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I am a professional who spends their day looking at securities, swaps, legislation and legal implications on the same. I look for value where it is otherwise not found. I look for the Blue Star Airlines before the Blue Horse Shoes of the World, exploit it.
  • IN RE VIRETX V. APPLE: HOW APPLE'S EXCUSES DON'T ADD UP TO A DEFENSE 29 comments
    Jul 23, 2014 9:31 AM | about stocks: VHC, APPL, RPXC

    APPLE CAME OFF INCREDIBLY DISENGEUOUS - APPLE NOT ONLY GOT CAUGHT INFRINGING, THE EXCUSUSES FOR WHY IT SHOULD NOT BE PUNISHED APPER DISIGENUOUS

    While Virnetx has many patents world wide, the patents at issue before the CAFC are as follows: U.S. Patent Nos. 6,502, 135 ("the '135 Patent"), 7,418,504 ("the '504 Patent), 7,490,151 ("the '151 Patent), and 7,921,211 ("the '211Patent)

    To view them yourself you can study them by going to USPTO.GOV, and inserting the full patent number for and read them yourselves - if you have an extra 400 hours.

    WHAT THE PATENTS SAY

    The '135 and '151 Patents generally describe a method of transparently creating a virtual private network ("VPN") between a client computer and a target computer, while the '504 and '211 Patents disclose a secure domain name service. VirnetX accuses Apple's VPN On Demand and FaceTime features of infringement.

    First, both products feature establishing secure communications, with Apple's FaceTime feature providing a secure communication link for users when video-chatting.

    Apple's VPN On Demand feature on the other hand is a product that seamlessly creates a VPN when a user requests access to a secure website or server.

    As for Facetime, Apple tried to play it off as an "app" of de minimus value.

    VirnetX presented evidence why such a royalty rate would be justified in light of the value of the technology, noting the accused features were key to Apple attracting potential enterprise customers that valued security in their communications and offered the ease of operation valued by Apple customers. The numbers, speak for themselves: the accused features have been used extensively by Apple customers, with over 2.6 billion FaceTime calls being made since June 2010 to November 2012. This was the population of the Planet Earth when I was born.

    Without the VPN on Demand Feature and the FaceTime feature providing a secure communication link for users when video-chatting. Think about it, the VPN is what makes Apple's products work and why they work seamlessly - they create the value of the Apple parts.

    WHY APPLE WANTED A SECOND BITE AT THE …APPLE: CAFC

    Apple first argues the Court erred by allowing VirnetX to present the testimony of Apple employees, since this evidence gave the "incorrect impression that Apple as a company disregards others' intellectual property."

    Contrary to Apple's assertion, this evidence was relevant to VirnetX's contention that Apple took steps to avoid confirming infringement. From this evidence, the jury may or may not have inferred that, "Apple as a company, actively avoids investigating the scope of prior art when it is developing a "new" application."

    Apple argues this evidence should have been excluded because it was prejudicial.

    THE FOUR PATENTS ARE INEXTRBALY INTERTWINED WITH APPLES VPN AND FACETIME

    The Damages:

    Why is there is debate about a $29 dollar upgrade and that is the value of the infringement vs Billions awarded to Virnetx over time!

    What APPLE SAID: at trial, Apple argued the royalties should be calculated using $29 as the base for all the accused devices! This price was the price of a software upgrade for the Mac computers. The problem was Apple never charged its customers for a similar upgrade for its iOS devices, including the iPhone.

    Worse, Apple never produced any other testimony or evidence regarding how one should properly calculate the damages for the iOS devices, instead it relied solely on the upgrade price for a dissimilar product.

    If Apple had advanced a different theory showing the iOS device was not the smallest saleable unit, there may have been a different result.

    Pre-judgment Interest

    Shockingly, Apple did not oppose awarding VirnetX pre-judgment interest. Apple did however it dispute which interest rate should be used.

    VirnetX asks the Court to award the Texas statutory interest rate of 5%, compounded quarterly,

    Apple has requested the Court award the periodic prime interest rate of 3.25%, compounded quarterly.

    VirnetX was awarded pre-judgment interest on the $368,160,000.00 damage award at the prime rate compounded quarterly, such that the pre-judgment interest is $8,755,381 through October 31,2012, with daily interest of $33,561.

    Post-Verdict Damages

    Apple contended VirnetX's post-verdict damages model overestimates the number of sales post-verdict, because VirnetX improperly assumed the sale of accused products would remain consistent throughout the year.

    Apple argues this is incorrect, because its release of new products in late 2012 would have decreased the demand for the accused products.

    Historically, when Apple released a new model, sales of the prior iteration would decline. Therefore, Apple contends VirnetX's request is too high. At the post-trial hearing, VirnetX emphasized it only had sales information up to June2012 and therefore could not determine the impact of new products on accused product sales.

    Again, wasting the courts time, The Court ordered Apple to produce its most current sales data up to December 31, 2012 and ordered VirnetX to file an amended request in light of Apple's new sales figures. VirnetX amended its request in light of the new data to $330,201 per day from November6, 2012 through the date of the final judgment.

    .Then, Apple instead proposed awarding post-verdict damages of $279,229 a day vs the $330, 201 per day.Apple was asking VirnetX to look into a crystal ball to divine if and how accused product sales will further decrease. VirnetX was only given sales information up to Apple estimated the decrease in accused product sales by averaging the decrease in sales of other older models after the release of new products. This again smacks of the absence of genuineness.

    Countless hours, and courts time has already been spent in front of Judge Davis who has never been reversed on a damages issue. Look for one word this week - AFFIRMED. I caught a whiff of Apple's …..conduct before the USPTO, using RPX as a proxy already, and this second bite crumbled with the truth but sealed by the lack of candor to the Court, VirnetTx and the USPTO. I've never seen it pay to mislead so many different parties….oh….and look what the jury said.

    Disclosure: The author is short VHC.

    Additional disclosure: Do your own homework and use common sense. Don't overspend, and don't believe everything you read, just because it sounds authoritative.

