[00:00:00] Speaker 05:
A case for argument today is 23-1101 Echo Factor versus Google.

[00:00:06] Speaker 04:
Ms.

[00:00:07] Speaker 04:
Anders, please proceed.

[00:00:09] Speaker 04:
Good morning, and may it please the court.

[00:00:10] Speaker 04:
I'm Ginger Anders, representing Google.

[00:00:13] Speaker 04:
The district court abused its discretion in this case by holding that the reliability of Kennedy's testimony, assigning the ex-royalty rate to the three lump sum licenses, was a matter for the jury to decide for itself.

[00:00:24] Speaker 04:
Rule 702 has long required the district court to ensure reliability before

[00:00:29] Speaker 04:
admitting challenge expert testimony.

[00:00:31] Speaker 04:
Here, Kennedy's testimony was clearly unreliable.

[00:00:34] Speaker 04:
He testified that the license's non-binding recitals of EcoFactor's belief that its licenses had agreed to the royalty rate, combined with EcoFactor's CEO's unsupported and self-interested assertion that that had happened, established that every EcoFactor licensee had, in fact, agreed to the royalty rate.

[00:00:50] Speaker 08:
Let me ask you what I view it to be a somewhat of a threshold issue here.

[00:00:57] Speaker 08:
probably a little bit broader issue than what the one that you were describing.

[00:01:02] Speaker 08:
But you say in your brief that rule 7.2 requires district courts to serve as rigorous gatekeepers.

[00:01:11] Speaker 08:
And throughout your brief there's other parts where you say that here the expert testimony must be subject to rigorous reliability testing.

[00:01:23] Speaker 08:
And I found

[00:01:25] Speaker 08:
numerous other places in your brief, where you use the word rigorously.

[00:01:31] Speaker 08:
And apparently, if we all carry backwards around with us, yours would say rigorously.

[00:01:38] Speaker 08:
So you believe that what happens here at the district court level is less than rigorous, correct?

[00:01:45] Speaker 08:
I do.

[00:01:46] Speaker 08:
And you believe that the district court should look at Robert and rule 702

[00:01:52] Speaker 08:
And be more rigorous from here on out.

[00:01:54] Speaker 08:
That's why we're here.

[00:01:55] Speaker 08:
That's why this is a non-bond court.

[00:01:57] Speaker 08:
You want a more rigorous application of 702 and the dover.

[00:02:02] Speaker 08:
You're correct.

[00:02:03] Speaker 04:
So I don't think that we're arguing that the standard should be increased from where it is today.

[00:02:07] Speaker 04:
I think what we're saying is that what we are saying is that this court should reaffirm the longstanding rule 702 principles that have been in place, I think, for decades now.

[00:02:16] Speaker 04:
And that we're reaffirming.

[00:02:17] Speaker 08:
You're not advocating a new rule or a new requirement.

[00:02:20] Speaker 04:
We're definitely not advocating a new rule.

[00:02:22] Speaker 08:
I do think that this is a- Just that rule 702 and DOBRA should be applied more rigorous.

[00:02:30] Speaker 04:
I think it should be applied according to its terms.

[00:02:35] Speaker 04:
I think the district court didn't do that here.

[00:02:37] Speaker 04:
And if I could just make a couple of statements.

[00:02:39] Speaker 08:
I think it should be applied in accordance with what the statute says and what the Supreme Court said in Dabra.

[00:02:48] Speaker 08:
But you don't feel that that's what happened here.

[00:02:51] Speaker 08:
And you want us to look at it.

[00:02:53] Speaker 08:
So we can say that the application of 7-02 and Daubert is done on a case-by-case basis.

[00:03:03] Speaker 04:
It is absolutely done on a case-by-case basis.

[00:03:06] Speaker 08:
And in this case, you think that it was not done correctly.

[00:03:09] Speaker 08:
And that's because of the facts of this case, correct?

[00:03:12] Speaker 04:
It's legal error as well as the facts of this case the legal error that the district court committed was it said It looked at the Daubert motion, and it said this is a matter for cross-examination So in other words the district court didn't do the gatekeeping under rule 702 that's a legal error You're not promoting a new rule or a new requirement with respect to Daubert and rule 702 You just don't like the rule in the outcome in this case

[00:03:37] Speaker 04:
That's correct.

[00:03:38] Speaker 04:
We think that this is an abuse of discretion.

[00:03:39] Speaker 04:
And if I could explain a couple things about why that is, starting with the standard and then what the district court did.

[00:03:45] Speaker 04:
So the standard here, I think, is Rule 702B says the expert's opinion has to be based on sufficient facts and data.

[00:03:54] Speaker 04:
And that was what was the problem here, that Kennedy's testimony was not based on sufficient facts and data.

[00:03:59] Speaker 04:
I think the standard for that really comes from the Supreme Court's decision in Joyner.

[00:04:03] Speaker 04:
I think this is a good statement of it.

