysis. E.g., Conceptus, Inc. v. Hologic, Inc., 771 F. Supp. 2d 1164, 1179-80 (N.D.
`Cal. 2010).
`
`Dr. Ugone Improperly Uses Ex-Post Value Indicators To Set A Royalty Cap.
`II.
`Dr. Ugone devotes a section of his reasonable royalty analysis to consideration of ex-post value
`indicators, including Micro Motion’s incremental profits on the accused products. Ugone Rep.,
`¶¶ 147-51. His reliance upon these indicators to “provide an upper bound of the value Micro
`Motion anticipated extracting from the claimed patented technology,” id. at ¶ 149, violates the
`Federal Circuit’s express prohibition on using actual profits of the alleged infringer to set a
`royalty cap, as recently articulated in Aqua Shield v. Inter Pool Cover Team, No. 2014-CV-1263,
`2014 WL 7239738, at *5 (Fed. Cir. Dec. 22, 2014).
`
`Dr. Ugone’s Opinion Regarding Timing Of The Hypothetical Negotiation Is
`III.
`Arbitrary And Unsupported. Dr. Ugone opines that the hypothetical negotiation “would occur
`sometime in the April to August 2004 timeframe,” and arbitrarily picks the “mid-point of that
`time period (i.e., June 2004).” Ugone Rep., ¶ 99 n.213. However, calculation of a reasonable
`royalty requires a hypothetical negotiation “date”—not date range. E.g., Dynetix Design
`Solutions, Inc. v. Synopsys, Inc., No. 11-CV-5973, 2013 WL 4537838, at *6 (N.D. Cal.
`Aug. 22, 2013). Furthermore, Dr. Ugone’s assumed date range is unsupported. Cassidian
`Commc’ns, Inc. v. Microdata GIS, Inc., No. 12-CV-162, slip op. at 3-5 (E.D. Tex. Dec. 3, 2013)
`(excluding testimony of damages expert in its entirety where expert relied upon incorrect
`hypothetical negotiation date). He allegedly derived this date range based upon having been
`informed that “Micro Motion first made and tested an 800 enhanced core processor between
`April and August 2004,” and cites the Maginnis Disclosure as evidence. Ugone Rep., ¶ 99
`n.213; Ugone Dep. Tr. at 280:13-17. However, the Maginnis Disclosure does not contain any
`reference to the April to August 2004 date range; and, in his subsequent deposition, Dr. Ugone
`could not say where he got this information. Ugone Dep. Tr. at 282:2-5.
`
`Dr. Ugone’s Averaging And Trend-Line Methodologies Are Not Generally
`IV.
`Accepted And Are Unreliable. Dr. Ugone uses averaging and trend-line methodology to
`evaluate “Invensys’s claimed lost U.S. sales.” Ugone Rep., ¶ 206.
`Presenting these
`methodologies as scientific and reliable would mislead the jury because, in fact, they are not
`reliable or generally-accepted. When asked for a formal endorsement of his methodologies,
`Dr. Ugone cited the Litigation Services Handbook (Ugone Dep. Tr. at 255:2-17, 274:23-275:11);
`however,
`this treatise actually criticizes the use of averaging methodology. Litig. Servs.
`Handbook § 4.4(a) (5th ed. 2012) (use of averages can mislead analysis, especially when used in
`but-for comparisons). Dr. Ugone’s “trend-line” methodology also is not based on sound
`economic principles, as he admitted that it does not utilize any statistical techniques. Ugone
`Dep. Tr. at 269:7-12. Neither methodology accounts for other factors that changed between the
`pre-infringement and post-infringement timeframes, and Dr. Ugone has admitted that he did not
`adjust for factors that artificially depressed Invensys’ performance in the “before infringement”
`timeframe, such as Micro Motion’s “F.U.D.” strategy. Ugone Dep. Tr. at 276:8-10.
`
`Dr. Ugone’s Opinions Regarding Non-Infringing Alternatives Should Be
`V.