    Themes: SHORTS, PATENT PLAYS Stocks: VHC, APPL, RPXC
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Comments (29)
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  • Dale Korpi
    , contributor
    Comments (175) | Send Message
     
    CV,

     

    Well done. I now more fully understand the oral argument by the Apple attorney, i.e., it was vague and at times opaque as he argued for reversal based on how the jury may have interpreted the jury instruction on smallest salable unit.

     

    I discern that the Apple strategy was in large part influenced with the recent Apple/IBM enterprise alliance as part of the calculus.

     

    It seems plausible that the combined effect of FaceTime and VPN in the enterprise market could supplant services like "Go To Meeting" et al and it would be device neutral.

     

    Thoughts please.

     

    Dale Korpi
    23 Jul, 11:06 AM Reply Like
  • Cassandra Veritas
    , contributor
    Comments (50) | Send Message
     
    Author’s reply » THANK YOU SIR!!!

     

    VERY KIND.

     

    I think Rader being off the case is better for VHC, but I do think it was reassigned, thus the delay.

     

    As you may have figured out my profession...whichi mean nothing i will share this, I have spoken to a friend who is a former clerk at CAFC and said the Mototola cite alone was something we have never seen before. You don't cite to a case on appeal, after oral argument, esp from same panel. IVE NEVER SEEN THIS OCCUR! EVER.
    23 Jul, 11:32 AM Reply Like
  • Dale Korpi
    , contributor
    Comments (175) | Send Message
     
    CV;

     

    The cite to the Motorola case is significant and raises the question - Why would a court cite to a case in process?

     

    The Motorola court admonished the district court to allow the expert witness testimony and then let the adversarial process proceed. The end result of the process is that the factual consideration is for the jury alone. (See Opinion page 50.)

     

    The SA author Perdix opined in "Tinderbox" that while the principles may apply, the cite is perhaps limited to benchmark products. I don't think so.

     

    The reference to Virnetx was a "See also ..." and it can't be attached to just "benchmark" products like the Trackpad in the Motorola case. It was about methodology, not that a factor in the methodology had a certain attribute.

     

    Thanks for your help and insight. Any thoughts on Virango?

     

    Dale Korpi
    23 Jul, 01:12 PM Reply Like
  • Cassandra Veritas
    , contributor
    Comments (50) | Send Message
     
    Author’s reply » DID YOU KNOW THIS CITE IS IN BRIEFS ALL OVER THE COUNTRY?

     

    ITS IN AM JUR!

     

    IT's been treated like its the law....
    23 Jul, 09:40 PM Reply Like
  • Dale Korpi
    , contributor
    Comments (175) | Send Message
     
    CV;

     

    Great to hear. I hope it translates into an increase in Virnetx.

     

    Any insight on timing decision by CAFC?

     

    Dale Korpi
    23 Jul, 11:21 PM Reply Like
  • Cassandra Veritas
    , contributor
    Comments (50) | Send Message
     
    Author’s reply » Rader dominated the oral argument, Chen has the least work load, but both are handling all the original cases assigned to Rader. My outer bands were 2nd week in Feb, but this was pre-Rader was stepping down.

     

    The clerks change in August but this has a ripple effect the begins in mind July bc of the Bar. New clerks are taking week or two off before the bar for full transition which is really August.

     

    One would think they would have the clerk's work by now and merely be fine tuning this....put it this way, you know someone with the Calls that expire very soon, but plenty in September too.

     

    Because this will be a precendential decision...then again, there may be a reason not to make it published either.

     

    Apple blew themselves up before the PTO, the jury, and Judge Davis.

     

    Re listen to the oral argument, Rader sounded almost hostile. But when you listen, compare it to the order. Literally, he took it word for word beginning with Damages, with what Apple argued, Apple did, Apple this and that, but when you look closely its like he is reading from the post trial order - verbatim.

     

    It's like he's trying to sound overly articulate, but its almost verbatim. I assume this was assigned to him.

     

    Chen and Prost are clearly in agreement otherwise another judge would be appointed by now. So, look at it this way....

     

    If you believed one of the judges - sided with VHC
    And assume it was NOT Rader.
    The one judge has clearly won over the other.
    Using this logic, a bit odd, we only had to sell one judge.

     

    If I was Apple, I would fear a remand, and the damages will be elevated to 1.5 RR, for the recent fraud on the PTO. Davis held back powder. He know they would appeal.

     

    The record is clean but CAFC has been an embarrassment.

     

    24 Jul, 02:03 AM Reply Like
  • Dale Korpi
    , contributor
    Comments (175) | Send Message
     
    CV;

     

    Here is the link to the oral argument transcript in case you don't have it.

     

    http://bit.ly/1z88iqd

     

    It is the case that Judge Rader is driven to make certain points with the Apple attorney and gives the attorney deference but in the exchanges with the Virnetx attorney he is quite aggressive and seems to be stepping in as the trier of fact role rather than appellate review.

     

    Judge Chen then steps in with the "confusing theories" comment that seems to be a quite significant departure from the norm in court decorum practice.

     

    After that point, Judge Rader only participates to make snarky interjections on Nash Bargaining and then to give the last five minutes to the Apple attorney. He did not give an additional five to the Virnetx attorney even though it was offered at the outset.

     

    It just seemed something was off in the court and Judge Chen's interjection highlighted it. After that point, Judge Rader toned it down a bit but was still a bit snarky.

     

    How this translates into a decision is another matter. We will see ..,
    24 Jul, 11:40 AM Reply Like
  • Cassandra Veritas
    , contributor
    Comments (50) | Send Message
     
    Author’s reply » Oh, I have read and listened to it so many times.....

     

    I can tell you that you have no idea ...how many time you can walk out of court believing you lost...or won based on the questions.

     

    I Agree about the tone. RADER DOMINATED IT. RADER IS GONE.

     

    CHEN and PROST are "deferential."

     

    The jury cut the request, factored in Apples claims, but the jury was not told they couldn't do a work around.....to this day. 2.5 Billion uses in less than 2 years and growing.
    24 Jul, 09:04 PM Reply Like
  • Dale Korpi
    , contributor
    Comments (175) | Send Message
     
    CV,

     

    The dynamic change by Judge Rader not being part of the composition seems to allow the decision to be based on a deferential basis, i.e., allow in "reliable" expert testimony under the evidence rules, let the civil procedure process contest it, and leave the evaluation to the trier of fact.