[00:04:04] Speaker 04:
where the Supreme Court says, what you do is you look at the expert's opinion and you examine whether the analytical gap between that opinion and the facts on which the expert relied is too great, such that essentially the expert is relying on Ipsi-Dixit rather than reason and analysis.

[00:04:21] Speaker 04:
And then the other thing that this report does, and you see this in this court's cases as well as all the cases we've cited in our brief, the court looks to whether

[00:04:27] Speaker 04:
the evidence on which the expert relied is of the sort that an expert would reasonably rely on.

[00:04:32] Speaker 04:
And that is what did not happen here, just because the district judge didn't do the reliability analysis at all.

[00:04:39] Speaker 04:
He kicked it to the jury, which, as I said, was legal error.

[00:04:42] Speaker 04:
But I think the other problem here is that it is difficult to imagine a clearer example of expert Ipsy Dixit than what happened in this case.

[00:04:49] Speaker 01:
Ms.

[00:04:49] Speaker 01:
Anders, what about the language in 702 about demonstrating to the court that it's more likely than not

[00:04:57] Speaker 04:
that these factors

[00:05:14] Speaker 04:
to show to the district court by proponents of the evidence that the testimony is more likely than not reliable.

[00:05:20] Speaker 04:
So that has always been the standard.

[00:05:21] Speaker 04:
It was eco-factors burdened here.

[00:05:23] Speaker 04:
And I think that's another reason the district court simply didn't apply that.

[00:05:25] Speaker 03:
And what the advisory committee called out was the improper in looking back at what the many courts or some courts had been doing.

[00:05:32] Speaker 03:
But the improper application by holding the critical questions of sufficiency of an expert's basis and the application of the expert's methodology

[00:05:40] Speaker 03:
as questions of weight and non-admissibility.

[00:05:43] Speaker 03:
That's exactly right.

[00:05:44] Speaker 03:
And that is exactly the problem.

[00:05:46] Speaker 04:
That is what happened here, what the district court did.

[00:05:49] Speaker 04:
And so I think the 2023 amendment makes that very clear.

[00:05:53] Speaker 04:
It makes it unmistakable.

[00:05:54] Speaker 04:
But it was already the standard before, as you can see in the Arthur case, which was from 2022 in the Fifth Circuit.

[00:06:00] Speaker 05:
It seems a little hard to understand what the district court did, because he didn't say anything about it.

[00:06:04] Speaker 04:
I think that's correct as well.

[00:06:06] Speaker 04:
It is difficult to evaluate under abuse and discretion review when there is no reasoning to look to.

[00:06:11] Speaker 04:
So I think that's the problem.

[00:06:13] Speaker 07:
Do you think a district court should write an opinion any time there's a Daubert challenge?

[00:06:17] Speaker 04:
I think it's going to depend on the circumstances.

[00:06:19] Speaker 04:
I think, obviously, there will be some cases where it's pretty straightforward.

[00:06:22] Speaker 04:
And a district court wouldn't have to say very much.

[00:06:23] Speaker 04:
There are other cases where maybe it does have to explain a little bit.

[00:06:27] Speaker 04:
I think there's no magic words, requirements, no.

[00:06:30] Speaker 08:
Should we send this back down and have the district court

[00:06:33] Speaker 08:
We viewed this, in the first instance, as far as providing the explanations for the rulings that he did do.

[00:06:41] Speaker 08:
We just simply had him do the rulings over.

[00:06:43] Speaker 04:
So I don't think so for a couple of reasons.

[00:06:45] Speaker 04:
I think, for one thing, I think it is very clear here.

[00:06:47] Speaker 04:
I think there's really only one right answer here.

[00:06:49] Speaker 04:
And this court has said that when there's only one right answer, you don't have to remand to have the district court do it again.

[00:06:54] Speaker 04:
And I also think it's really important for this court to give guidance as to the standard here.

[00:06:58] Speaker 04:
Because I think that if this kind of expert testimony is allowed, this really impacts a lot of important patent values here, right?

[00:07:06] Speaker 04:
This is not just about an expert taking his own client's interested assertions and sort of asserting them as expert.

[00:07:13] Speaker 04:
as the experts authoritative conclusion, which is what happened here.

[00:07:17] Speaker 04:
But there are patent values at stake.

[00:07:20] Speaker 06:
The point of using for... Before you get into that, I just want to better understand.

[00:07:23] Speaker 06:
You say the evidence here is very clear and there's only one right answer.

[00:07:27] Speaker 06:
I suppose if I agreed with that, then it follows that we should just take care of it.

[00:07:33] Speaker 06:
But what if this is like what I assume is the more common case where the evidence is not very clear and there's not just one right answer?

[00:07:42] Speaker 06:
If I see it that way, why would I not remand to Judge Albright for him to comply with Daubert in the way that you say we should remind him he needs to do?

[00:07:51] Speaker 04:
I think that course is certainly open to this court if it thinks that that should happen in the first instance.

[00:07:56] Speaker 04:
But I do think that it would be helpful here to give guidance because of the extremity of this case, because this is a case in which you have licenses

[00:08:04] Speaker 04:
that have solely a non-operative unilateral clause stating eco-friendly belief that this royalty rate was used.

