Case 1:19-cv-01334-CJB Document 677 Filed 02/21/24 Page 1 of 6 PageID #: 17736
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
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`MIDWEST ENERGY EMISSIONS
`CORP. and MES INC.,
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`Plaintiffs,
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`v.
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`ARTHUR J. GALLAGHER & CO., et al.,
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`Defendants.
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`Civil Action No. 19-1334-CJB
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`MEMORANDUM ORDER
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`1.
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`Pending before the Court in this patent infringement action is the CERT
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`Defendants’ “Notice in Response to Memorandum Order (D.I. 627), Objections to Expert
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`Testimony Inconsistent Therewith, and Motion to Reconsider Denial of Motion to Exclude
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`Testimony of Plaintiffs’ Damages Expert for Including Tax Credits in Patent Damages
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`(“Motion”)[.]” (D.I. 639) The Court writes briefly here and for the parties, who are well
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`familiar with the facts and law relating to the Motion. Having reviewed the Motion and the
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`briefing related thereto, (id.; D.I. 651), having heard argument on February 14, 2024 (the
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`“February 14, 2024 hearing”), (D.I. 676 (hereinafter, “Tr.”)), and having considered the legal
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`requirements for review of a motion for reconsideration, see (D.I. 651 at 2-3), the Court hereby
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`GRANTS-IN-PART and DENIES-IN-PART the Motion for the reasons set out below.1
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`2.
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`In the Court’s November 7, 2023 Memorandum Order (“Memorandum Order”)
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`denying Defendants’ motion to exclude certain opinions of Plaintiffs’ damages expert Philip
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`Green (the “Green Daubert Motion”), the Court addressed the three arguments presented by the
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`1
`The parties have jointly consented to the Court’s jurisdiction to conduct all
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`proceedings in this case, including trial, the entry of final judgment and all post-trial
`proceedings. (D.I. 398)
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`Case 1:19-cv-01334-CJB Document 677 Filed 02/21/24 Page 2 of 6 PageID #: 17737
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`Green Daubert Motion. (D.I. 627) The third argument—and one that was addressed by the
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`parties in only a few paragraphs in their summary judgment/Daubert briefs—is what is now at
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`issue with the instant Motion. In that third argument, Defendants asserted that “Mr. Green’s
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`opinion on royalty rates also must be excluded because he does not apportion out the value of the
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`Section 45 tax credits earned by the licensees of Chem-Mod’s, Nalco’s, and ADA-ES’s
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`technology[]” (“Defendants’ third argument”). (D.I. 528 at 49) In response to that argument,
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`Plaintiffs stated in part:
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`Mr. Green’s royalty rate opinion is a flat per-unit amount, assessed
`on a per-ton basis, and determined from a variety of inputs. . . . It
`does not include any tax credit component to apportion out, and
`Defendants identify no evidence to show the inclusion of the value
`of the tax credits.
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`(D.I. 545 at 48-49 (emphasis in original)) In light of the above positions, the Court’s MO dealt
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`with Defendants’ third argument as follows:
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`On this record, where the parties’ arguments were not very clear, at
`least to the Court, the Court can only take Plaintiffs at their word
`that Mr. Green’s royalty rate range is not going [to] “include a[]
`tax credit component” (and therefore does not “[f]ail to [a]pportion
`tax credits).” . . . In light of this representation, Defendants’
`argument that Mr. Green’s royalty rate opinions must be excluded
`for failure to apportion out Section 45 tax credits is not well-taken.
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`(D.I. 627 at 12)
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`3.