     

    In colloquial terms, don't let the perfect get in the way of the good. (In the case of expert testimony, it is by nature an estimate.)

     

    The Motorola decision, which remanded to allow the Apple experts testimony, did just that and the expert's methodology discussed in the opinion, is quite similar to the methodology Virnetx employed with the Mac, Iphone and Ipad. Some have focused on a particular, a "benchmark" product that was part of the methodology, however, it is about the a reliable methodology applied to the universe of products.

     

    A bit ironic to some in the SA community, however, the world is asymmetric.

     

    Thanks

     

    Dale Korpi
    25 Jul, 07:48 AM Reply Like
  • Cassandra Veritas
    , contributor
    Comments (50) | Send Message
     
    Author’s reply » Another decision, referencing VHC V APPLE

     

    United States District Court, N.D. California.
    MediaTek Inc., Plaintiff,
    v.
    Freescale Semiconductor, Inc., Defendant.

     

    Case No.: 11–cv–5341 YGR
    Signed 06/20/2014

     

    Adele R. Frankel, Wilmer Cutler Pickering Hale and Dorr LLP, New York, NY, Christopher Austin Franklin, Craig Evan Davis, Jennifer Esther Chen, Joseph Francis Haag, Keith Leonard Slenkovich, Michael Patrick Wickey, Nathan Loy Walker, Wilmer Cutler Pickering Hale and Dorr LLP, Palo Alto, CA, James M. Dowd, Wilmer Cutler Pickering Hale & Dorr, Los Angeles, CA, Robert E. Camors, Jr., Law Offices of Bob Camors, San Jose, CA, William F. Lee, Wilmer Pickering Hale & Dorr LLP, Boston, MA, for Plaintiff.

     

    Alexander J. Hadjis, Cadwalader Wickersham & Taft LLP, Michelle Ching Youn Yang, Jacob Paul Ewerdt, Joshua Hartman, Morrison and Foerster LLP, Washington, DC, Jayson L. Cohen, Morrison and Foerster LLP, New York, NY, Alan Cope Johnston, Rudolph Kim, Morrison & Foerster LLP, Palo Alto, CA, Hector G. Gallegos, Morrison & Foerster, Los Angeles, CA, for Defendant.

     

    ORDER DENYING FREESCALE'S MOTION TO EXCLUDE CERTAIN TESTIMONY OF CATHARINE M. LAWTON

     

    YVONNE GONZALEZ ROGERS, UNITED STATES DISTRICT COURT JUDGE
    *1 Defendant Freescale Semiconductor, Inc. (“Freescale”) has filed its Motion to Exclude Certain Testimony Of Catharine M. Lawton, Plaintiff MediaTek, Inc.'s (“MediaTek”) damages expert. (Dkt. 302–5, and see Corrected Motion at Dkt. 358–6.) The Court, in its Pre–Trial Order No. 3 Re: Expert Testimony At Trial, previously denied that portion of the motion concerning certain background factual assumptions in Lawton's report. ( See Dkt. No. 476.) The Court now turns to the remainder of Freescale's motion concerning Lawton's damages opinions with respect to: (1) her apportionment analysis; (2) her royalty rate estimate for certain patents-in-suit; and (3) her opinion on the U.S. share of Kindle e-reader sales.

     

    The Court, having carefully considered the briefing and arguments of the parties, including their supplemental briefing,FN1 DENIES the motion. Freescale's arguments do not establish grounds for excluding Lawton's testimony as to her royalty base, royalty rate, or estimated U.S. sales of Amazon Kindle's incorporating Freescale's accused chips. Instead, the arguments raised are attacks on Lawton's credibility and the weight her opinion should be afforded.

     

    FN1. MediaTek filed a supplemental memorandum on April 3, 2014 (Dkt. No. 516). Freescale filed a Motion for Leave to File a Response to that memorandum (Dkt. No. 520), which the Court GRANTS by separate order. In opposition to that Motion for Leave, MediaTek submitted an additional memorandum on April 21, 2014. (Dkt. No. 527.) The Court has considered all these arguments in reaching its decision herein.

     

    I. APPLICABLE STANDARD
    “In federal courts, the admission of expert testimony is governed by Federal Rule of Evidence 702, as elucidated by the Supreme Court in Daubert.” Barabin v. AstenJohnson, Inc., 700 F.3d 428, 432 (9th Cir.2012). Federal Rule of Evidence 702 allows expert testimony only if the expert's “scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue.” Fed.R.Evid. 702. Rule 702 permits experts to testify if their testimony is: (1) based upon sufficient facts or data, (2) the product of reliable principles and methods, and (3) the result of applying those principles and methods reliably to the facts of the case. Id. In determining whether an expert's testimony meets the standards of Rule 702, the court acts as a “gatekeeper” that “ensur[es] that [the] expert's testimony both rests on a reliable foundation and is relevant to the task at hand.” Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 597 (1993); see also Kumho Tire Co. v. Carmichael, 526 U.S. 137, 148–49 (1999). In addition, the court may exclude expert testimony that is “otherwise admissible may be excluded under Rule 403 if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury.” U.S. v. Rincon, 28 F.3d 921, 923 (9th Cir.1994) (citing Daubert, 509 U.S. at 595).

     

    *2 The Ninth Circuit has reiterated that the “test of reliability is ‘flexible’.... When an expert meets the threshold established by Rule 702 as explained in Daubert, the expert may testify and the jury decides how much weight to give that testimony.” Primiano v. Cook, 598 F.3d 558, 564–65 (9th Cir.2010). “Shaky but admissible evidence is to be attacked by cross examination, contrary evidence, and attention to the burden of proof, not exclusion.” Id.