[00:08:12] Speaker 09:
Is your position that those recitals, those non-binding recitals in the agreements are irrelevant to the question, or that they're not sufficient to form the basis for an expert opinion?

[00:08:27] Speaker 04:
I think they are not sufficient as a matter of law, essentially.

[00:08:30] Speaker 04:
In two of the licensees, those- But not irrelevant?

[00:08:33] Speaker 04:
I think they become irrelevant because they simply can't establish what Kennedy wanted them to establish.

[00:08:40] Speaker 04:
So in two of the licenses, there were operative clauses that said the lump sum amount is not based on the rate.

[00:08:46] Speaker 05:
Just to be clear, you're not saying the licenses are irrelevant and shouldn't have been entered into evidence, correct?

[00:08:51] Speaker 04:
No.

[00:08:52] Speaker 05:
Yes or no?

[00:08:53] Speaker 05:
No.

[00:08:53] Speaker 05:
We objected to the royalty rate in the license.

[00:08:55] Speaker 05:
But you didn't object.

[00:08:57] Speaker 05:
So you don't.

[00:08:58] Speaker 05:
We didn't object to the licenses in them.

[00:09:00] Speaker 05:
You do object to the royalty rate.

[00:09:01] Speaker 05:
I mean, isn't one of the

[00:09:03] Speaker 05:
a reasonable royalty analysis, what the patentee would want to get for its royalty rate.

[00:09:10] Speaker 05:
And so don't the licenses at least offer some evidence of what the patentee was seeking?

[00:09:16] Speaker 05:
They are relevant.

[00:09:17] Speaker 04:
They would be relevant, I think, for that purpose.

[00:09:19] Speaker 04:
OK.

[00:09:19] Speaker 04:
But that, very importantly, is not what Kennedy testified for.

[00:09:21] Speaker 09:
There were evidence that the licenses were worth his value, right?

[00:09:25] Speaker 04:
So what Kennedy testified to was he said, he was asked, is there evidence of a royalty rate in this license?

[00:09:31] Speaker 04:
He said there's X rate in the whereas clause per unit for the estimated past and projected sales of future sale of products.

[00:09:38] Speaker 04:
That's at 5773.

[00:09:39] Speaker 04:
So what he testified to

[00:09:40] Speaker 04:
was that these licenses reflected the licensees binding agreement to apply the ex-loyalty rate to their sales, but the licenses simply did not support that proposition.

[00:09:50] Speaker 04:
They had lump sums, but, of course, two, again, two of the licenses had operative clauses that said the lump sum is not based on sales.

[00:09:57] Speaker 04:
and does not reflect a royalty.

[00:09:59] Speaker 04:
And even in the third license, it was simply a non-operative unilateral clause that cannot reflect the agreement of the two parties.

[00:10:06] Speaker 04:
And so just to get back to that.

[00:10:08] Speaker 09:
What about Kennedy's testimony, apart from the recitals and the licenses he relied on, the Habib testimony?

[00:10:17] Speaker 09:
Why is that not sufficient?

[00:10:20] Speaker 04:
So I think there are two problems with Habib's testimony.

[00:10:23] Speaker 04:
The first is that it simply doesn't support the conclusion, again, that the licensees agreed to apply this rate.

[00:10:28] Speaker 04:
And it's also not the sort of evidence on which an expert would reasonably rely, because it is an unsupported assertion by an interested party as to the key fact in the damages case.

[00:10:37] Speaker 04:
And I think that's true.

[00:10:38] Speaker 06:
Is there any evidence in the record that an expert who deals with damages and finances would not rely on their own client's statement as to what their financial records are?

[00:10:49] Speaker 04:
So I think it depends, actually, on the circumstances that are at issue.

[00:10:53] Speaker 04:
But I think what the cases that we cited in our brief say, what decision after decision says is that an expert is unreliable when he simply takes his client's unsupported assertions on faith about critical facts and then relies on them.

[00:11:08] Speaker 04:
So for instance, the endless term.

[00:11:09] Speaker 06:
It turns out to be true that financial experts all the time

[00:11:12] Speaker 06:
rely on their own clients' representations about their finances.

[00:11:19] Speaker 06:
They may put a caveat in their opinion.

[00:11:21] Speaker 06:
My opinion is only as good as the inputs that were given to me.

[00:11:25] Speaker 06:
maybe as a empirical matter, experts rely on their own clients all the time.

[00:11:30] Speaker 04:
And I think there are many situations in which they can.

[00:11:32] Speaker 04:
And again, I think that this report would have to evaluate this on the circumstances.

[00:11:36] Speaker 04:
So for instance, if an expert is relying on ordinary course business data that's created all the time, not just for litigation, it seems like something that the expert wouldn't have to verify.

[00:11:44] Speaker 04:
And I also think the sort of caveat that Your Honor is talking about is very important, because what Kennedy testified to here was that the licensees agreed to use the raid as a matter of fact.

