Case 6:21-cv-00569-ADA Document 188 Filed 01/26/23 Page 1 of 8
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE WESTERN DISTRICT OF TEXAS
`WACO DIVISION
`
`TOUCHSTREAM TECHNOLOGIES, INC.,
`
`
`Plaintiff,
`
`
`
`v.
`
`
`GOOGLE LLC,
`
`
`Defendant.
`
`Civil Case No. 6:21-cv-569-ADA
`
`JURY TRIAL DEMANDED
`
`U.S. District Judge Alan Albright
`
`REDACTED – PUBLIC VERSION
`
`TOUCHSTREAM TECHNOLOGIES, INC.’S REPLY IN SUPPORT OF
`MOTION TO EXCLUDE CERTAIN OPINIONS AND TESTIMONY OF
`DEFENDANT’S DAMAGES EXPERT CHRISTOPHER A. MARTINEZ
`
`INTRODUCTION AND SUMMARY
`
`The
`
` Agreement was a
`
`, which therefore had
`
`significant differences from the hypothetical negotiation in a patent case. Touchstream’ motion
`
`identified such differences in detail. Mr. Martinez failed to consider many of them, and he also
`
`failed to prove that the
`
`
`
` significant differences from a hypothetically negotiated license. (Section I, below.)
`
`Therefore, opinions and testimony regarding the
`
` Agreement should be
`
`excluded. A plethora of established precedent holds that settlements of litigation, including
`
`threatened litigation, are too different from the hypothetical negotiation in a patent case to form a
`
`reliable basis for damages. Google cites no cases contrary to this abundant precedent or that would
`
`justify deviating from it. (Section II.)
`
`For the foregoing reasons, and as described below and in Touchstream’s opening brief, the
`
`Court should exclude Mr. Martinez’s opinions and testimony regarding a reasonable royalty, and
`
`any other opinions and testimony to the extent they rely on the
`
` Agreement.
`
`

`

`Case 6:21-cv-00569-ADA Document 188 Filed 01/26/23 Page 2 of 8
`
`ARGUMENT
`
`I.
`
`MR. MARTINEZ IGNORED AND FAILED TO ACCOUNT FOR THE
` AGREEMENT’S DIFFERENCES FROM THE HYPOTHETICAL
`NEGOTIATION
`
`Google’s response does not address, and therefore concedes: (i) the following facts about
`
`the
`
` Agreement; (ii) that Mr. Martinez did not consider these facts; and (iii) that these
`
`facts show the
`
` Agreement’s drastic differences from a hypothetical negotiation:
`
`a.
`
`The
`
`Mot. Ex. 3 at 89:6-90:17.
`
`b.
`
`The
`
` Mot. at 2, citing
`
`
`
` Mot. at 3, citing Mot. Ex. 3 at 110:1-9; Mot. Ex. 1 § 2.1.
`
`c.
`
`d.
`
`Mot. Ex. 3 at 88:20-25; Mot. Ex. 4.
`
` Mot. at 3, citing
`
`
`
` Mot. at 3, citing Mot. Ex. 1 § 3.1; Mot. Ex. 3 at 92:19-
`
`93:5.
`
`These concessions alone demonstrate that the
`
` Agreement is a
`
`
`
` with significant differences from a hypothetically negotiated agreement and, therefore,
`
`that exclusion is warranted under well-settled precedent. See Section II, below.
`
`Moreover, the
`
` Agreement Section 2.9
`
` Mot. at 2, citing Mot. Ex. 3 at 82:5-8, 83:16-19; Mot. Ex. 1 § 2.9.
`
`
`
`
`
`
`
` Resp. at 3-4. Nor does Google suggest that any offsetting provisions or circumstances
`
`about the agreement would render it comparable to a hypothetically negotiated license. Id.
`
`2
`
`