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`The Court, particularly after now having had the benefit of discussing this issue
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`with the parties’ counsel during the February 14, 2024 hearing, now better understands the thrust
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`of Defendants’ third argument: i.e., that it was wrong for Mr. Green, when compiling his royalty
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`rate, to take into account in any fashion value that is attributable to the receipt of Section 45 tax
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`credits. (See, e.g., D.I. 639 at 6-7) And while Plaintiffs represented that Mr. Green’s royalty rate
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`did not “include” any particular tax credit component, it is now clear to the Court that this
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`2
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`Case 1:19-cv-01334-CJB Document 677 Filed 02/21/24 Page 3 of 6 PageID #: 17738
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`representation should not have resolved the dispute. That is because it is now evident that what
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`Plaintiffs meant by this statement was simply that Mr. Green’s proposed royalty rate did not
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`include, as a “line item[,]” a portion that was explicitly attributable to the value of Section 45
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`tax credits. (Tr. at 63, 72 (emphasis added)) And yet during the February 14, 2024 argument,
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`Plaintiffs’ counsel at times acknowledged that, in different ways, Mr. Green’s royalty rate
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`opinion was indeed influenced by the value of Section 45 tax credits. (See, e.g., id. at 63-64, 69
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`(Plaintiffs’ counsel acknowledging that “Section 45 actually influenced . . . the amounts paid
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`[with respect to] economically and technologically comparable licenses[,]” that the impact of the
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`receipt of those tax credits “could make the [royalty rate] number go up or down a little bit” and
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`that the tax credits have “an effect on the rate. . . . [i]n the sense of how much [an entity paid for
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`a] comparable license”); see also D.I. 651 at 2 n.2, 6 (“That’s not to say that tax credits are not
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`relevant or are not part of Mr. Green’s opinion: they are simply not part of his math.”))
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`Therefore, the Court agrees with Defendants that the Court did not accurately apprehend the
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`parties’ positions regarding Defendants’ third argument. And so in fairness, the Court must
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`reconsider the basis for its denial of the Green Daubert Motion on this ground.
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`4.
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`In doing so, however, another problem for Defendants rears its head. This relates
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`to the fact that, in Defendants’ opening brief as to the Green Daubert Motion, they argued that
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`Mr. Green’s failure to “apportion out the value of the Section 45 tax credits earned by the
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`licensees of Chem-Mod’s, Nalco’s, and ADA-ES’s technology” was “fundamentally flawed for
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`two reasons.” (D.I. 528 at 49) And the problem is that both of the “reasons” that Defendants put
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`forward simply do not withstand scrutiny.
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`5.
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`Defendants’ first argument was that “it is undisputed that the patents-in-suit do
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`not claim or enable qualifying for Section 45 tax credits or reducing NOx, a requirement to earn
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`3
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`Case 1:19-cv-01334-CJB Document 677 Filed 02/21/24 Page 4 of 6 PageID #: 17739
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`those credits[.]” (Id.) Yet Defendants’ sole support for this assertion was a citation to Plaintiffs’
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`response to one of Defendants’ Requests for Admission (“RFA”); that RFA asked Plaintiffs to
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`“[a]dmit that attainment of a Qualified Emission Reduction, as defined in 26 U.S.C. §
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`45(c)(7)(B), is not part of any method stated in an Asserted Claim.” (D.I. 534, ex. 29 at 2) To
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`that, Plaintiffs responded only that “[they] admit[] that no Asserted Claim recites ‘attainment of a
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`Qualified Emission Reduction, as defined in 26 U.S.C. § 45(c)(7)(B),’ otherwise denied.” (Id.
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`(cited in D.I. 528 at 49)) It is wrong to suggest that this RFA response amounts to an
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`acknowledgement by Plaintiffs that the patents-in-suit “do not claim or enable qualifying for
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`Section 45 tax credits or reducing NOx[,]” let alone that this state of affairs is “undisputed.” It is
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`no such acknowledgement at all.
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`6.
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`Defendants’ second argument was that “even if practicing the patents were
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`incidentally necessary to earn the tax credits, the value of the allegedly infringing [r]efined [c]oal
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`would still be attributable to the legal requirements that tax payers must meet to earn tax credits”
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`and that “[t]he value of tax code compliance—comparable to the value inherent in meeting a
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`standard set by an organization—would still need to be apportioned out.” (D.I. 528 at 50) Yet
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`the sole case that Defendants cited in support of this proposition—Ericsson, Inc. v. D-Link Sys.,
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`Inc., 773 F.3d 1201 (Fed. Cir. 2014)—stands only for the proposition that “the royalty for
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`[standard essential patents] should reflect the approximate value of that technological
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`contribution, not the value of its widespread adoption due to standardization.” 773 F.3d at 1233
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`(cited in D.I. 528 at 49-50). The Court does not understand how such caselaw is relevant to our
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`situation here, where the asserted patents are not said to be essential to practicing a technological
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`standard mode of operation. Nor did the few lines of argument in Defendants’ opening brief
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`4
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`Case 1:19-cv-01334-CJB Document 677 Filed 02/21/24 Page 5 of 6 PageID #: 17740
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`regarding the Green Daubert Motion sufficiently explain why this was so. (D.I. 528 at 50; see
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`also D.I. 651 at 7)
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`7.