[00:11:54] Speaker 04:
That's what he testified to.

[00:11:55] Speaker 04:
He didn't testify while assuming that, you know, what people had told me is correct.

[00:12:00] Speaker 04:
I'm going to just take that assumption

[00:12:01] Speaker 04:
True and so the champagne metals case that we cited in our brief makes clear that there's a big difference When an expert testifies as a matter of fact I have concluded that this was the case that is very powerful testimony And that enabled you know you're not challenging Reliability right you don't have any specific arguments on the liability you know who challenges really about the sufficiency of facts and

[00:12:27] Speaker 04:
So I think the two things are wrapped up with each other.

[00:12:28] Speaker 04:
And that's because an expert.

[00:12:32] Speaker 08:
But you don't address, directly, reliability.

[00:12:36] Speaker 08:
But you do address quite a bit and devote quite a bit of space to sufficiency of facts.

[00:12:44] Speaker 04:
So we do say that we think that Kennedy's opinion was not based on a reliable methodology.

[00:12:49] Speaker 04:
But it's not really a separate argument.

[00:12:50] Speaker 04:
Because it's not a reliable methodology because he bases conclusions on insufficient facts and data.

[00:12:55] Speaker 04:
So I think the two things.

[00:12:56] Speaker 04:
in this circumstance really are intertwined.

[00:12:59] Speaker 04:
But I think that sort of makes sense, right?

[00:13:01] Speaker 08:
That in respect to that part that deals with sufficiency of facts, we give broad discretion to the trial court, correct?

[00:13:10] Speaker 04:
It's an abusive discretion standard, yes.

[00:13:12] Speaker 04:
But I think it's clear that the district court abused its discretion here.

[00:13:15] Speaker 04:
And again, I think if you look at the licenses, this unilateral whereas clause, which states only eco-factors view, and then you have Kennedy testifying.

[00:13:24] Speaker 08:
What's the problem with the liability?

[00:13:26] Speaker 08:
a hypothetical negotiation?

[00:13:29] Speaker 08:
Is that an unreliable method?

[00:13:32] Speaker 04:
No, it's not an unreliable method, but of course, this is sort of an antecedent stage, right, where what Kennedy said, the analytical gap here is that Kennedy used these unilateral whereas clauses that stated only eco-factors belief and said, I see in that

[00:13:48] Speaker 04:
evidence that the licensees agreed to apply the rate.

[00:13:52] Speaker 04:
So there's this unbridgeable gap between evidence that EcoFactor thought this was the rate and what he wanted to establish, what he purported to establish, which was that the licensees themselves had agreed to apply the rate.

[00:14:03] Speaker 04:
I think that's very much like the sports decision in the MLC, where the experts said,

[00:14:08] Speaker 04:
I've looked at the most favored nations clause.

[00:14:10] Speaker 04:
It's got a 25% rate in there.

[00:14:13] Speaker 04:
And I am going to testify to that.

[00:14:15] Speaker 05:
Can you tell me what portion of Kennedy's testimony point me to the specific portions that you think are the most unreliable because they're not supported by facts in record?

[00:14:25] Speaker 04:
Right.

[00:14:25] Speaker 04:
So at 5773, that's what I read before, where he's asked about the licenses specifically.

[00:14:29] Speaker 04:
He says there's x-rate in the whereas clause.

[00:14:32] Speaker 04:
So he identifies this unilateral clause, this unilateral whereas clause, which is a non-binding recital.

[00:14:37] Speaker 04:
He identifies that.

[00:14:38] Speaker 04:
as evidence that the licensees themselves agreed to use the rate.

[00:14:43] Speaker 04:
And then later on, at 5765, he's asked what is about the form of the, quote, royalty paid in the agreement.

[00:14:49] Speaker 04:
He says it was based on sales as a winning royalty, but they, the parties, agreed to a lump sum for all those royalties.

[00:14:55] Speaker 04:
So he is saying that the lump sum was derived

[00:14:57] Speaker 04:
by applying the royalty rate to sales, that the licensees had done that.

[00:15:00] Speaker 04:
So again, he is testifying that it is his conclusion that the licensees agreed to use the rate.

[00:15:05] Speaker 04:
And then later on, he says, it is x per unit that other people have paid.

[00:15:10] Speaker 04:
That's on 5778.

[00:15:10] Speaker 04:
So again, he's asserting that the licensees paid it.

[00:15:14] Speaker 00:
What does he say about Mr. Habib's testimony, which I may find misremembering that Mr. Habib said,

[00:15:21] Speaker 00:
I, of course, did not get to see the sales data, but my understanding is this is how this number was calculated, from which one might infer there was agreement to this number because it was calculated this way.

[00:15:36] Speaker 00:
What's insufficient about relying on the CEO's understanding?

[00:15:40] Speaker 04:
So several things.

[00:15:42] Speaker 04:
So what Habib is doing there is he's making a factual assertion about what that other parties read to this rate.

[00:15:47] Speaker 04:
But he doesn't have any foundation to make that kind of assertion.