`

`Case 6:21-cv-00569-ADA Document 188 Filed 01/26/23 Page 3 of 8
`Case 6:21-cv-00569-ADA Document 188 Filed 01/26/23 Page 3 of 8
`
`In sum, Mr. Martinez did not consider “any of the circumstances leading up to this
`
`agreement, theL agreement,” Mot. Ex. 3 at 88:7-11,ee
`
`|iY See id.; a-d, above; Mot. at 2. Nor did Martinez attempt to rebut that
`these circumstances show thei sec
`
`Instead of poimting to anywhere that Mr. Martinez attempted to account for the
`
`circumstances described above, Google argues only that the| Agreement should be
`
`considered comparable to a hypothetically negotiated license because Mr. Martinez took into
`
`oO; e2=5 25a @fersOQa =65 2 éoO Q}699—oO 8
`
`a=oaa =ae5 °eh
`
`Mot. at 1-2, 4—along with other factors such as purported technical comparability, purported
`
`product overlap, the bargaining positions of Touchstream and Google, and Google’s [|
`
`Mot. at 4. However, even
`
`assumingthe truth ofall these purported facts,! none eliminates, or evenrelates to, the status of
`
`the[ Agreementasa litigation settlement.
`
`1 Touchstream assumes these purported facts to be true only for purposes of the current motion
`and reservesall rights to object to their admissibility.
`Indeed, they are in serious doubt and ma
`be inadmissible for reasons not addressed by
`this motion. See, e.g., Mot. Ex. 3 at 130:2-138:9
`
`>
`
`. at 23:22-24:1
`
`

`

`Case 6:21-cv-00569-ADA Document 188 Filed 01/26/23 Page 4 of 8
`
`II.
`
`ESTABLISHED PRECEDENT WARRANTS EXCLUSION
`
`As Touchstream explained in its motion, parties facing litigation face a “drastically
`
`different backdrop than the hypothetical negotiation involving two willing licensors.” Mot. at 2,
`
`quoting M2M Sols. LLC v. Enfora, Inc., 167 F. Supp. 3d 665, 678 (D. Del. 2016). “Federal Circuit
`
`precedent is hostile toward using litigation settlement agreements in proving a reasonable royalty,
`
`except in limited circumstances.” Id. Thus, an expert’s opinions that rely on a litigation settlement
`
`agreement should be excluded when they fail to account for the drastic differences between the
`
`hypothetical negotiation and a litigation settlement. Mot. at 3-4, citing M2M, 167 F. Supp. 3d at
`
`678; Sprint Commc’ns Co. v. Comcast IP Holdings, LLC, 2015 WL 456154, at *2 (D. Del. Jan.
`
`30, 2015); AVM Techs., LLC v. Intel Corp., 927 F. Supp. 2d 139, 144 (D. Del. 2013); Baltimore
`
`Aircoil Co., Inc. v. SPX Cooling Techs. Inc., 2016 WL 4426681, at *24 (D. Md. Aug. 22, 2016).
`
`Google argues that the foregoing cases are inapplicable only because the agreements in
`
`these cases involved settled litigation that was “pending,” whereas the
`
`
`
` Resp. at 2, citing Mot. Ex. 4. However, the holdings
`
`of these cases turned not on the status of the litigation settled, but on the drastic differences between
`
`litigation settlements and hypothetical negotiations between a willing licensor and willing licensee.
`
`Moreover, courts have repeatedly excluded evidence and testimony regarding settlements of mere
`
`threatened litigation, under the same reasoning applied to pending litigation. See, e.g., Spreadsheet
`
`Automation Corp. v. Microsoft Corp., 587 F. Supp. 2d 794, 801 (E.D. Tex. 2007) (excluding
`
`evidence of “licenses made under threat of litigation” under Rule 403); Pioneer Corp. v. Samsung
`
`SDI Co., 2008 WL 11344761, at *5 (E.D. Tex. Oct. 2, 2008) (same, stating, “even if negotiations,
`
`offers, and agreements reached under the threat of litigation had some probative value, such value
`
`would be too slight and clearly outweighed by the danger of unfair prejudice and confusion”);
`
`Atlas IP, LLC v. Medtronic, Inc., 2014 WL 5741870, at *6 (S.D. Fla. Oct. 6, 2014) (excluding
`
`4
`
`