     

    II. DISCUSSION
    Lawton's expert testimony concerns damages in this patent infringement action. A plaintiff prevailing on a patent infringement claim is entitled to “damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court.” 35 U.S.C. § 284 (2006). A reasonable royalty is calculated by identifying a royalty “base” ( i.e., the amount of infringing sales against which damages are assessed) and applying a royalty “rate” to that base ( i.e., a percentage to which a willing licensor and willing licensee would have agreed in a hypothetical negotiation before infringement began, reflecting the proportional value of the patented technology to the base). See, e.g., VirnetX Inc. v. Apple Inc., 925 F.Supp.2d 816, 835 (E.D.Tex.2013). The royalty base generally is determined based upon the “smallest salable patent-practicing unit.” Laser Dynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 67 (Fed.Cir.2012) (quoting Cornell Univ. v. HewlettPackard Co., 609 F.Supp.2d 279, 283, 287–88 (N.D.N.Y.2009)).

     

    A reasonable royalty assumes a hypothetical negotiation between the patentee and the infringer at a time before the infringement. Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d 1075, 1078 (Fed.Cir.1983). This hypothetical negotiation assumes that both the patentee and the accused infringer are willing parties to the negotiation, and that the patent was valid, enforceable, and infringed. Georgia–Pacific Corp. v. U.S. Plywood Corp., 318 F.Supp. 1116, 1120 (S.D.N.Y.1970). The Georgia–Pacific case sets forth the commonly-accepted factors relevant to a reasonable royalty analysis. Id.

     

    A. APPORTIONMENT ANALYSIS
    Freescale contends that Lawton's damages opinion should be excluded because she assessed damages based on the entire market of Freescale's accused chips, rather than apportioning damages to the portion of the chips accused of practicing the asserted patents, that is the alleged patentpracticing components on the accused chips. MediaTek counters that both parties' damages experts used the price of the accused chips as the applicable royalty base, and that the use of the entire chip is supported by Lawton's opinions.

     

    The Federal Circuit has held that “it is generally required that royalties be based ... on the ‘smallest salable patent-practicing unit.’ ” LaserDynamics, Inc. v. Quantas Computer, 694 F.3d 51, 67 (Fed.Cir.2012) (quoting Cornell, 609 F.Supp.2d at 283, 287–88). “Where small elements of multi-component products are accused of infringement, calculating a royalty on the entire product carries a considerable risk that the patentee will be improperly compensated for non-infringing components of that product. Thus, it is generally required that royalties be based not on the entire product, but instead on the “smallest salable patent-practicing unit.” Laser Dynamics, 694 F.3d at 67 (rejecting argument that revenue from sale of entire laptop computer was royalty base).

     

    *3 The exception to the general smallest salable unit rule is the “entire market value rule.” Versata Software, Inc. v. SAP Am., Inc., 717 F.3d 1255, 1268 (Fed.Cir.2013); see also Positive Technologies, Inc. v. Sony Electronics, Inc., 11–CV–2226 SI, 2013 WL 707914, at *3 (N.D.Cal. Feb. 26, 2013) (“A royalty base should be calculated based on the ‘smallest salable patent-practicing unit’... [t]here is an exception to this rule known as the entire market value rule.”). If the patentee seeks to use something larger than the smallest salable unit as the royalty base for a multi-component product, the patentee must demonstrate that “the patented feature drives the demand for an entire multi-component product....” Laser Dynamics, 694 F.3d at 67. Put another way, the entire market value rule requires a patentee to “prove that the patent-related feature is the basis for customer demand.” Lucent Technologies, Inc. v. Gateway, Inc., 580 F.3d 1301, 1336 (Fed.Cir.2009) (internal quotations omitted); see also Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1318 (Fed.Cir.2011) (patented feature “substantially create[s] the value of the component parts”). As the Federal Circuit has held, where the proposed royalty base considers the market for an entire, multicomponent product, “[i]t is not enough to merely show that the [patented technology at issue] is viewed as valuable, important, or even essential to” the alleged infringing product. LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 68 (Fed.Cir.2012).

     

    Cases following from Laser Dynamics have emphasized the requirement that the royalty base be the “smallest salable patent-practicing unit” to the effect that the smallest salable unit must be “closely tied to the patent” or else an apportionment of the value of the patent-practicing technology to the alleged infringing product is still required, even if the patentee is not invoking the entire market value rule expressly. See Dynetix Design Solutions, Inc. v. Synopsys, Inc., C 11–05973 PSG, 2013 WL 4538210 at *3 (N.D.Cal. Aug. 22, 2013) (“This court sees no logical basis to depart from an apportionment requirement in a case, such as the present one, where the alleged smallest salable unit plainly is not closely tied to the patented feature”); Network Prot. Sciences, LLC v. Fortinet, Inc., C 12–01106 WHA, 2013 WL 5402089 at *7 (N.D.Cal. Sept. 26, 2013) (“When using a multicomponent product as a royalty base, even if it is the smallest salable unit, a patentee must still show that the patented feature drives demand for the entire product.”) (emphasis in original)); Golden Bridge Tech. v. Apple Inc., 5:12–CV–04882–PSG, 2014 WL 2194501 (N.D.Cal. May 18, 2014) (“Even if the accused products were the smallest salable unit, this court has previously explained that, under the Circuit's case law, relying on the smallest salable unit does not relieve a patentee of the burden of apportioning the base”). Moreover, “[w]hen a patent is for an improvement, and not for an entirely new machine or contrivance, the patentee must show in what particulars his improvement has added to the usefulness of the machine or contrivance.” Lucent Techs. v. Gateway, Inc., 580 F.3d 1301, 1337 (Fed.Cir.2009) ( quoting Garretson v. Clark, 111 U.S. 120, 121 (1884)). FN2

     

    FN2. The authorities cited in opposition by MediaTek are not to the contrary. Positive Technologies was a discovery case, not a ruling on admissibility of the evidence: Positive Technologies, Inc. v. Sony Electronics, Inc., 11–CV–2226 SI KAW, 2013 WL 707914 at *3. (N.D.Cal. Feb. 26, 2013) (“ LaserDynamics limits admissibility, not discoverability.”). Interwoven simply stated that there was a dispute of facts as to “the extent the patented technology allegedly drove consumer demand for Interwoven's products” allowing a reasonable royalty to be based on the entire accused product. Interwoven, Inc. v. Vertical Computer Sys., CV 10–04645 RS, 2013 WL 3786633 (N.D.Cal. July 18, 2013).