[00:15:50] Speaker 09:
So he wasn't involved in the negotiations?

[00:15:51] Speaker 04:
He was not involved.

[00:15:52] Speaker 04:
I think that's critical.

[00:15:53] Speaker 04:
He was not involved in the negotiations.

[00:15:55] Speaker 04:
He didn't see any sales data.

[00:15:57] Speaker 04:
Ecofactors as a whole didn't see any sales data.

[00:15:59] Speaker 04:
And this is what he admits to at 5692.

[00:16:02] Speaker 04:
And of course, as I've been talking about, nothing in the licenses supports the conclusion that the licensees agreed to this.

[00:16:10] Speaker 00:
What's also really important here is that... Just to be clear, did Mr. Kennedy have... I think this word understanding came into testimony later, but pre-testimony, what did Mr. Kennedy have from Mr. Habib?

[00:16:29] Speaker 04:
I think it was essentially the same thing as my understanding of the record, that he had Khabib's assertion that this had been used, but nothing more than that.

[00:16:37] Speaker 04:
That's my understanding of the motions.

[00:16:38] Speaker 00:
And that's basically a no personal knowledge.

[00:16:41] Speaker 04:
Yes.

[00:16:41] Speaker 04:
Yes, exactly.

[00:16:42] Speaker 04:
And that's the 185, the motion eliminated that describes that testimony, is that 185.

[00:16:45] Speaker 06:
It wasn't indisputable whether Khabib had personal knowledge.

[00:16:49] Speaker 06:
He was apparently subject to the confidentiality order because the settlements arose from litigation.

[00:16:55] Speaker 06:
So it's very common that he is a competitive decision maker

[00:16:58] Speaker 06:
wouldn't himself have access to the sales data of the licensees.

[00:17:03] Speaker 06:
But that doesn't mean that outside counsel who were advising him whether to sign the agreement, to sign the agreement and give up Echo Factor's patent litigation rights against those licensees, that he wouldn't have had a high level understanding as to what he was giving up and what the value of that was.

[00:17:22] Speaker 06:
Why is that not even a reasonable interpretation

[00:17:26] Speaker 06:
of Habib's understanding and his personal knowledge.

[00:17:28] Speaker 04:
Well, I think there's a significant leap, an influential leap, between what Habib actually testified to, which is, this is just my understanding, period, full stop, I have no personal knowledge, and the idea that maybe the licensees actually did agree to this raid and somebody told Habib, et cetera.

[00:17:43] Speaker 04:
And I think it's really important that the burden here is on eco-factor, as the proponent of this testimony and the proponent of its damages case and the proponent of

[00:17:51] Speaker 04:
Kennedy's testimony to establish why this is reliable and what Kennedy relied on.

[00:17:55] Speaker 04:
And so, you know, the record comes to us in this way where we don't have any kind of understanding of.

[00:18:01] Speaker 09:
Who, who did Habib talk to about this?

[00:18:04] Speaker 04:
We don't know who, who Habib talked to.

[00:18:06] Speaker 04:
And so, again, this record is.

[00:18:08] Speaker 09:
I thought he, he didn't describe certain conversations in his testimony, or reference certain conversations in his testimony.

[00:18:14] Speaker 09:
Am I mistaken about that?

[00:18:16] Speaker 04:
As I stand here, I don't think that he referenced any conversations.

[00:18:20] Speaker 04:
He simply said that it was his understanding in his testimony at trial.

[00:18:23] Speaker 08:
And so I think there is a... Wasn't there an email in this regard or something like that?

[00:18:27] Speaker 04:
So there's an email between Johnson, one of the licensees.

[00:18:32] Speaker 04:
Is that what Your Honor is referring to?

[00:18:34] Speaker 08:
So I think that email is also... Didn't he negotiate the Johnson license?

[00:18:39] Speaker 04:
That's not my understanding.

[00:18:40] Speaker 04:
He testified that he was not involved in the negotiations.

[00:18:43] Speaker 04:
So there is a Johnson email, which is not with Hubby, I think, is my understanding.

[00:18:49] Speaker 04:
And in that email, again, it doesn't establish that Johnson.

[00:18:52] Speaker 03:
Can I just interrupt you first to understand the email?

[00:18:55] Speaker 03:
My understanding of the record is the email was that Kennedy was not allowed to rely on me.

[00:19:00] Speaker 03:
It is not something that Kennedy relied on in his testimony.

[00:19:03] Speaker 03:
And you recall what it appears from the record.

[00:19:05] Speaker 03:
The reason was that Kennedy was not allowed to rely on the email.

[00:19:08] Speaker 03:
I'm not sure I want to hazard.

[00:19:11] Speaker 03:
Well, I thought the record indicated it was because of the person that negotiated the Johnson license was also a person on the trial team.

[00:19:19] Speaker 04:
I believe that's correct, yes.

[00:19:21] Speaker 03:
And so this was not part of it.

[00:19:23] Speaker 03:
He said so that the email was not permissively used by Kennedy because of that.

