SSI Technologies, LLC v. Dongguan Zhengyang Electronic Mechanical LTD

District Court, W.D. Wisconsin·Decided September 16, 2024·No. 3:20-cv-00019·Unknown

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WISCONSIN

SSI TECHNOLOGIES, LLC,

Plaintiff, v. OPINION and ORDER

DONGGUAN ZHENGYANG ELECTRONIC 20-cv-19-jdp MECHANICAL LTD,

Defendant.

This order addresses the parties’ motions in limine. A. SSI’s motions in limine Motion No. 1: exclude certain testimony from Lindsey Fisher Lindsey Fisher is DZEM’s damages expert. Fisher rebuts the report of SSI’s damages expert, Richard Bero, and presents what she believes is a reasonable royalty. SSI asks the court to exclude Fisher’s testimony related to four categories of evidence: 1) Average royalty rates in the automative industry;

2) DZEM’s market share and profits based on discussions with DZEM personnel;

3) apportionment of profits based on DZEM patents; and

4) the court’s 2021 summary judgment opinion. The court will defer its analysis of the fourth category, addressing it in the context of SSI’s sixth motion in limine. a. Automotive industry royalty rates Fisher states in her report that she “did not identify any license agreement that would be sufficiently comparable to the hypothetical license in this matter or that covered comparable technology to that of the Patent-in-Suit.” Dkt. 248, ¶ 199. Despite not finding any specific comparable license agreement, Fisher cites the IPSCO RoyaltySource database for the average royalty rate in the automotive industry as a “reasonableness check” of her opinions about an appropriate royalty rate in this case. Id., ¶ 200. SSI contends that the court should preclude Fisher from testifying about the average royalty rate in the automotive industry because Fisher

does not explain why the average royalty rate for the automotive industry is an appropriate comparison for the technology in this case. A license for related technology is an appropriate basis for an expert opinion on a reasonable royalty if the license is “sufficiently comparable to the hypothetical license at issue in suit.” Virnetx, Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1330 (Fed. Cir. 2014) (quoting Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1325 (Fed. Cir. 2009)). But “alleging a loose or vague comparability between different technologies or licenses does not suffice.” LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 79 (Fed. Cir. 2012). “[T]here must be a basis in fact

to associate the royalty rates used in prior licenses to the particular hypothetical negotiation at issue in the case,” Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1317 (Fed. Cir. 2011), and the reasonable royalty calculation “must account for differences in the technologies and economic circumstances of the contracting parties,” Virnetx, 767 F.3d at 1330 (quoting Finjan, Inc. v. Secure Computing Corp., 626 F.3d 1197, 1211 (Fed.Cir.2010)). If an expert applies a reliable methodology to account for differences between licenses for related technology and the hypothetical negotiation, disputes about the degree of comparability go to the weight of the expert’s testimony, not its admissibility. ActiveVideo Networks, Inc. v. Verizon Commc’ns, Inc., 694

F.3d 1312, 1333 (Fed. Cir. 2012). Fisher does not provide any explanation of why the average royalty rate of the automotive industry as a whole is relevant to the specific technology at issue in this case. DZEM contends that the average royalty rate in the automotive industry is relevant because the sensor at issue here falls within the general category of the automotive industry. But that category includes such a wide range of technologies that it’s not an appropriate comparison, at least not without some explanation. Fisher implicitly recognizes the weakness of the comparison,

because she relegates the average automotive industry royalty rate to a “reasonableness check,” and does not use it as a core part of her analysis. But using it as a reasonableness check is not harmless, because it buttresses her reasonable royalty rate analysis. That buttressing is unreliable without some explanation, which Fisher does not supply. This part of SSI’s motion is granted. b. DZEM market share and profits Fisher states that DZEM believes specific competitors “make up approximately 34% of

the market, with SSI and DZEM making up the remainder” based on calculations she performed using DZEM’s sales data and “[d]iscussions with DZEM personnel.” Dkt. 248, ¶ 85. Fisher also used a cost transparency document DZEM provided one of its customers to estimate DZEM’s profit per unit of the infringing sensor. Id. ¶ 141. SSI asks the court to preclude Fisher from testifying about DZEM’s market share and profits because her analysis is inconsistent with the testimony from DZEM’s corporate representative on those topics. SSI deposed DZEM’s Rule 30(b)(6) witness, its CEO Robert Kirby, on damages topics on February 2, 2024. One of the noticed topics was DZEM’s

knowledge of the market for the accused products, including “DZEM’s market share for the Accused Products.” Dkt. 263-1 at 6. During that deposition, Kirby testified that he could not provide a breakdown of the market share for the sensors at issue in this case, but estimated that DZEM had roughly 50 or 60 percent of the market. Dkt. 241 (Kirby Dep. 149:19– 150:13). He also testified that DZEM does not keep records of profits per product in the ordinary course of business. Id. (Kirby Dep. 62:5–14). SSI contends that it was entitled to rely on Kirby’s Rule 30(b)(6) testimony that DZEM did not have the market share or profit per product information, and that DZEM is

sandbagging by using Fisher to “circumvent” that testimony. The court will not preclude Fisher from testifying about her analysis of the cost transparency document. The document was available to both sides. Fisher may be able to draw inferences from it using her expertise that Kirby himself could not. The court will preclude Fisher from offering opinions about market share, because that analysis is based largely on “[d]iscussions with DZEM personnel.” See Dkt. 248, ¶ 85 n.164; Dkt. 248-12 (Exhibit 8) n.3. A statement in a Rule 30(b)(6) deposition is not necessarily binding on the corporate entity, tantamount to a response to a request for admission. But once

Kirby testified that he (speaking for the company on a properly noticed topic) could provide no more than a rough estimate of DZEM market share, he closed off further inquiry on the topic by SSI. It would be extremely unfair to allow DZEM’s expert to use additional market share information provided by unnamed DZEM employees after DZEM (speaking through Kirby as its Rule 30(b)(6) designee) denied that it had any additional information. Fisher may not offer the opinions stated in Paragraph 85 of her report. c. DZEM patents

Fisher cites DZEM’s patents in the context of critiquing Bero’s opinion on how to apportion profits to the patented features of the infringing product. SSI contends that DZEM has not shown that the infringing sensor is actually covered by its own patents. So, SSI’s argument goes, it would be improper for Fisher to suggest that DZEM’s patents demonstrate that the appeal of the infringing sensor is attributable to DZEM’s own patented improvements. SSI asks the court to bar Fisher from testifying about DZEM’s own patents. Fisher is free to testify that the portion of profits attributable to SSI’s patented

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SSI Technologies, LLC v. Dongguan Zhengyang Electronic Mechanical LTD, (W.D. Wis. 2024).

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