     

    MediaTek argues that there is no way, conceptually or practically, to separate the patentpracticing features of the accused chips from the remainder of the chip. Citing its other experts' reports on the technology at issue, MediaTek contends that it is not possible to remove the accused features from the chip and sell them on their own, since the patents-in-suit read on the master and slave components of the chips and concern interconnections between them. Thus, in her report, Lawton opined that “the embedded processor chips that are sold by Freescale as a single assembly or unit” constitute the smallest salable patent-practicing unit. (Yang Dec. Exh. 1, Lawton Report, at ¶ 425.) Consequently, Lawton used the market value of Freescale's accused chips as the appropriate royalty base, and did not conduct an apportionment analysis. ( Id. at ¶ 427.) Lawton acknowledged that “the amount of profit that can be properly attributed to the patented invention ... will depend on the balance between infringing and non-infringing features in the context of consumer demand.” (Dkt. No. 323–11 at 169 (Lawton Expert Report, add'l excerpts).) She found, however, that “currently available information is insufficient to estimate the amount of profit that can be properly attributed to the patented inventions.” ( Id.)

     

    *4 Freescale's attack on Lawton's report is two-fold. First, Freescale contends that Lawton's analysis is flawed because she did not attempt to apportion damages to the components of Freescale's accused integrated circuit chips that allegedly practice the patents-in-suit, rather than the entire chip. The patents-in-suit allegedly read only on a portion of the accused products, which contain numerous other components. Freescale contends that Lawton's opinion should be excluded because she failed to account for the information known about the value of other chip components, such as the ARM core technology, and failed to consider Freescale's current use of alternatives to using the patent-practicing technology. Lawton also had sales and development documentation for different generations of Freescale product lines, some with the alleged patented technology and some without, but she did not compare the allegedly infringing to the undisputed non-infringing products.

     

    Here, MediaTek has offered its expert's opinion, based upon the information from the technical experts concerning the technology and accused products at issue, that the “smallest salable patent-practicing unit” is the chip itself, i.e., because of the nature of the patented technology, there is no smaller unit that is “salable.” While Freescale argues that this is not the proper smallest salable patent-practicing unit, it offers no evidence to support an alternative.

     

    The Court finds that there is a disputed issue requiring further evidence to determine whether, in light of the nature of the patented technologies at issue and their use on the alleged infringing chips, it would be possible to apportion the value of the patent-practicing technology compared to that of the apparent smallest salable unit here, the chip. Though Freescale disagrees with Lawton's conclusions, and has raised some questions their factual underpinnings, those issues bear on the weight to be accorded the testimony than its reliability or probative value. Given the state of the record, the Court declines to exclude the testimony. Cf. Apple Inc. v. Motorola, Inc., 2012–1548, 2014 WL 1646435 (Fed.Cir. Apr. 25, 2014) (reversing decision to exclude expert testimony where challenge to basis for royalty rate went to evidentiary weight, not admissibility, which could be dealt with on cross-examination).

     

    B. ROYALTY RATE
    Freescale next argues that Lawton's royalty rate analysis for the ′331 and ′845 patents (collectively the “ADI Patents”) should be excluded as unreliable and not based on sufficient facts or data. Freescale argues that Lawton used a 1% royalty starting point for the ADI Patents as well as the ′>753 Patent, and came out nearly the same on her Georgia–Pacific analysis for the two patents, yet concluded that the ′753 Patent warranted a 1% royalty rate while the ADI Patents warranted a 10% royalty rate. Freescale contends that Lawton's bases for the higher rates—MediaTek's strategy to compete with Freescale in the eReader market and “significant cost and disruption to its business” if Freescale could not obtain a license—are unsupported by evidence.

     

    Freescale's arguments, again, go to the weight to be accorded to Lawton's opinions rather than their admissibility. For instance, on the competition question, Freescale concedes that two of MediaTek's annual reports discuss its interest in offering WLAN and other peripherals chips for eReader applications in the future, and that it sells chips in the e-Reader market, it contends that the evidence is insufficient to a strategy to compete.FN3 On the significant cost and disruption issue, despite the report's recitation of a number of factors affecting the value and importance of the technologies at issue, Freescale argues that Lawton's report does not sufficiently quantify the costs or benefits. Lawton, in fact, cited evidence of sales and revenue of accused products, and sales forecasts, Further, Lawton's report cited to a variety of facts showing that the circumstances of and between the parties had changed significantly in the four years between the hypothetical negotiation on the ′753 Patent and on the ADI Patents, not the least of which were rapid changes in the semiconductor market and repeated litigation by Freescale against MediaTek. In short, Lawton's report indicates that she relied on a number of Georgia–Pacific factors, including the two on which Freescale focuses here, in reaching her opinion on the reasonable royalty rate for the ADI patents. Based upon the information presently before the Court, Freescale's criticisms are appropriate for cross-examination and not a basis for exclusion of Lawton's testimony. See Primiano, 598 F.3d at 564–65; Apple Inc. v. Motorola, Inc., 2014 WL 1646435 at *22–23.FN4

     

    FN3. Freescale's continued focus on the dearth of evidence of actual competition, including the fact that the MediaTek's MT8135 chip had not been released and was excluded from being listed as a product of MediaTek's that practices the patents-in-suit, is unavailing. Lawton's opinion concerns the effect of a strategy to compete and its effect on the hypothetical negotiation.

     

    FN4. Freescale further argued that Lawton's opinion was unreliable because it did not take into account non-infringing alternatives in estimating cost and disruption to Freescale's business if it were unable to obtain licenses for the technology from MediaTek. To the extent that this omission was significant, the Court notes that it has, by separate order, granted MediaTek's motion to supplement portions of its expert reports, including Lawton's report with respect to non-infringing alternatives theories not disclosed by Freescale prior to her original reports.

