The BERO Group Publications

In Apple, Inc. v Motorola, Inc., The Federal Circuit Reverses Exclusion of Both Parties' Damages Experts

By The BERO Group

In Apple, Inc. v. Motorola, Inc., 1 the Federal Circuit recently reversed a district court’s decision that excluded the majority of both parties’ damages expert evidence. 2Commentators have suggested that this decision may signal a reverse in the trend of increasing Daubert challenges.3

At issue were patent infringement claims and counterclaims relating to cell phones. Based on claim construction decisions, Judge Posner, sitting by designation in the Northern District of Illinois, had granted summary judgment of non-infringement with respect to certain claims and excluded most of both parties’ damages expert evidence for the remaining claims. Judge Posner then granted summary judgment that neither side was entitled to any damages or an injunction.

Regarding the excluded damage expert testimony, the Federal Circuit warned: 4

A judge must be cautious not to overstep its gatekeeping role and weigh facts, evaluate the correctness of conclusions, impose its own preferred methodology, or judge credibility, including the credibility of one expert over another. These tasks are solely reserved for the fact finder.

In the context of patent damages, the Federal Circuit repeated its long-standing recognition that estimating a reasonable royalty is “not an exact science.” Thus, the record may support a range of “reasonable” royalties and there may be more than one reliable method for estimating a reasonable royalty.

Specifically, the district court had excluded Apple’s damages evidence because Apple’s expert relied upon
information provided by a technical expert hired by Apple. The Federal Circuit concluded that this decision was erroneous, pointing out that experts routinely rely upon other experts hired by the party they represent for expertise outside of their field and that potential concern regarding bias is addressed by the weight given to the expert’s testimony, not its admissibility. The Federal Circuit also pointed out that, consistent with Rule 703, patent damages experts often rely on technical expertise outside of their field when evaluating design around options or valuing the importance of the specific, infringing features in a complex device.

The district court had excluded Motorola’s damages expert, in part, because Motorola’s expert had considered, but not quantified, the possibility that Apple could have contracted with Verizon rather than AT&T. The Federal Circuit reversed, 5explaining that there is no requirement that a patentee value every potential non-infringing alternative in order for its damages testimony to be admissible.

The district court had not excluded all of Apple’s damage expert’s testimony even though it discredited that testimony in granting summary judgment. The Federal Circuit held that a finding that a royalty estimate may suffer from factual flaws does not by itself support the legal conclusion that zero is a reasonable royalty, stating: 6

…a fact finder may award no damages only when the record supports
a zero royalty award.

Consequently, the Federal Circuit reversed the district court’s grant of summary judgment concluding that Apple presented admissible evidence that it is entitled to a non-zero royalty.

1Apple Inc., et. al., v. Motorola, Inc., No. 2012-1548, 1549, 2014 U.S. App. LEXIS.

2 The Federal Circuit also vacated the district court’s grant of summary judgment regarding Apple’s request for an injunction and affirmed the district court’s decision that Motorola was not entitled to an injunction for infringement of a FRAND committed patent.

3 See, e.g., Apple v. Motorola May Help Defenders of Daubert Challenges, IP Law 360, May 21, 2014.

4 Apple Inc., et. al., v. Motorola, Inc., No. 2012-1548, 1549, 2014 U.S. App. LEXIS.

5 The Federal Circuit affirmed a partial exclusion of Motorola’s damages expert to the extent her testimony relied on certain other excluded testimony.

6 Apple Inc., et. al., v. Motorola, Inc., No. 2012-1548, 1549, 2014 U.S. App. LEXIS.