1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 6 DOLBY LABORATORIES LICENSING CASE NO. 18-cv-01553-YGR CORPORATION, ET AL., 7 Plaintiffs, ORDER GRANTING IN PART AND DENYING 8 IN PART MOTIONS TO STRIKE OR EXCLUDE vs. EXPERT TESTIMONY 9 ADOBE INC., Re: Dkt. Nos. 159, 162 10 Defendant. 11
12 The parties in this action have each filed a motion to exclude or strike testimony offered by 13 the opposing party’s experts. Specifically, Dolby seeks to strike certain testimony offered by 14 Adobe experts Steven Kursh, Schuyler Quackenbush, and Christian Tregillis, while Adobe seeks 15 to strike certain testimony offered by Dolby experts John Strawn, Paul Meyer, and Lorin Hitt. 16 (Dkt. Nos. 159, 162.) The Court heard oral argument on October 23, 2019.1 17 Federal Rule of Evidence 702 controls expert witness testimony. The admissibility of an 18 expert opinion requires a three-step analysis: 19 The admissibility of expert testimony, Rule 702, requires that the trial court make several preliminary determinations, Rule 104(a). The trial court must 20 decide whether the witness called is properly qualified to give the testimony sought. A witness may be qualified as an expert on the basis of either 21 knowledge, skill, experience, training, or education or a combination thereof, 22 Rule 702. The trial court must further determine that the testimony of the expert witness, in the form of an opinion or otherwise, will assist the trier of fact, i.e., 23 be helpful, to understand the evidence or to determine a fact in issue, Rule 702(a). Finally the trial court must determine that as actually applied in the 24 matter at hand, Rule 702(d), to facts, data, or opinions sufficiently established to exist, Rule 702(b), including facts, data, or opinions reasonably relied upon 25 under Rule 703, sufficient assurances of trustworthiness are present that the 26
27 1 On November 7, 2019, pursuant to the Court’s order, Adobe filed a supplemental expert witness’ explanative theory produced a correct result to warrant jury 1 acceptance, i.e., a product of reliable principles and methods, Rule 702(c). 2 Michael H. Graham, 5 HANDBOOK OF FED. EVID. § 702:1 (8th ed.) (footnotes omitted). An expert 3 is generally not permitted to opine on an ultimate issue of fact except in limited circumstances, 4 since such opinions may invade the province of the jury. See Nationwide Transport Finance v. 5 Cass Information Systems, Inc., 523 F.3d 1051, 1060 (9th Cir. 2008) (“[E]vidence that merely tells 6 the jury what result to reach is not sufficiently helpful to the trier of fact to be admissible.” 7 (quoting Kostelecky v. NL Acme Tool/NL Indus., Inc., 837 F.2d 828, 830 (8th Cir. 1988))). Nor 8 may an expert opine on questions which are matters of law for the court. See id. at 1058 (deciding 9 questions of law is the exclusive province of the trial judge); McHugh v. United Service Auto 10 Assoc., 164 F.3d 451, 454 (9th Cir. 1999) (expert testimony cannot be used to provide the legal 11 meaning or interpretation of insurance policy terms); Aguilar v. Int’l Longshoremen’s Union Local 12 No. 10, 966 F.2d 443, 447 (9th Cir. 1992) (expert opinion that reliance was reasonable and 13 foreseeable were inappropriate subjects for expert testimony). However, as a practical matter, 14 experts may express opinions based upon hypotheticals and information which would otherwise 15 be inadmissible hearsay on its own. Berman v. Freedom Fin. Network, LLC, 400 F. Supp. 3d 964 16 (N.D. Cal. 2019). Moreover, Rule 703 FRE explicitly allows an expert to base an opinion on facts 17 or data made known to the expert at or before the hearing. Interwoven, Inc. v. Vertical Computer 18 Sys., CV 10-04645 RS, 2013 WL 3786633, at *7 (N.D. Cal. July 18, 2013) (“Experts are, 19 however, permitted to rely on hearsay evidence in coming to their conclusions, so long as an 20 expert in the field would reasonably rely on that information.”). 