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`Therefore, Defendants presented two reasons as to why Mr. Green’s failure to
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`apportion out the value of the Section 45 tax credits amounts to an unreliable methodology. And
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`yet those two reasons were entirely unpersuasive.
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`8.
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`That said, it is Plaintiffs’ burden, as the party offering Mr. Green’s expert
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`testimony, to show that it is sufficiently reliable. See, e.g., Personal Audio, LLC v. Google LLC,
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`Civil Action No. 17-1751-CFC-CJB, 2021 WL 5038740, at *2 (D. Del. Oct. 25, 2021). And it is
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`not like Plaintiffs did a great job of that either. As was noted above, one of the arguments that
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`Plaintiffs made in their answering brief regarding the Green Daubert Motion—i.e., that Mr.
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`Green’s royalty rate opinion does not “include any tax credit component to apportion out[,]”
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`(D.I. 545 at 48 (emphasis in original))—now seems off-point at best. And overall, Plaintiffs’
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`couple-of-paragraph response in their brief as to this issue was less than clear.
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`9.
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`However, in the last section of this portion of their brief, Plaintiffs appear to have
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`been suggesting that it can be appropriate for Mr. Green to consider tax credits as relevant to his
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`reasonable royalty opinion. (D.I. 545 at 49-50) And Plaintiffs’ slides regarding the Green
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`Daubert Motion do point to a linkage between the claimed technology and how one may claim
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`entitlement to Section 45 tax credits. (Plaintiffs’ Slides Regarding Defendants’ Motion to
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`Exclude Philip Green, Slides 86-88; see also, e.g., D.I. 546, ex. A at 45-46 at ¶¶ 83-84; id. at
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`150, 167; Tr. at 58-60)2 Under these circumstances, the Court declines to exclude Mr. Green’s
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`2
`Specifically, the Court has been told that in order to claim Section 45 tax credits,
`one must utilize refined coal in a manner that allows for a reduction of mercury and NOx
`emissions of a certain amount. (See D.I. 555 at 24 (citing 26 U.S.C. § 45(c)(7)) Defendants
`provide refined coal containing MerSorb and S-Sorb and, as Defendants acknowledge, use of
`these additives leads to reduction in both mercury and NOx emissions. (Id. at 25; see also D.I.
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`Case 1:19-cv-01334-CJB Document 677 Filed 02/21/24 Page 6 of 6 PageID #: 17741
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`expert opinions on the ground that he did not apportion out the value of the Section 45 tax credits
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`earned by the licensees of Chem-Mod’s, Nalco’s, and ADA-ES’s technology. Defendants “will
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`be free to cross-examine [Mr. Green] on his factual assumptions underlying his reasonable
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`royalty opinion” during trial. Shire Viropharma Inc. v. CSL Behring LLC, Civil Action No. 17-
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`414 CONSOLIDATED, 2021 WL 1227097, at *28 (D. Del. Mar. 31, 2021).3
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`10.
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`Because this Memorandum Order may contain confidential information, it has
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`been released under seal, pending review by the parties to allow them to submit a single, jointly
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`proposed, redacted version (if necessary) of the Memorandum Order. Any such redacted version
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`shall be submitted no later than March 6, 2024 for review by the Court. It should be
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`accompanied by a motion for redaction that shows that the presumption of public access to
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`judicial records has been rebutted with respect to the proposed redacted material, by including a
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`factually-detailed explanation as to how that material is the “kind of information that courts will
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`protect and that disclosure will work a clearly defined and serious injury to the party seeking
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`closure.” In re Avandia Mktg., Sales Pracs. & Prods. Liab. Litig., 924 F.3d 662, 672 (3d Cir.
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`2019) (internal quotation marks and citation omitted). The Court will subsequently issue a
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`publicly-available version of its Memorandum Order.
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`Dated: February 21, 2024
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`____________________________________
`Christopher J. Burke
`UNITED STATES MAGISTRATE JUDGE
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`546, ex. A at 46 at ¶ 84) And Plaintiffs’ technical expert has opined that MerSorb and S-Sorb
`practice at least claim 2 of the '517 patent. (D.I. 546, ex. A at 150, 167)
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`The portion of the CERT Defendants’ Motion for Leave to File Reply relating to
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`the instant Motion, (D.I. 652), is DENIED. The Court is not persuaded that Defendants’
`authority represents a change in the law that would warrant a reply brief. (See D.I. 654 at 1)
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