     

    C. U.S. SHARE OF KINDLE E–READER SALES
    *5 Finally, Freescale argues that Lawton's damages calculation estimating U.S. sales of Amazon Kindles should be excluded as unreliable. Lawton's report estimated the sales because she did not have actual data for sale of Kindles by Amazon, but only had estimates from a third party analyst for North American sales. Freescale contends that Lawton's estimate of the U.S. proportion of North American sales improperly relied on the ratio of U.S. to Canadian mobile handset sales as a proxy, without any discussion of why it would be appropriate to do so and without considering sales in Mexico. (Yang Decl. Ex. 1, Lawton Report at 82–83, Table 16). As such, Freescale argues that her opinion is too speculative to be reliable, citing Power Integrations v. Fairchild Semiconductor Int'l, 711 F.3d 1348, 1373–1374 (Fed.Cir.2013).

     

    MediaTek responds that, in the absence of data from Amazon, Lawton estimated damages based on publicly available industry data showing the U.S. share of North American computers imported into the U.S. Lawton used that information to estimate U.S. Kindle sales as a proportion of total North American sales. Thus, MediaTek argues, Lawton's estimates are not based on speculation, but are simply reasonable approximations no different than any proper damage calculation.

     

    The Court agrees with MediaTek. Freescale does not dispute the reliability of the data source itself here, only Lawton's conclusions and opinions. Unlike Power Integrations, where the source of the expert's data was unclear and his estimates were based upon improper assumptions about the accused products themselves, here it is an undisputed fact that the source of the ratio estimate is based upon disclosed, publicly available data and that Amazon Kindles incorporate Freescale's accused chips. Id. at 1373. Freescale's quarrels with this evidence are not a basis for its exclusion, but are disagreements and credibility challenges that can be clarified on cross-examination.

     

    III. CONCLUSION
    The motion to exclude Lawton's damages testimony as to the royalty base, the royalty rate for the ADI Patents, and the estimate of U.S. sales of Amazon Kindle devices containing accused chips is DENIED.

     

    This Order terminates Docket Nos. 302 and 358.

     

    IT IS SO ORDERED.
    31 Jul, 04:49 PM Reply Like
  • Dale Korpi
    , contributor
    Comments (175) | Send Message
     
    CV,

     

    Thank goodness for that guy Shepard. The arguments, both plaintiff and defendant, here are eerily similar to Virnetx v Apple.

     

    Eerie for Apple. I surmise Apple's trial strategy was not to present counter evidence and if they would get a remand on damages, it will be a gift at this juncture.

     

    It seems Judge Prost's dissent is pivotal now, i.e., will she decide a remand is in order?

     

    Well done,

     

    Dale Korpi
    1 Aug, 11:16 AM Reply Like
  • Cassandra Veritas
    , contributor
    Comments (50) | Send Message
     
    Author’s reply » A remand when there were 3 alternate damage theories, the jury discounted what Virnetx sought. Given the post trial conduct RPX, the only remand that would not be a disaster is whether a 1.5 is more appropriate. There was no real alternative that Apple left on the table.
    1 Aug, 06:15 PM Reply Like
  • Dale Korpi
    , contributor
    Comments (175) | Send Message
     
    CV,

     

    Indeed Apple just played defense on damages in general; Virnetx offered a combination of relevant and reliable damage theories.

     

    Judge Davis allowed the jury to be the trier of fact, seems to simple but it does tilt to Virnetx.

     

    Oh, and interesting site:

     

    http://bit.ly/1lkGiax

     

    It shows the effect of the shorts on price in relation to long and short volume. It is not beanball ...

     

    Thank you.
    1 Aug, 07:25 PM Reply Like
  • Cassandra Veritas
    , contributor
    Comments (50) | Send Message
     
    Author’s reply » DALE: I REALLY LIKED THIS SITE you pointed out. Very novel. And have already began to use it in some of my work.
    7 Sep, 06:24 PM Reply Like
  • Dale Korpi
    , contributor
    Comments (175) | Send Message
     
    CV,

     

    There is also a companion one, short squeeze, that provides more detail, it is:

     

    http://bit.ly/16VS75b

     

    The other one is shortanalytics which you already have the link for.

     

    The short squeeze shows current reported short interest, float, holdings by institutional and insiders and the days to cover. VHC is short interest as a percent of float at 42.19 % and some 51 days to cover, the put to call ratio is 4.5 for 1 day.

     

    What a game of chicken!

     

    Nice post on HLF!

     

    Best regards,

     

    Dale Korpi
    9 Sep, 08:17 PM Reply Like
  • Dale Korpi
    , contributor
    Comments (175) | Send Message
     
    CV,

     

    Great, I am curious as to who publishes. I discern with a subscription it allows you to drill down deeper, however, it requires a lot of effort to get a direction on what the activity portends for the future.
    I am workin' it.

     

    Best regards,

     

    Dale Korpi
    9 Sep, 10:18 AM Reply Like
  • Cassandra Veritas
    , contributor
    Comments (50) | Send Message
     
    Author’s reply » I think this is a good summary of this issue: It comes from a poster from IV: Identity unknown but well deserving of the credit.

     