21 Below, the Court addresses each of the experts whose testimony is at issue in the parties’ 22 motions to exclude. 23 I. Industry Experts 24 A. Steven Kursh 25 Adobe retained Dr. Kursh to provide opinions regarding whether Dolby’s interpretation of 26 the agreements at issue in this case is “commercially reasonable relative to customs and practices 27 in the software industry.” (Dkt. No. 158, Ex. A (“Kursh Opening Report”), ¶ 13.) In addition, Dr. 1 Kursh purports to offer his opinions about the technical meaning of terms used in the agreements 2 “relative to industry customs and practices.” (Id.)2 3 Dolby seeks to exclude Dr. Kursh’s opinions in their entirety. Dolby challenges specific 4 portions of Dr. Kursh’s opening report (id., ¶¶ 67-99, 101, 114, 126-214) on the grounds that Dr. 5 Kursh offers impermissible legal opinions regarding contract interpretation and fails to provide 6 any basis for his “customs and practices” opinions. Dolby also challenges Dr. Kursh’s opinion in 7 his rebuttal report that “the applications in Creative Cloud flow together and are complementary of 8 each other,” and thus, that Adobe included Dolby’s technology in Creative Cloud applications 9 only “where it was appropriate and efficient.” (Dkt. No. 158, Ex. B (“Kursh Rebuttal Report”), 10 ¶¶ 34-41.) Dolby contends that this opinion lacks foundation because Dr. Kursh never examined 11 any of Adobe’s source code. 12 Adobe counters that Dr. Kursh’s opinions are based on extensive experience with licensing 13 negotiations and partnerships, as well as an examination of numerous third-party sources. Adobe 14 further argues that rather than reaching legal conclusions, Dr. Kursh simply provides industry 15 context to aid in the interpretation of terms like “professional” and “consumer.” With respect to 16 the rebuttal report, Adobe contends that Dr. Kursh properly offers an opinion, based on industry 17 customs and practices regarding product bundling, to rebut Dolby’s damages expert. 18 The Court largely grants Dolby’s request to exclude Dr. Kursh’s opinions, with the 19 exceptions noted herein. Specifically, Dr. Kursh’s opinions regarding contract interpretation are 20 excluded. Dolby and Adobe are sophisticated parties. The contracts at issue were negotiated by 21 attorneys and technical personnel. That a dispute has arisen regarding contract interpretation does 22 not mean that a third party may offer “opinions” to support one party’s interpretation. In large 23 part, the proffered opinions are merely attorney argument dressed in the guise of “custom and 24 practice.” 25 The role of an expert is to provide specific expertise so that a fact finder can make its own 26 decisions with respect to the factual dispute. To the extent that an issue is within the sphere of a 27 1 fact finder’s understanding, an “expert” cannot usurp that role. Thus, Dr. Kursh’s opinion 2 regarding the “best practice” in drafting contracts is no more than legal argument. For instance, 3 the jury does not need Dr. Kursh to opine that the disputed terms in the contract should have been 4 “explicit” or “clearly defined,” or that they should have had “clear objective criteria.” (Kursh 5 Opening Report, ¶¶ 149-150; see also id.