`

`Case 6:21-cv-00569-ADA Document 188 Filed 01/26/23 Page 5 of 8
`
`expert opinion regarding a reasonable royalty that “employs royalty rates involving [] products
`
`derived as the result of threatened litigation, not the result of a hypothetical arm’s-length
`
`negotiation . . . Such rates do not provide proper evidence of comparable royalty rates in the
`
`marketplace”), citing Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d 1075, 1078-79 (Fed. Cir.
`
`1983) (affirming exclusion, stating, “license fees negotiated in the face of a threat of high litigation
`
`costs may be strongly influenced by a desire to avoid full litigation”) (punctuation omitted); Univ.
`
`v. Hewlett-Packard Co., 2008 WL 11274580, at *4 (N.D.N.Y. May 14, 2008) (“Where, as here, a
`
`license agreement arises under the threat of litigation, it has little relevance to the hypothetical
`
`reasonable royalty situation”); Honeywell Int’l, Inc. v. Nfioikon Corp., 2009 WL 577274, at *1 (D.
`
`Del. Mar. 4, 2009) (excluding licenses that arose out of “threat of litigation,” stating, “the Court,
`
`like the Special Master, is unable to identify any cases, either from this District or the Federal
`
`Circuit, in which licenses taken under threat of litigation were given significant weight, particularly
`
`in jury cases. Indeed, as the Federal Circuit explained, ‘it is often cheaper to take licenses than to
`
`defend infringement suits’”) (citation omitted).
`
`Google does not cite a single case suggesting that the Federal Circuit’s hostility to the use
`
`of settlement agreements in reasonable royalty analyses applies to settlements of only pending
`
`litigation, not also threatened litigation. Nor does Google cite any other case that helps Google.
`
`Instead, Google cites ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860 (Fed. Cir. 2010), which
`
`Google argues “permit[ted] reliance on such [litigation settlement] agreements.” Mot. at 3 (citing
`
`id. at 872). However, the appellate court did not “permit” evidence, as Google claims. Instead, it
`
`reversed and vacated a reasonable royalty award and cautioned the District Court on remand that
`
`it “should not rely on unrelated licenses,” noting that “litigation itself can skew the results of the
`
`5
`
`

`

`Case 6:21-cv-00569-ADA Document 188 Filed 01/26/23 Page 6 of 8
`
`hypothetical negotiation” and that a reasonable royalty based on “speculative evidence violates the
`
`statutory requirement that damages under § 284.” 594 F.3d at 872-73.
`
`Google’s other two cases are distinguishable and likewise unhelpful to Google. In neither
`
`case did the party challenging use of the settlement agreement show any unaccounted-for
`
`economic differences with the hypothetical negotiation, like Touchstream has shown here. In
`
`Colibri Heart Valve LLC v. Medtronic CoreValve LLC, 2021 WL 7285995 (C.D. Cal. Nov. 16,
`
`2021), the settlement agreement in question was an “arms-length negotiation,” was “the most
`
`reliable license in the record,” the challenger of the settlement agreement “d[id] not show
`
`otherwise” or “present any alternative reliable evidence,” and the proponent’s expert “recognized
`
`and expressly accounted for each of the differences” that were noted by the challenger. Id. at **4-
`
`6. Likewise, in Elbit Sys. Land & C4I Ltd. v. Hughes Network Sys., LLC, 927 F.3d 1292 (Fed. Cir.
`
`2019), the challenging party “[did] not demonstrate[] either ‘faulty assumptions’ or ‘a lack of
`
`reliable economic testimony.’” Id. at 1300. Here, by contrast, Touchstream has shown numerous
`
`significant economic differences with the hypothetical negotiation, and that Mr. Martinez failed to
`
`account for them. See Section I, above. Under these circumstances, exclusion is warranted. M2M,
`
`167 F. Supp. 3d at 678; Sprint, 2015 WL 456154, at *2; AVM, 927 F. Supp. 2d at 144; Baltimore
`
`Aircoil, 2016 WL 4426681, at *24; Spreadsheet, 587 F. Supp. 2d at 801; Pioneer, 2008 WL
`
`11344761, at *5; Atlas, 2014 WL 5741870, at *6; Hanson, 718 F.2d at 1078-79; Univ. v. Hewlett-
`
`Packard, 2008 WL 11274580, at *4; Honeywell, 2009 WL 577274, at *1.
`
`CONCLUSION
`
`For the foregoing reasons, and those set forth in its opening motion and memorandum,
`
`Touchstream requests that this Court exclude opinions and testimony of Google’s proffered expert
`
`Christopher Martinez regarding a reasonable royalty, and any other opinions and testimony to the
`
`extent they rely on the
`
` Agreement.
`
`6
`
`