`Stricken. Determination of non-infringing alternatives requires analysis of the commercial
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`Case 6:12-cv-00799-JRG Document 265-1 Filed 01/26/15 Page 4 of 5 PageID #: 9486
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`acceptability and availability of the alleged substitutes. TWM Mfg. Co. v. Dura Corp., 789 F.2d
`895, 901-02 (Fed. Cir. 1986); LaserDynamics, Inc. v. Quanta Computer, Inc., 06-CV-348, 2011
`WL 197869, at *3 (E.D. Tex. Jan. 20, 2011). Dr. Ugone is not a technical expert and he is not
`qualified to opine whether a product constitutes a commercially acceptable and available non-
`infringing substitute. Broadcom Corp. v. Emulex Corp., No. 09-CV-1058, slip op. at 9-10 (C.D.
`Cal. Aug. 10, 2011). To determine whether non-infringing alternatives existed, Dr. Ugone
`simply looked at whether other companies advertise that
`they can address entrained gas
`measurement issues. Ugone Dep. Tr. at 185:16-186:3, 190:25-191:18, 201:2-5. However, an
`expert cannot rely upon conclusory assessments or competitors’ “puffing.” Dr. Ugone’s
`opinions regarding commercial acceptability also are contradicted by Defendants’ own internal
`product analysis, which showed that alleged alternatives did not have anywhere near the
`accuracy of the accused product. Ugone Dep. Tr. at 195:21-196:1, 197:14-19, 198:4-10; see also
`Integrated Tech. Corp. v. Rudolph Techs., Inc., No. 06-CV-2182, 2010 WL 8545468, at **5-6
`(D. Ariz. Sept. 2, 2010) (rejecting argument that plaintiff’s expert failed to consider alleged non-
`infringing alternatives where defendant’s own documents reported parties were only “viable”
`producers of accused products).
`In addition, Dr. Ugone does not provide evidence establishing
`that each alleged non-infringing alternative was actually commercially available. Conceptus,
`Inc., 771 F. Supp. 2d at 1179 (granting summary judgment for plaintiff where only support for
`argument that defendant could have implemented non-infringing alternative was “portion of the
`unsworn report of [defendant’s] own expert that relies exclusively on private conversations with
`[defendant’s] personnel”); Parker-Hannifin Corp. v. Champion Labs., Inc., No. 06-CV-2616,
`2008 WL 1843922, at *10 (N.D. Ohio Apr. 22, 2008) (finding alleged non-infringing alternative
`was not “available” where defendant was required to spend thousands of hours designing and
`testing it).
`
`Dr. Ugone’s Testimony And Expert Report Are Replete With Additional
`VI.
`Errors And, Accordingly, Should Be Excluded As Unreliable. Additional
`issues with
`Dr. Ugone’s expert opinions include, but are not limited to:
`(1) his opinions incorporate the
`testimony of six other testifying experts designated by Defendants, which runs afoul of the
`Court’s five-expert limit (Ugone Rep., ¶ 34(d)); (2) his reliance upon Dr. Sidman and Dr. Blair
`injects further elements of unreliability into his opinions because, as outlined in Invensys’
`concurrently filed letter briefs, their testimony also is unreliable; (3) he bases many of his
`opinions upon unsupported assertions;1 and (4) he interviewed only two Micro Motion/Emerson
`employees – Bill Graber, who did not join Micro Motion’s U.S. operations until 2013 and so
`would have almost no personal knowledge related to historical demand for and sales of the
`accused products, and Mark Bell, who provided information only regarding Micro Motion’s
`manufacturing capacity, although Mr. Bell was not identified as a witness with knowledge on
`that
`topic and,
`in fact, Defendants designated Steve Cutler as their 30(b)(6) witness on
`manufacturing capacity.
`
`1 For example, citing to Dr. Blair’s report for support, Dr. Ugone asserts that Micro Motion
`products containing the 700 CP likely would have been considered non-infringing alternatives by
`many customers, Ugone Rep., ¶ 8(c)(v) & n.24; however, there were no questions in Dr. Blair’s
`survey regarding the 700 CP. Blair Dep. Tr. at 211:2-6.
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`Case 6:12-cv-00799-JRG Document 265-1 Filed 01/26/15 Page 5 of 5 PageID #: 9487
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`Respectfully submitted,
`/s/ Claudia Wilson Frost
`Claudia Wilson Frost
`
`cc:
`
`All Counsel of Record (via ECF)
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