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1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 6 DOLBY LABORATORIES LICENSING CASE NO. 18-cv-01553-YGR CORPORATION, ET AL., 7 Plaintiffs, ORDER GRANTING IN PART AND DENYING 8 IN PART MOTIONS TO STRIKE OR EXCLUDE vs. EXPERT TESTIMONY 9 ADOBE INC., Re: Dkt. Nos. 159, 162 10 Defendant. 11
12 The parties in this action have each filed a motion to exclude or strike testimony offered by 13 the opposing party’s experts. Specifically, Dolby seeks to strike certain testimony offered by 14 Adobe experts Steven Kursh, Schuyler Quackenbush, and Christian Tregillis, while Adobe seeks 15 to strike certain testimony offered by Dolby experts John Strawn, Paul Meyer, and Lorin Hitt. 16 (Dkt. Nos. 159, 162.) The Court heard oral argument on October 23, 2019.1 17 Federal Rule of Evidence 702 controls expert witness testimony. The admissibility of an 18 expert opinion requires a three-step analysis: 19 The admissibility of expert testimony, Rule 702, requires that the trial court make several preliminary determinations, Rule 104(a). The trial court must 20 decide whether the witness called is properly qualified to give the testimony sought. A witness may be qualified as an expert on the basis of either 21 knowledge, skill, experience, training, or education or a combination thereof, 22 Rule 702. The trial court must further determine that the testimony of the expert witness, in the form of an opinion or otherwise, will assist the trier of fact, i.e., 23 be helpful, to understand the evidence or to determine a fact in issue, Rule 702(a). Finally the trial court must determine that as actually applied in the 24 matter at hand, Rule 702(d), to facts, data, or opinions sufficiently established to exist, Rule 702(b), including facts, data, or opinions reasonably relied upon 25 under Rule 703, sufficient assurances of trustworthiness are present that the 26
27 1 On November 7, 2019, pursuant to the Court’s order, Adobe filed a supplemental expert witness’ explanative theory produced a correct result to warrant jury 1 acceptance, i.e., a product of reliable principles and methods, Rule 702(c). 2 Michael H. Graham, 5 HANDBOOK OF FED. EVID. § 702:1 (8th ed.) (footnotes omitted). An expert 3 is generally not permitted to opine on an ultimate issue of fact except in limited circumstances, 4 since such opinions may invade the province of the jury. See Nationwide Transport Finance v. 5 Cass Information Systems, Inc., 523 F.3d 1051, 1060 (9th Cir. 2008) (“[E]vidence that merely tells 6 the jury what result to reach is not sufficiently helpful to the trier of fact to be admissible.” 7 (quoting Kostelecky v. NL Acme Tool/NL Indus., Inc., 837 F.2d 828, 830 (8th Cir. 1988))). Nor 8 may an expert opine on questions which are matters of law for the court. See id. at 1058 (deciding 9 questions of law is the exclusive province of the trial judge); McHugh v. United Service Auto 10 Assoc., 164 F.3d 451, 454 (9th Cir. 1999) (expert testimony cannot be used to provide the legal 11 meaning or interpretation of insurance policy terms); Aguilar v. Int’l Longshoremen’s Union Local 12 No. 10, 966 F.2d 443, 447 (9th Cir. 1992) (expert opinion that reliance was reasonable and 13 foreseeable were inappropriate subjects for expert testimony). However, as a practical matter, 14 experts may express opinions based upon hypotheticals and information which would otherwise 15 be inadmissible hearsay on its own. Berman v. Freedom Fin. Network, LLC, 400 F. Supp. 3d 964 16 (N.D. Cal. 2019). Moreover, Rule 703 FRE explicitly allows an expert to base an opinion on facts 17 or data made known to the expert at or before the hearing. Interwoven, Inc. v. Vertical Computer 18 Sys., CV 10-04645 RS, 2013 WL 3786633, at *7 (N.D. Cal. July 18, 2013) (“Experts are, 19 however, permitted to rely on hearsay evidence in coming to their conclusions, so long as an 20 expert in the field would reasonably rely on that information.”). 21 Below, the Court addresses each of the experts whose testimony is at issue in the parties’ 22 motions to exclude. 