`

`Case 6:21-cv-00569-ADA Document 188 Filed 01/26/23 Page 7 of 8
`
`Date: January 19, 2023
`
`
`
`
`Respectfully submitted,
`
`TOUCHSTREAM TECHNOLOGIES, INC.
`
`By:
`
` /s/ Justin R. Donoho
`One of Its Attorneys
`
`
`
`Ryan D. Dykal, pro hac vice
`B. Trent Webb, pro hac vice
`Jordan T. Bergsten, pro hac vice
`SHOOK, HARDY & BACON L.L.P.
`2555 Grand Boulevard
`Kansas City, MO 64108
`(816) 474-6550
`Fax: (816) 421-5547
`Email: rdykal@shb.com
`Email: bwebb@shb.com
`Email: jbergsten@shb.com
`
`
`
`
`Michael W. Gray (TX Bar No. 24094385)
`Fiona A. Bell (TX Bar No. 24052288)
`Andrew M. Long (TX Bar No. 24123079)
`SHOOK, HARDY & BACON L.L.P.
`600 Travis Street, Suite 3400
`Houston, TX 77002
`(713) 227-2008
`Fax: 713-227-9508
`Email: mgray@shb.com
`Email: fbell@shb.com
`Email: amlong@shb.com
`
`Gary M. Miller, pro hac vice
`Justin R. Donoho, pro hac vice
`SHOOK, HARDY & BACON L.L.P.
`111 S. Wacker Drive, Suite 4700
`Chicago, IL 60606
`(312) 704-7700
`Fax: 312-558-1195
`Email: gmiller@shb.com
`Email: jdonoho@shb.com
`
`
`
`
`Counsel for Plaintiff Touchstream Technologies, Inc.
`
`7
`
`

`

`Case 6:21-cv-00569-ADA Document 188 Filed 01/26/23 Page 8 of 8
`
`
`
`CERTIFICATE OF SERVICE
`
`Pursuant to the Federal Rules of Civil Procedure and the Local Rules for the Western
`
`District of Texas, I hereby certify that on the 19th day of January, 2023, I served the foregoing to
`
`the following counsel of record via the e-mail addresses shown below:
`
`Michael E. Jones
`Patrick C. Clutter
`Shaun William Hassett
`Potter Minton PC
`110 N College, Suite 500
`Tyler, TX 75702
`Tel: 903-597-8311
`Email: mikejones@potterminton.com
`Email: patrickclutter@potterminton.com
`Email: shaunhassett@potterminton.com
`
`Evan M. McLean, pro hac vice
`Michael C. Hendershot, pro hac vice
`Tharan Gregory Lanier, pro hac vice
`Jones Day
`1755 Embarcadero Road
`Palo Alto, CA 94303
`Tel: (650) 739-3939
`Email: emclean@jonesday.com
`Email: mhendershot@jonesday.com
`Email: tglanier@jonesday.com
`
`Edwin O. Garcia, pro hac vice
`Jones Day
`51 Louisiana Avenue, N.W.
`Washington, DC 20001
`Tel: (202) 879-3695
`Email: edwingarcia@jonesday.com
`
` /s/ Justin R. Donoho
`Attorney for Plaintiff
`
`
`
`
`
`
`