[00:19:28] Speaker 04:
I think that's right.

[00:19:29] Speaker 04:
It came in, nonetheless, at trial, not in Kennedy's testimony.

[00:19:33] Speaker 04:
It's not something that Kennedy relied on.

[00:19:35] Speaker 04:
And I do think Rule 702 instructs the district court to determine whether the expert's testimony is reliable based on what the expert has relied on.

[00:19:43] Speaker 04:
And so that's how the analysis would be done.

[00:19:45] Speaker 06:
I think you're right about that.

[00:19:46] Speaker 06:
But we're here, technically, as I understand it, on your appeal for the denial of the motion for a new trial.

[00:19:52] Speaker 06:
So wouldn't that bring the whole trial record into question?

[00:19:56] Speaker 06:
And we should consider the whole trial record in deciding whether there was an abuse of discretion.

[00:20:01] Speaker 06:
denying your request for a new trial?

[00:20:03] Speaker 04:
I think it's a practical matter, yes.

[00:20:04] Speaker 04:
That's why we're not, I'm not here standing to say that you shouldn't think about it at all.

[00:20:09] Speaker 04:
I do think that it has to.

[00:20:10] Speaker 04:
I'm sorry, I'm sorry.

[00:20:10] Speaker 06:
I just want to clear.

[00:20:11] Speaker 06:
We can consider it a Johnson email.

[00:20:12] Speaker 04:
I think you can consider it.

[00:20:13] Speaker 04:
I do think it is relevant, however, that it is not something that Kennedy relied on himself.

[00:20:19] Speaker 04:
And I think the email is.

[00:20:21] Speaker 03:
Did the judge not rule that Kennedy could not rely on the email?

[00:20:24] Speaker 03:
It was admitted through Google's expert testimony later on.

[00:20:28] Speaker 03:
But my read of the record is that this is

[00:20:31] Speaker 03:
at 1109 of your supplemental appendix?

[00:20:36] Speaker 04:
That may well be.

[00:20:36] Speaker 04:
I think you could then think about this as a harmlessness question, I suppose.

[00:20:40] Speaker 04:
You could think about whether the email sort of provides support after the fact.

[00:20:45] Speaker 04:
I don't think it does.

[00:20:46] Speaker 04:
But so I think however you get there, the email does not help.

[00:20:49] Speaker 09:
Does the email show anything more than the default factory demanded an X rate?

[00:20:56] Speaker 04:
I think that's exactly right.

[00:20:57] Speaker 04:
It showed that EcoFactor proposed to that rate.

[00:20:59] Speaker 04:
And of course, as this court has just said in Whitserv, you know, patentee proposals are, you know, they are one thing to be considered in the damages analysis, but they are not particularly probative because of patentee naturally has the incentive to

[00:21:12] Speaker 04:
to inflate the royalty rate that they're seeking.

[00:21:16] Speaker 04:
And I think that's a critical thing to keep in mind about Kennedy's testimony here.

[00:21:20] Speaker 04:
He did not simply testify that this was a rate that EcoFactor wanted to get, that it had proposed to multiple licensees.

[00:21:26] Speaker 04:
He testified that the licensees agreed to pay this rate.

[00:21:29] Speaker 04:
And that is critical for the damages case, because of course, what you're trying to do in the damages analysis

[00:21:34] Speaker 04:
is figure out what the market value of the patent technology is and what other licensees have paid is, of course, very relevant to that.

[00:21:42] Speaker 04:
And so it was incredibly powerful for Kennedy to come in and say, every single licensee has paid this same rate, which is why he repeats it again and again.

[00:21:50] Speaker 06:
If I'm asking Ms.

[00:21:51] Speaker 06:
Sanders about the Schneider license, this is the one that has not necessarily just a unilateral representation about the X dollar rate.

[00:22:01] Speaker 06:
But it seems to me it could be reasonably read as both sides, that is, including Schneider the licensee, agreeing to the x dollar rate.

[00:22:10] Speaker 06:
I'm sure you're familiar with it.

[00:22:11] Speaker 06:
I'm looking at the copy at 10,400.

[00:22:14] Speaker 06:
But that whereas ends with nothing in this clause should be interpreted as an agreement by Schneider that the x dollar per unit is a reasonable royalty, why could one not reasonably read that as Schneider saying,

[00:22:30] Speaker 06:
I understand that you're calculating our lump sum payment based on X dollars as a rate, as a royalty rate.

[00:22:37] Speaker 06:
We just are reserving the right to say we don't agree that it's a reasonable rate.

[00:22:41] Speaker 06:
We're paying it, and that's how things are calculated.

[00:22:44] Speaker 06:
We agree to that, but it's not reasonable.

[00:22:47] Speaker 06:
What is unreasonable about that reading?

[00:22:51] Speaker 04:
that reading doesn't work because of course this is a legal instrument and so we have to come through all of its terms and there is an operative provision in the Snyder license that says that the lump sum amount is not based on sales and does not reflect or constitute a royalty and because that is an operative provision that reflects both parties agreement I think it's just as a matter of contract interpretation it trumps

[00:23:13] Speaker 04:
anything that's going to be unilaterally strong.