23 I. Industry Experts 24 A. Steven Kursh 25 Adobe retained Dr. Kursh to provide opinions regarding whether Dolby’s interpretation of 26 the agreements at issue in this case is “commercially reasonable relative to customs and practices 27 in the software industry.” (Dkt. No. 158, Ex. A (“Kursh Opening Report”), ¶ 13.) In addition, Dr. 1 Kursh purports to offer his opinions about the technical meaning of terms used in the agreements 2 “relative to industry customs and practices.” (Id.)2 3 Dolby seeks to exclude Dr. Kursh’s opinions in their entirety. Dolby challenges specific 4 portions of Dr. Kursh’s opening report (id., ¶¶ 67-99, 101, 114, 126-214) on the grounds that Dr. 5 Kursh offers impermissible legal opinions regarding contract interpretation and fails to provide 6 any basis for his “customs and practices” opinions. Dolby also challenges Dr. Kursh’s opinion in 7 his rebuttal report that “the applications in Creative Cloud flow together and are complementary of 8 each other,” and thus, that Adobe included Dolby’s technology in Creative Cloud applications 9 only “where it was appropriate and efficient.” (Dkt. No. 158, Ex. B (“Kursh Rebuttal Report”), 10 ¶¶ 34-41.) Dolby contends that this opinion lacks foundation because Dr. Kursh never examined 11 any of Adobe’s source code. 12 Adobe counters that Dr. Kursh’s opinions are based on extensive experience with licensing 13 negotiations and partnerships, as well as an examination of numerous third-party sources. Adobe 14 further argues that rather than reaching legal conclusions, Dr. Kursh simply provides industry 15 context to aid in the interpretation of terms like “professional” and “consumer.” With respect to 16 the rebuttal report, Adobe contends that Dr. Kursh properly offers an opinion, based on industry 17 customs and practices regarding product bundling, to rebut Dolby’s damages expert. 18 The Court largely grants Dolby’s request to exclude Dr. Kursh’s opinions, with the 19 exceptions noted herein. Specifically, Dr. Kursh’s opinions regarding contract interpretation are 20 excluded. Dolby and Adobe are sophisticated parties. The contracts at issue were negotiated by 21 attorneys and technical personnel. That a dispute has arisen regarding contract interpretation does 22 not mean that a third party may offer “opinions” to support one party’s interpretation. In large 23 part, the proffered opinions are merely attorney argument dressed in the guise of “custom and 24 practice.” 25 The role of an expert is to provide specific expertise so that a fact finder can make its own 26 decisions with respect to the factual dispute. To the extent that an issue is within the sphere of a 27 1 fact finder’s understanding, an “expert” cannot usurp that role. Thus, Dr. Kursh’s opinion 2 regarding the “best practice” in drafting contracts is no more than legal argument. For instance, 3 the jury does not need Dr. Kursh to opine that the disputed terms in the contract should have been 4 “explicit” or “clearly defined,” or that they should have had “clear objective criteria.” (Kursh 5 Opening Report, ¶¶ 149-150; see also id. ¶¶ 82-85 (noting that license agreements must be 6 analyzed by “the language agreed to by the parties”).) Further, cross-referencing American Bar 7 Association manuals or other legal resources is not equivalent to relying on “industry custom and 8 practice”; the documents to which Dr. Kursh cites provide legal training on licensing. 9 Presumably, percipient witnesses employed by each party will testify and explain their own 10 version of the basic facts to the jury. To claim that a person dressed as an expert can opine in 11 court and seek to interpret the contracts at the core of the parties’ dispute would usurp the jury’s 12 role of resolving contract disputes and open the door to “legal experts” frequenting the courtroom. 13 Moreover, common business practices—such as seeking “clarity” regarding contract 14 interpretation or using multiple contracts or addendums to define the terms of an agreement—are 15 not “custom[s] and practice[s] specific to the software industry.” Nor would the jury benefit from 16 Dr. Kursh’s opinions on the effect of payments and receipts on ongoing business relationships (id. 17 ¶¶ 185-190) or bundling (id. ¶¶ 191-202). The jury does not need expert guidance on such generic 18 business considerations.3 19 Accordingly, Dolby’s motion to exclude Dr. Kursh’s opinions is granted, except for the 20 following opinions, which are based on Dr. Kursh’s industry expertise and would be properly 21 before the jury: 22
