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ABS Global, Inc. v. Inguran, LLC

United States District Court, W.D. Wisconsin

August 23, 2019

ABS GLOBAL, INC., Plaintiff/Counterclaim Defendant,
v.
INGURAN, LLC d/b/a SEXING TECHNOLOGIES, Defendant/Counterclaim Plaintiff, and XY, LLC, Intervenor-Defendant/Counterclaim Plaintiff,
v.
GENUS PLC, Counterclaim Defendant. INGURAN, LLC, CYTONOME/ST, LLC, and XY, LLC, Plaintiffs/Counter Defendants,
v.
ABS GLOBAL, INC., GENUS PLC and PREMIUM GENETICS (UK) LTD., Defendants/Counter Claimants.

          OPINION AND ORDER

          WILLIAM M. CONLEY DISTRICT JUDGE

         At the final pretrial conference, the court directed the parties to submit supplemental briefing with respect to a number of motions in limine on which the court previously reserved, along with other topics. This opinion and order addresses this additional briefing, as well as other recent motions filed by the parties.

         OPINION

         I. Reserved MILs / Other Areas of Discussion Prompted by MIL Opinion

         A. ABS's Motion to Strike ST's Damages Expert Malackowski's Testimony ('503 dkt. #934; '446 dkt. #329).

         In the court's motions in limine opinion, the court reserved on whether to exclude Malackowski's testimony based on an allocation of 50% of the value of ABS's SEXCEL product to the patented invention on the basis that it was unreliable. (8/14/19 Op. & Order ('503 dkt. #1008; '446 dkt. #403) 15-16.) During the FPTC, ST indicated that its expert Vacca provided the necessary support for the 50% allocation. In turn, the court directed ST to submit a proffer explaining Vacca's basis for this percentage, which it did ('503 dkt. #1014; '446 dkt. #409), and ABS has also filed a responded ('503 dkt. #1021; '446 dkt. #416).[1]

         The problem with Malackowski's reliance on Vacca does not arise out of what Vacca opines, but rather on what he does not opine, indeed is unqualified to opine. As a technical expert, Vacca appropriately describes the “very difficult task” of “distinguishing between sperm cells on the basis of their chromosome content with a high degree of confidence and at a suitable rate, ” and lauds the “enhanced precision provided by the Cytonome patents” to do both “using relatively less expensive manufacturing methods and with less complexity due to the use of channel geometry, as opposed to actively monitoring and controlling inputs to the system, ” while at the same time being “generally exerting less stress on the cells.” (Vacca Rept. (‘746 dkt. #259) ¶¶ 32, 38.) While this neatly summarizes the advantages of the Cytonome patented technology, what is missing is in Vacca's analysis is any explanation as to the relative value of this improvement over past technology, whether in terms of percentage improvement in cell selection by sex, speed or robustness of the sperm cells, much less what that percent improvement might mean commercially, whether by increase in demand, price or reduction in costs. Without this information, Malackowski would seem to be allocating 50% of the value of ABS's SEXCEL product to the patented invention out of whole cloth. Indeed, as ST concedes, Vacca's only opinion allocating the relative contribution of this new technology to the overall product is that the “three dimensional focusing claimed in the Cytonome patents” is “responsible for a majority of the GSS system's technical value.” (Id. at ¶ 32.) Whatever this may or may not mean from a technical perspective (for example, degree of difficulty, elegance of solution, purity of product), Malackowski could only be guessing as to how that might translate as to the relative market value, since Vacca does not even purport to have that kind of expertise.[2]

         Accordingly, Malackowski will be precluded from offering any royalty opinion based on his reliance on Vacca's vague allocation from a technical standpoint. The reserved portion of this motion is, therefore, GRANTED.

         B. ABS's Other MILs No. 5: Bar evidence or argument relating to Cytonome research and development activities involving the use of microfluidics in sperm sorting ('503 dkt. #944; '446 dkt. #339).