[00:23:15] Speaker 06:
What Echo Factor argues is that operative agreement that you've just pointed to is simply representing that the calculation was not based upon solely prior sales

[00:23:28] Speaker 06:
But it really was based on prior sales plus projected sales.

[00:23:31] Speaker 06:
And that's all that the consideration clause you're relying on is saying.

[00:23:35] Speaker 06:
What would be unreasonable about that reading?

[00:23:37] Speaker 04:
Well, I think just looking at the text of the agreement, I mean, it says such amount is not based upon sales.

[00:23:42] Speaker 04:
It doesn't say prior sales, future sales.

[00:23:44] Speaker 04:
And again, this is a legal instrument.

[00:23:46] Speaker 04:
We interpret the contract according to its terms.

[00:23:49] Speaker 06:
What if all that together means that there's a conflict?

[00:23:52] Speaker 06:
between page one and page two of the agreement, there's an ambiguity.

[00:23:58] Speaker 06:
Shouldn't the district court resolve that ambiguity?

[00:24:00] Speaker 04:
Well, I think a whereas clause can't create ambiguity when you have plain provisions in other cases.

[00:24:04] Speaker 04:
Have you seen any other cases that say that?

[00:24:07] Speaker 04:
There's a case that we cite in our brief talking about how whereas clauses can't trump something agreed upon by

[00:24:12] Speaker 04:
by both parties.

[00:24:14] Speaker 06:
But it could create an ambiguity.

[00:24:15] Speaker 06:
I agree they can't trump, but couldn't they create an ambiguity?

[00:24:18] Speaker 04:
I think only if the plain text of the operative provision were already ambiguous, then maybe you would look to the whereas clause to discern something about parties' intent.

[00:24:26] Speaker 04:
But this is basically like the for all evidence rule.

[00:24:28] Speaker 04:
I mean, you look at the text of the agreement, nobody has ever questioned it.

[00:24:31] Speaker 07:
I can take you in a different direction.

[00:24:33] Speaker 07:
I take your point that, in your view, the analytical gap is too big between the whereas clause

[00:24:40] Speaker 07:
Mr. Kennedy's assertion of a particular rate.

[00:24:44] Speaker 07:
But what if the facts were different?

[00:24:46] Speaker 07:
What if these licenses said, instead of the whereas recital, it said both contracting parties agree that this lump sum amount equates to X dollars per unit royalty rate?

[00:25:06] Speaker 07:
And then Mr. Kennedy then said, yeah, my opinion is that that is, in fact, the rate of this license.

[00:25:13] Speaker 07:
The party said so in the contract.

[00:25:15] Speaker 07:
Would you agree that that's fine?

[00:25:16] Speaker 04:
And I think that, yes, I think that would be very different if you had something in the agreement that suggested that both parties had negotiation documents.

[00:25:25] Speaker 07:
And I ask because I felt like in the briefing, there was a lot of discussion about how the expert's opinion, in order to have sufficient data and facts

[00:25:36] Speaker 07:
you need it to all be verifiable, verified and verifiable.

[00:25:40] Speaker 07:
And my hypothetical, you wouldn't necessarily have a situation where it's verified or verifiable.

[00:25:47] Speaker 07:
So what I'm trying to understand is where is the line?

[00:25:52] Speaker 07:
Can we even describe the line of when is something with sufficient data and facts or insufficient data and facts?

[00:25:59] Speaker 04:
So just to be clear here, I do think that, as Your Honor suggests, there would simply have to be some sort of factual evidence that the licensees agreed.

[00:26:07] Speaker 04:
So that could be in the whereas clauses, reflecting that both agreed.

[00:26:11] Speaker 04:
It could be an operative term in the agreement.

[00:26:12] Speaker 04:
It could be an negotiation document.

[00:26:14] Speaker 09:
The whereas clauses would be sufficient.

[00:26:15] Speaker 09:
I mean, given the cases that suggest that whereas clauses aren't very significant, if it's a non-binding recital

[00:26:23] Speaker 09:
that's sought by the patentee and simply agreed to as an insignificant recital by the other side, is that going to be sufficient?

[00:26:34] Speaker 04:
Well, so if I could just answer very quickly, I think that if you had a situation in, I think it would be a little bit context specific, but if you had a response that says both parties agree about this,

[00:26:43] Speaker 04:
then I think that would be some evidence at least from a licensee's side.

[00:26:47] Speaker 04:
And the parties would be able to look to that.

[00:26:49] Speaker 04:
The expert would be able to testify about it.

[00:26:51] Speaker 04:
The key thing is that we don't have anything close to that here.

[00:26:54] Speaker 04:
We have EcoFactor saying what it thought the royalty rate was, and then Kennedy taking that and testifying that it said something that it didn't, which is that the licensees had agreed to that rate.

[00:27:03] Speaker 04:
If I could reserve the... Yes, of course.