23 3 In support of its motion, Dolby points to Cisco Sys., Inc. v. Hewlett-Packard Co., No. 2015-1-CV-284707 (Cal. Super. Ct. Santa Clara County, May 3, 2018) (order after hearing on April 24 27, 2018), in which a court excluded Dr. Kursh’s testimony because “references to specific 25 industry customs and usage that inform[ed] his interpretation of” the agreement at issue were “few and far between.” Dr. Kursh’s opinions in this case suffer from the same deficiencies. Actuate 26 Corp. v. Aon Corp., No. C 10-05750 WHA, 2012 WL 2285187, at *3 (N.D. Cal. June 18, 2012) does not require a contrary finding. There, Dr. Kursh was found “qualified to testify about how 27 the term CPU would have been understood in the context of software license agreements,” but The lack of a distinction between “consumer” and “professional” designations in the 1 software industry, excluding issues related to contract interpretation. Thus, Dr. Kursh may 2 testify that, for example, “there is no generally-accepted distinction between consumer and professional software . . . use.” (Id. ¶ 134; see also id. ¶¶ 136-137, 139-140.) 3 The certification process generically. (See, e.g., id. ¶¶ 174-175.) The Court reserves on 4 whether there has been a sufficient proffer for the conclusion that “[i]t would be contrary to industry custom and practice to require further implementations of Dolby Plus in 5 Creative Cloud applications following the completion of this approval process.” (Id. ¶ 184.)4 6 Given how little of Dr. Kursh’s opinion is proper, the Court will discuss what else Dr. Kursh may 7 say at trial, if anything, during the pretrial conference. 8 B. Lorin Hitt 9 Dolby offers Dr. Hitt, a professor of operations, information, and decisions at the 10 University of Pennsylvania, as an expert on customs and practices in the software industry and as 11 a rebuttal to Dr. Kursh. (Dkt. No. 161, Ex. J (“Litt Report”), ¶¶ 1, 9.) 12 Adobe moves to strike four portions of Dr. Hitt’s report: Opinions B (¶¶ 19-20), B-3 13 (¶¶ 47-53), C (¶¶ 54-65), and D (¶¶ 66-71). In general, the parties disagree as to whether these 14 opinions constitute improper contractual interpretation or actually rebut any opinion from Dr. 15 Kursh. Adobe further argues that because Dr. Hitt is an academic without practical experience, he 16 lacks the qualifications to express an opinion regarding Dolby’s product certification process and 17 its impact on licensing. 18 Adobe’s request to exclude portions of Dr. Hitt’s report is granted in part. Specifically, to 19 the extent the Court has stricken certain of Dr. Kursh’s opinions, there is no need for rebuttal, and 20 Dr. Hitt’s rebuttal opinions likewise are stricken. (See, e.g., id. ¶¶ 66-71 (discussing bundling).) 21 Further, Dr. Hitt is subject to the same limitations as Dr. Kursh, namely, any opinions from Dr. 22 Hitt regarding contract interpretation (see id. ¶¶ 53, 56) or generic business practices (see id. ¶ 68), 23 are excluded. These limitations significantly reduce the portions of Dr. Hitt’s report that would be 24 properly before the jury. 25 26
27 4 In order to determine whether this opinion is proper, the Court requires a further proffer 1 To the extent the Court allows Dr. Kursh to opine on issues regarding industry customs 2 and practices, however, Dr. Hitt is permitted to offer a rebuttal. Thus, Dr. Hitt, like Dr. Kursh, 3 may testify about the distinction between “consumer” and “professional” designations in the 4 software industry (see id. ¶¶ 19-20, 47-53), excluding any contract interpretation. Further, Dr. Hitt 5 may offer opinions regarding the product certification process generally. (See id. ¶¶ 61-63.) 