    Justice GrindsI won't be a regular poster, and I'm not going to be your PM pal. In reality, this need only be communicated once. For those of you with tender and vacillating emotions, bookmark the post and reference it whenever you need it. For others who demand a sustained tone of voice and board presence to establish credibility, add me to your "ignored posters" list and be done with me.
    What tires me is the repeated questions that keep coming my way about this litigation. I am voluntarily sharing all that I know, and it is all that anyone knows who is not immediately involved in the affairs. I absolutely will not go into my experiences and credentials because they will be challenged regardless.
    It does not take long to discover the most active social forum with respect to this entity. The people who approach me reference this forum and this forum is by far the most cited on any search regarding VirnetX. Before you begin speculating that non-public details are about to be shared, exhale, they will not be.
    Your precedential opinion may come tomorrow. It may come 6 weeks from now. Make no mistake, your opinion is written (mostly) and decided long ago. Today, there is a relationship between the assigned authoring judge (unknown) who regulates the throttle and his/her case-specific clerk; there are countless scenarios that govern the process. The point is, VirnetX v. Apple has been decided at the Appellate level already.
    That's not shocking news to those of this forum with a legal background or others who are well informed. This appeal has an interesting dynamic which has some perplexed. I'm referring to a citation to the Eastern District of Texas Memorandum Opinion and Order that isolated Judge Davis' opinion on certain damages as a supplemental citation to i4i v. Microsoft. This element is shocking and it's highly unusual.
    The citation to VirnetX v. Apple was not only by endorsement, but it was by specific instruction. It must have been by instruction from either Rader and Prost, who paneled on Apple v. Motorola. However, it certainly was sanctioned by Chen as a non-paneled judge on Apple v. Motorola but serving on-panel for VirnetX v. Apple. I can assure you that there is not one clerk who would have cited to a district court in a precedential opinion unless instructed by the authoring judge and in concurrence with the VirnetX v. Apple judges panel in whole.
    This bodes extremely well for the VirnetX v. Apple opinion that's yet to be published. The sequence of events is just as important as the events themselves. Oral arguments early March means the decision was early March. The citation was late April meaning the VirnetX v. Apple case had already been taken under advisement and decided.
    If there were going to be any remand, the citation would have never made it through circulation prior to being published. As skeptical as people are, those things are vetted, particularly if the case is currently under appeal. It's really that simple.
    9 Sep, 08:38 PM Reply Like
  • Dale Korpi
    , contributor
    Comments (175) | Send Message
     
    CV,

     

    Wow. Thanks.

     

    On Tonix Pharma, TNXP, it appears worth a shot. Joe Springer on Seeking Alpha somehow has a great track record, so the source is good.

     

    Most critical aspect seems restorative sleep is the positive for Fibromyalgia, upcoming is PTSD trial (from Joe's comments) and tension headache relief is another indicator. Little or no institutions in yet (see the shortanalytics site)

     

    Again, worth a look.

     

    Best regards,

     

    Dale Korpi
    10 Sep, 09:27 AM Reply Like
  • Cassandra Veritas
    , contributor
    Comments (50) | Send Message
     
    Author’s reply » TNXP could hit big relative to value. I haven't delved into the details but that's a great risk reward ratio at the outset.

     

    One other possibility. Rader’s clerks who were expected to start may or may not have been absorbed and his old clerks left. (His new clerks may have not stayed ). Rader’s case load was massive. With Rader gone and his old clerks gone plus the possible absence of the ones who were to start after the bar and get up to speed my mid August, there may be not only be administrative issues in getting this out, but they possibly could have increased several-fold here if in fact I am right on this final point.

     

    I did analyze the time here and this is an alternative, albeit consistent, explanation for the time on VIRNETX (VHC).

     

    If the vote is unanimous but one judge writes a concurring opinion on top of the other, this could explain this time. This means they both agree, for notoriety or because they reach the same conclusion through non-identical means, Prost writes opinion and Chen writes concurring opinion. Since Rader was originally part of the debate and dominated the oral argument, something he said in chambers may have resonated with one and not the other.

     

    Another thought is, this is both Prost and Chen’s moment to shine. They know this opinion will be debated and read and find it’s way in to a law review topic, so they may want to discuss not just that any theory of damages they are affirming, but “why” under “each damage theory the are affirming" which is another example of why one judge vs the other may take the time to write a concurrence. (Note: in this case it would NOT be necessary to address each.) But this possibility alone could explain how “the opinion was written in or prior to May” but also why one judge may wish to go out of his way to express the view of this “Rader-less Court," or for pure vanity, adding a "concurring opinion.” (adding time -both judge and clerks who switched over - some left in July/August pushing many cases on to others and their clerks). This is added to the end of the opinion of Prost and more administrative once done.
    10 Sep, 07:28 PM Reply Like
  • Dale Korpi
    , contributor
    Comments (175) | Send Message
     
    CV,

     

    Interesting. Your mention of Rader's role during oral brings me back to Judge Chen's interjection at a point when Rader was on a rant about damage theory - Chen declares " I think we are confusing a couple of theories ... "

     

    Judge Chen later queries the Virnetx attorney on how the theories are so similar - perhaps in an effort to clarify a distinction.

     

    I remember Judge Prost expressing that the Nash Bargaining Solution "infected" the damage theory - but she immediately walked it back as too harsh of a characterization. I wonder where she is now ...

     

    My observation on the time expanse is perhaps the complexity of the IP of both Apple and Virnetx causes each Chen and Prost pause to set not only damages in this context and to not create unintended consequences in the IP present and future.

     

    Michael Lewis depicted complexity in this way - A key is simple, a car is complicated, but driving a car in traffic is complex.

     

    Thanks,

     

    Dale Korpi
    11 Sep, 10:05 AM Reply Like
  • Cassandra Veritas
    , contributor
    Comments (50) | Send Message
     
    Author’s reply » The Lewis analogy was great. On the issue of the jury trial, that was complex, any patent trial is. That's why the deference by the CAFC to jurys. You cannot unscramble an egg. And given how strange this case is simply because Apple put up the oddest defense imaginable, which it clearly regrets, there is no RULE this must be a Published/Reported opinion. In fact, for the reasons you just stated, this might be the best reason, to issue this stamped as non reported. This way, there are no unintended consequences in the future of IP. That's even better for VirentX. An un published opinion would also prevent an enbanc attempt. Thus, ensuring revenue recognition this fiscal year. This way everyone, the CAFC, VHC, and VHC shareholders achieve their goals...well everyone but Apple.
    11 Sep, 02:40 PM Reply Like
  • sonicthoughts
    , contributor
    Comments (220) | Send Message
     
    @Cassandra Veritas anyth thoughts on $VHC CACF timing?
    15 Sep, 12:18 PM Reply Like
  • Cassandra Veritas
    , contributor
    Comments (50) | Send Message
     
    Author’s reply » If we follow the sequence of events, which is more important or just as important than the issue itself.

     

    Oral Argument in March. Then AFTER oral argument, the citation to VirnetX v. Apple. This was not by accident, but it was by specific instruction and had to have come from instruction from either Rader and Prost, who paneled on Apple v. Motorola. However, it certainly was sanctioned by Chen as a non-paneled judge on Apple v. Motorola but serving on-panel for VirnetX v. Apple.