         In the MIL opinion, the court also reserved on whether reference to some narrower area of R&D (e.g., Viper SS project) should be excluded. (8/14/19 Op. & Order ('503 dkt. #1008; '446 dkt. #403) 29-30.) Specifically, during the FPTC, the court directed ABS to submit clarification as to the intended scope of its motion, which it has now done. ('503 dkt. #1013; '446 dkt. #408.) ABS seeks to limit Sharpe to his deposition testimony on the Viper SS machine, and more specifically seeks to bar him from testifying that the Viper SS falls within the scope of the Cytonome patents. In response, ST reiterates that Sharpe's trial testimony will be limited strictly to that offered during his deposition -- namely, that Cytonome is investigating the use of the Cytonome patented technology in the Viper SS machines. ('503 dkt. #1023; '476 dkt. #418.) On this much, the parties appear to be in agreement. However, in response, ST points out that ABS also seeks to prohibit Sharpe from testifying as to whether “any other Cytonome patent[] falls within the scope of any claim in the asserted Cytonome patents.” (Id. at 2.) As ST points out, the court previously rejected ABS's request to strike Sharpe's testimony that the GigaSort technology practices the Cytonome patents. As such, this motion is DENIED. Sharpe is free to testify about both the Viper SS and GigaSort products provided he does so in a manner consistent with his deposition testimony.

         C. ABS's Other MILs No. 7: Bar testimony regarding reasonable royalty figures not disclosed in expert report or by witnesses who have not served expert reports ('503 dkt. #944; '446 dkt. #339).

         In its MIL order, the court denied ABS's motion to bar testimony regarding reasonably royalty figures not disclosed in an expert report or by witnesses who have not served expert reports. During the FPTC, ABS sought clarification. In response, the court invited ABS to submit a proffer directing the court to caselaw limiting a patent plaintiff to damages disclosed in an expert report and/or foreclosing fact testimony or attorney argument as to a higher amount that disclosed by its damages expert. In its submission, ABS expressly seeks to exclude ST's CEO Juan Moreno's testimony regarding a total damages award, offering three bases: (1) Moreno's testimony about a hypothetical negotiation would not be based on personal knowledge and is, therefore, inadmissible; (2) Moreno's testimony would be contrary to his deposition testimony in which he disavowed any knowledge of what the Cytonome patents are worth; and (3) Moreno would likely “speculate widely” about the value of these patents given his deposition testimony about the value of an XY patent. ('503 dkt. #1012; '446 dkt. #407.) As specifically requested by the court, ABS also points to some district court cases in support of its first basis, excluding fact witness testimony about what would happen in the hypothetical negotiation unless based on personal knowledge. See AVM Techs., LLC v. Intel Corp., 927 F.Supp.2d 139, 146 (D. Del. 2013); Info-Hold, Inc. v. Muzak, LLC, No. 11-cv-283, 2013 WL 4482442, at *5 (S.D. Ohio Aug. 20, 2013), reversed in part on other grounds by 783 F.3d 1365 (Fed. Cir. 2015); NetAirus Techs., LLC v. Apple Inc., No. 10-cv-03257, slip op. at *7-8 (C.D. Cal. Nov. 8, 2013).[3]

         ST responded with its own cases, in which courts have allowed testimony by owners or corporate executives regarding their state of mind during a hypothetical negotiation and what a reasonable royalty rate would have been. ('503 dkt. #1024; '446 dkt. #419.) See Carnegie Mellon Univ. v. Marvell Tech. Grp., Ltd., Civil Action No. 09-290, 2013 WL 176970, at *2 (W.D. Pa. Apr. 24, 2013); Seitz v. Envirotech Sys. Worldwide Inc., No. CIV. A. H-02-4782, 2008 WL 656513, at *5 (S.D. Tex. Mar. 6, 2008).

         In light of this apparent split in the caselaw, and without the benefit of Federal Circuit guidance on this question, the admissibility of Moreno's testimony about what he would have sought as a reasonable royalty during the hypothetical negotiation appears to be a close call.[4] Fortunately, the court need not reach this issue because Moreno expressly disavowed having an opinion at his deposition as to the value of the Cytonome patents. (Moreno Dep. (‘746 dkt. #148) 204 (“Q. So you have no opinion, no view, as to what ...


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