6 Moreover, notwithstanding his lack of industry experience, Dr. Hitt has the requisite expertise to 7 address industry customs and practices based on his study of the industry, including his 8 examination of academic resources and publicly-available third-license agreements. The 9 objections, in this regard, relate to the weight of his opinion rather than admissibility. 10 II. Technical Experts 11 A. Schuyler Quackenbush 12 Adobe offers Dr. Quackenbush as an expert on “the functionality of the audio compression 13 software that Adobe licensed from Dolby.” (Dkt. No. 158, Ex. D (“Schuyler Report”), ¶ 1.) 14 Dolby seeks to exclude Opinions 2 (¶¶ 157-171) and 4 (¶¶ 218-224) of Dr. Quackenbush’s 15 report, in which he opines that “once compiled into object code,” the Dolby Digital and Dolby 16 Digital Plus Asserted Works are “merely functional and non-expressive.” Dolby avers that these 17 portions of the report contain improper legal opinions about whether Dolby’s technology is 18 “expressive,” and rely on erroneous legal conclusions that are contrary to Ninth Circuit law 19 holding that copyright in source code extends to the object code form. Adobe counters that Dr. 20 Quackenbush opines that object code is “non-expressive” “as a matter of software engineering,” 21 not as a matter of law, and only “references copyright law and terms to guide the inquiry[.]” 22 Adobe further disagrees with Dolby’s interpretation of the relevant case law. 23 Dolby’s request to strike Opinions 2 and 4 of Dr. Quackenbush’s report is denied. As an 24 initial matter, and as explained in the Court’s order on the parties’ cross-motions for summary 25 judgment, although the Ninth Circuit has recognized that both source code and object code are 26 eligible for copyright protection, a dispute of material fact exists regarding whether the object 27 code provided to Adobe included Dolby’s copyrighted source code. Dr. Quackenbush properly 1 Moreover, the Court notes that both parties’ technical experts opine in similar ways. 2 Fundamentally, Dr. Quackenbush provides an explanation for his opinion that MainConcept’s 3 object code libraries, which were used by Adobe, contained no elements of “expression” or 4 “creativity.” As discussed herein, Dolby’s technical expert, Dr. Strawn, provides a basis for his 5 contrary opinion. Given the highly technical nature of the source code and object code at issue, 6 the Court finds that the expertise offered by both experts will be helpful to the jury in resolving 7 disputed factual issues in dispute. 8 That said, the Court will provide further guidance regarding the manner in which such 9 opinions may come into evidence at the pretrial conference and once the Court discusses the jury 10 instructions using the terms “expression,” “creative,” and “functional.” In particular, the experts 11 must segregate the basis for their opinions from the opinions themselves. Further, the Court 12 reminds the parties that experts may not be the source of the factual material upon which their 13 opinions are based. Thus, such evidence must first be admitted before the expert may rely on that 14 evidence to provide an opinion thereon. 15 B. John Strawn 16 As a rebuttal to Dr. Quackenbush, Dolby offers opinions from Dr. Strawn regarding 17 “computer software and programs that are at issue in this action.” (Dkt. No. 161, Ex. G, ¶¶ 1-2.) 18 Adobe seeks to exclude Section VIII (¶¶ 83-111) of Dr. Strawn’s report, in which he 19 concludes that MainConcept’s object code library used by Adobe “matches” and “incorporates” 20 Dolby’s source code. Adobe argues that Dr. Strawn’s opinion supports a “new, never-pleaded 21 theory of indirect copyright infringement based on Adobe’s inclusion of third-party object code 22 form MainConcept.” Adobe further contends that Dr. Quackenbush’s report never discusses the 23 theory that Dr. Strawn purportedly “rebuts.” 24 Adobe’s arguments fail to persuade. As previously explained, the opinions of both parties’ 25 technical experts will aid the jury in deciding the issues in this case. Insofar as Dr. Strawn opines 26 on issues not discussed in Dr. Quackenbush’s report, Adobe has had a full and fair opportunity to 27 rebut those opinions through Ronald Schnell’s expert report. Further, as the Court noted in its 1 the scope of the pleadings, which generally allege infringement of the “Asserted Dolby 2 Works.” Dr. Strawn’s discussion of this infringement theory therefore is proper. 