     

    My best guess is September following the turnover of the CAFC clerks since the citation was late April/May meaning the VirnetX v. Apple case had already been taken under advisement and decided. The wild card in timing is several fold. Rader stepping down forcing his cases on to the others and clerks in June. Then July- August, the turn over of the clerks put us into mid August. The volume of cases published during that time was reflective of the turnover and the Rader cases and the rate of those opinions sans Rader's opinion, suggests this is imminent. We are now in September. My best guess is any day....in September/early October.

     

    No crystal ball, but that's my personal best guess. I know nothing more than you do. (Do not take this as legal/investment or tax advice), but as my genuine opinion to a fellow SA member in the same situation likely as myself.
    15 Sep, 09:16 PM Reply Like
  • Dale Korpi
    , contributor
    Comments (175) | Send Message
     
    CV and sonic;

     

    Somewhat related on shortsqueeze.com and shortanalytics.com as to VHC -
    shortsqueeze reports a 41 % short interest at this point in time with an astronomical 53 days to cover; the share float is 42,500,000 with insiders at 16 % and institutions at 33 % and then most of SA. That does not give the daily trend, the 41 % is the cumulative.
    However the shortanalytics site indicates a shift in the proportion of long to short since September 10th. The problematic is as scant evidence as it is does this portend a change in sentiments on the short.
    I have not looked at implied v historical volatility in the option pricing but I will.
    Comments?

     

    Dale Korpi
    16 Sep, 09:35 AM Reply Like
  • Dale Korpi
    , contributor
    Comments (175) | Send Message
     
    CV and Sonic;

     

    I just perused the opinion, Prost's "infected" comment on Nash Bargaining was prescient.

     

    At page 30 I have a hard time that "the jury's verdict was tainted by the erroneous jury instruction" that Prost and Chen were able to see with clarity.

     

    It seems Prost concludes at page 28 that the instruction created a second exception to the entire market value, but then at page 29 it goes to "we are cognizant of the difficulty that patentees may face in assigning value to a feature that may not have ever been individually sold. However, we have never required absolute precision in this task; on the contrary, it is well understood that this process may involve some degree or approximation and uncertainty."

     

    CV, I think the reasoning is CRAP, if this is to be precedential opinion where is the clarification of smallest salable unit versus entire market value in the context of multi component products where an Apple type appropriates a feature, mixes that feature into a function that produces the economic result?

     

    A moment at oral was when Rader asked the Apple attorney "How were they misled?" No direct reply was given, but Prost and Chen adopted the misled in the opinion.

     

    Later, the Virnetx attorney, responded that there was no reason to produce a sale price for a product never sold in his assertion that it was not necessary to go beyond the smallest salable unit on damage. (I caught this in real time and the Virnetx attorney was judged wrong.)

     

    Now what?

     

    Dale Korpi
    16 Sep, 12:25 PM Reply Like
  • Dale Korpi
    , contributor
    Comments (175) | Send Message
     
    CV and Sonic,

     

    I asked a question above about the Short Position, at this point in time there are 12,872,000 plus shares traded and the share price is up from a low of $6.00 to $8.83.

     

    CV, so with this admittedly scant evidence BUT who know what on September 10th when the shift proportion of long to short increased?

     

    Hmm ...

     

    Dale Korpi
    16 Sep, 03:07 PM Reply Like
  • Cassandra Veritas
    , contributor
    Comments (50) | Send Message
     
    Author’s reply » En banc? Could cut to the chase, it also could be risky. VHC has not only this but APPLE II and MICROSOFT !!, with a clear map of where they need to be vis a vis the expert - I was in the air when this came across. If the expert can testify within the guidelines given, we could get not just a high or lower number, it might also result in a settlement, now that the table is set, and two cases are advancing, and another, on some issues we are seeing part deux of Part 1. I'm not in agreement with this reasoning and claims construction was never what the focus of the CAFC at oral argument.
    16 Sep, 05:06 PM Reply Like
  • Dale Korpi
    , contributor
    Comments (175) | Send Message
     
    CV,

     

    Yes, the reasoning is a three legged stool type with one leg made of sawdust.

     

    I shared the Short Interest from the sites to track how it went down. I want to explore what the trade is to address the time length and price direction.

     

    It just seems somehow the word was out on or after September 10th based on the shortanalytics site, as bad as that is.

     

    I refer back to oral argument and notes I made on the following exchange between the Apple attorney, Mr. Lee, and Judge Rader as attorney Lee argues on the the "error" in the second part of the jury instruction:

     

    Mr. Lee explains the two parts of the jury instruction, the first is the traditional exception as to EMV IF patented feature is the driver for product demand, but Mr. Lee asserts that second part alternative in jury instructions allows jury to stop at SSU. (HOW DOES VIRNETX DEMONSTRATE THAT THEY HAVE GONE BEYOND THIS?)

     

    Judge Rader probes Mr. Lee “Do you think the jury can get it, that it was really still just applying the first part of that and/or proposition, when it looks at SSU? Presses Mr. Lee for “Where was jury mislead, if at all?” (NOTE THAT JUDGE RADER DOES NOT EXPLORE WHAT WAS BEFORE THE JURY)

     

    Mr. Lee responds that there is both an analytical aspect and there is the application in this context and his argument, at least his oral argument seemed convoluted to me, but, it got Apple a "do over."

     

    Damn, I knew this was important at the time, but how did Prost and Chen adopt this in the opinion? I have not looked fully yet but it just feels that since this is a precedential opinion it was the path of least resistance to have Judge Davis do a retrial.

     

    Thoughts CV?

     

    Dale Korpi
    16 Sep, 06:03 PM Reply Like
  • Cassandra Veritas
    , contributor
    Comments (50) | Send Message
     
    Author’s reply » Claim construction wasn't even an issue. When did it become one? So Virentx V. Apple can still be cited - generally for the provision - that benchmarks are ok - but only if we agree they are the correct benchmark? What direction really does this offer someone? They have not advanced the law at all. This doesn't even sound like Prost or Chen.....it sounds like RADER!!
    16 Sep, 06:50 PM Reply Like
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