3 Accordingly, Adobe’s request to strike Section VIII of Dr. Strawn’s report denied. The 4 Court reiterates, however, that it will provide further guidance regarding the permissible limits of 5 Dr. Strawn’s testimony at the pretrial conference. 6 III. Damages Experts 7 A. Paul Meyer 8 Mr. Meyer was retained by Dolby as a damages expert. (Dkt. No. 161, Ex. E (“Meyer 9 Report”), ¶ 1; Ex. F (“Meyer Supplemental Report”), ¶ 1.) Relevant here, Mr. Meyer calculated 10 the royalties Adobe purportedly should have paid to Dolby based on the royalty rates applicable to 11 Adobe’s sales and the royalty-bearing sales Adobe purportedly should have reported. 12 Adobe seeks to exclude Mr. Meyer’s “hypothetical royalty” analysis on three bases: 13 (i) Dolby disavowed such a damages claim throughout discovery; (ii) Mr. Meyer’s analysis is 14 based on a breach-of-contract model, improperly calculating damages based on hypothetical, not 15 actual, acts of infringement; and (iii) Mr. Meyer’s report contains methodological flaws, including 16 failures to consider all contracts at issue and properly apportion value between copyrighted and 17 non-copyrighted materials. 18 Dolby principally raises four counter-arguments. First, it argues that it never “disavowed” 19 seeking actual damages, and instead, repeatedly stated in its complaint, initial disclosures, and 20 meet and confers that it would seek “actual damages” and was continuing to evaluate its damages 21 theories. Dolby further asserts that it provided Adobe with nearly 100 agreements between Dolby 22 and third-party licensees, making clear that it was producing them for damages purposes and 23 suggesting Dolby might pursue hypothetical royalty damages. Second, Dolby avers that Mr. 24 Meyer properly calculated damages based on each act of infringement, as measured by each sale 25 of a Creative Cloud subscription that gave a user access to use all software in the cloud. Third, 26 Dolby argues that the royalty rate used by Mr. Meyer, although not the actual rate agreed to by the 27 parties, is based on the parties’ own negotiation history and therefore is a proper basis for his 1 damages calculation. Fourth, Dolby rejects Adobe’s argument that the report contains 2 methodological flaws. 3 Adobe’s motion to exclude Mr. Meyer’s “hypothetical royalty” analysis is denied. 4 Although Adobe has presented evidence suggesting that Dolby was less than forthcoming about its 5 damages theory, the Court is not persuaded that Dolby ever disavowed the theory articulated in 6 Mr. Meyer’s report. (See Dkt. No. 161, Ex. F (stating, in July 20, 2019 meet and confer letter, that 7 “[t]he relative value of the Dolby Technology containing the Asserted Dolby Works is directly 8 relevant to a damages calculation based on a hypothetical reasonable royalty, a theory that has 9 been repeatedly upheld within the 9th Circuit”); Ex. P (response to interrogatory 16 stating that 10 “[Dolby’s] damages for copyright infringement will be based, in whole or in part, on the profits 11 earned by Adobe . . .”).) Absent express disavowal, Dolby is entitled to offer expert opinions to 12 support its damages calculation. 13 Insofar as Adobe disagrees with the factual bases underlying Mr. Meyer’s methodology, 14 such as that Mr. Meyer calculated damages based on Creative Cloud purchases rather than 15 application downloads, such issues are properly resolved by the jury, not this Court. See City of 16 Pomona v. SQM N. Am. Corp., 750 F.3d 1036, 1044 (9th Cir. 2014) (“Challenges that go to the 17 weight of the evidence are within the province of a fact finder, not a trial court judge.”). Adobe, 18 for its part, will have a full and fair opportunity to challenge Mr. Meyer’s methodology through its 19 rebuttal expert, Mr. Tregillis, discussed in further detail below.5 20 // 21 // 22
23 5 Adobe further argues that at his deposition, Mr. Meyer offered speculative testimony regarding (i) what Adobe knew and intended when entering into a licensing agreement with 24 Starbucks; (ii) Adobe’s financial success and growth in market capitalization; and (iii) what Dolby 25 knew or could have known about Adobe’s royalty reporting practices. The Court notes that much of the testimony identified by Adobe, including Mr. Meyer’s opinions about Adobe’s overall 26 financial success or what the parties did or did not know through the course of their business relationship, bears a tenuous relationship to Mr. Meyer’s report and lacks an evidentiary basis. 27 Mr. Meyer will not be permitted to offer opinions at trial that have not been clearly disclosed in 1 B. Christian Tregillis 2 Adobe retained Mr. Tregillis to rebut Mr. Meyer’s opinions and to “analyze accounting, 3 financial, economic, valuation, and licensing issues” related to Dolby’s claims. (Dkt. No. 158, Ex. 4 F (“Tregillis Report”).) 5 Dolby seeks to exclude from Mr. Tregillis’ rebuttal report: (i) paragraphs 160 through 185, 6 on the ground that Mr. Tregillis admitted in his deposition that he has no opinion the matters 7 discussed therein and instead was offering mere “observations”; and (ii) paragraphs 156, 203 8 through 207, and 228 through 231, on the ground that they offer improper legal conclusions 9 regarding copyright law. Adobe counters that these paragraphs summarize other experts’ opinions 10 to form the basis for Mr. Tregillis’ rebuttal and properly challenge Mr. Meyer’s methodologies 11 and conclusions. 12 Dolby’s motion to strike portions of Mr. Tregillis’ report is denied. Paragraph 156 of Mr. 13 Tregillis’ report summarizes Dr. Quackenbush’s testimony. Given that Dr. Quackenbush 14 generally will be permitted to testify regarding his opinions, Mr. Tregillis may refer to this 15 testimony in his report. With respect to the remaining paragraphs, insofar as Mr. Tregillis 16 summarizes Mr. Meyer’s opinions or other admissible evidence, he is permitted to do so in order 17 to establish a framework for his own opinions, such as that Mr. Meyer “greatly overstate[d] 18 royalties owed by Adobe.” This is not a case where, as Dolby contends, expert testimony “simply 19 rehash[es] otherwise admissible evidence about which [the expert] has no personal knowledge.” 20 Fujifilm Corp. v. Motorola Mobility LLC, No. 12–cv–03587–WHO, 2015 WL 757575, at *27 21 (N.D. Cal. Feb. 20, 2015) (citation omitted). As previously noted, however, neither Mr. Tregillis 22 nor any other expert can be the source of the factual material upon which an expert opinion is 23 based, and rather, such factual material must be separately admitted into evidence. 24 The Court also finds that, contrary to Dolby’s contentions, paragraphs 203 through 207 and 25 228 through 231 do not offer inadmissible legal conclusions. Although the titles of those 26 sections—which state that Mr. Meyer’s royalties analysis is not connected to a “copyright 27 infringement cause of action” and is “illogical in light of the contract as a whole”—suggest legal 1 opinions may follow, the substance of these sections properly challenge Mr. Meyer’s calculations 2 || based on Mr. Tregillis’ understanding of “economic realities” related to royalty transactions. 3 OK OR OK OR 4 Based upon the foregoing, the Court rules as follows with respect to the parties’ motions to 5 exclude or strike certain expert testimony: 6 (1) The motion to exclude the opinions of Dr. Strawn is GRANTED, subject to the 7 exceptions set forth above; 8 (2) Adobe’s motion to exclude Opinions B, B-3, C, and D of Dr. Hitt’s report is 9 GRANTED, subject to the exceptions set forth above; 10 (3) Dolby’s motion to exclude Opinions 2 and 4 of Dr. Quackenbush’s report is DENIED; 11 (4) Adobe’s motion to exclude Section VIII of Dr. Strawn’s report is DENIED; 12 (5) Adobe’s motion to exclude Mr. Meyer’s “hypothetical royalty” analysis is DENIED; g 13 (6) Dolby’s motion to exclude paragraphs 156, 160 through 185, 203 through 207, and 228 14 through 231 of Mr. Tregillis’ report is DENIED. 15 This Order terminates Docket Numbers 159 and 162. A 16 IT Is SO ORDERED.
18 Dated: November 26, 2019 Zypene Hag tflees— 19 YVONNE GONZALEZ ROGERS UNITED STATES DISTRICT COURT JUDGE 20 21 22 23 24 25 26 27 28