[00:27:06] Speaker 04:
Thank you, Ms.

[00:27:06] Speaker 04:
Sanders.

[00:27:12] Speaker 02:
Mr. Liddell, please proceed.

[00:27:25] Speaker 02:
Good morning and may it please the court.

[00:27:26] Speaker 02:
Brian Liddell from Russ Augustine Cabot on behalf of the EcoFactor.

[00:27:32] Speaker 02:
Broadly speaking, Google's argument rests on what we consider to be three critical mischaracterizations of the issues in this case.

[00:27:41] Speaker 02:
And I'd like to address all three, but I'd like to give you at least an overview of those.

[00:27:46] Speaker 02:
The first one is really that Google argues that Mr. Kennedy shouldn't have been able to reference the rates in these three licenses from EcoFactor under Rule 702, because Google disputes that those licenses were, in fact, based on the rate that was stated.

[00:28:01] Speaker 05:
Council, I didn't hear Google at least today or in its brief say Mr. Kennedy couldn't refer to the rate.

[00:28:09] Speaker 05:
I thought in fact that Ms.

[00:28:11] Speaker 05:
Anders conceded that Mr. Kennedy could have relied on the rate for purposes of establishing what the patentees sought in terms of a rate.

[00:28:19] Speaker 02:
I thought that her argument was focused on whether that

[00:28:38] Speaker 02:
What that leads to is the natural second question and the second issue, which is, what's the opinion that Mr. Kennedy's offering?

[00:28:46] Speaker 02:
It's suggested that his opinion is just, well, I saw a rate mislicensed.

[00:28:50] Speaker 02:
That's the end of the analysis.

[00:28:52] Speaker 02:
I'm done.

[00:28:52] Speaker 02:
That is absolutely not true and not at all what Mr. Kennedy did.

[00:28:57] Speaker 02:
Mr. Kennedy looked at the profit attributable to the accused products, Google's gross profit per unit.

[00:29:04] Speaker 09:
He didn't get the x rate from that calculation, right?

[00:29:07] Speaker 02:
That's correct.

[00:29:09] Speaker 02:
But what he did was he apportioned that profit.

[00:29:11] Speaker 02:
He determined what portion of that profit was attributable to the patented features.

[00:29:17] Speaker 02:
He looked at a variety of things to determine how, in a hypothetical negotiation, would the parties split that profit.

[00:29:23] Speaker 05:
How does that have anything at all to do with whether a particular licensee like Johnson or Deakin or Schneider agreed to pay X rate?

[00:29:34] Speaker 05:
What does Google's apportionment or Google's

[00:29:38] Speaker 02:
Sales have to do with what those licensees It goes to exactly actually the question you asked a few moments ago Which is isn't it relevant what the patentee would expect?

[00:29:50] Speaker 02:
Regardless of whether it was agreed to isn't that a relevant fact in the hypothetical negotiation the answer is unquestionably.

[00:29:56] Speaker 05:
Yes Nobody has I just don't understand that to be what's in dispute here I understand what is in dispute to be whether it was appropriate for mr.. Kennedy

[00:30:07] Speaker 05:
to attribute to the licensees that percentage rate.

[00:30:16] Speaker 02:
My point is that Mr. Kennedy looked at that number not as the end point of the analysis, but as how did the parties split the profit?

[00:30:26] Speaker 02:
The apportioned profit was more than three times this rate.

[00:30:30] Speaker 02:
And his analysis was that, based on that, at the hypothetical negotiation, the parties would have arrived at this rate as a means to split that.

[00:30:38] Speaker 05:
I don't understand.

[00:30:39] Speaker 05:
I really think that you need to address the direct issue that we spent

[00:30:43] Speaker 05:
all of our time here on, and you're not.

[00:30:47] Speaker 05:
And the issue is, was there a problem with Mr. Kennedy attributing that particular rate to those three licensees?

[00:30:55] Speaker 05:
Sure.

[00:30:56] Speaker 02:
Let's assume for the moment that that's a Rule 702 issue, and I don't really think it is.

[00:31:02] Speaker 02:
I think it's a fact question that is for the jury about whether those facts are believed, i.e.

[00:31:08] Speaker 02:
did the licensees pay that amount or not, and was the license based on that rate.

[00:31:13] Speaker 02:
But if we look at the evidence,

[00:31:16] Speaker 02:
Even if we take that question as the Rule 702 question, the evidence was far more about what Mr. Kennedy was looking at and what the evidence showed than was suggested here.

[00:31:28] Speaker 02:
There were some questions about the emails and specifically the email with Johnson.

[00:31:33] Speaker 02:
So that's at pages 797 to, or excuse me, 10797 to 799 of the appendix.

[00:31:42] Speaker 02:
And it's an email exchange back and forth where EcoFactors tells Johnson, these are the rates, and it uses the same stated rate.

[00:31:51] Speaker 02:
Johnson replies to that email.

[00:31:54] Speaker 02:
We are applying the rates to the time period that EcoFactor has said is implicated in the investigation.

[00:32:01] Speaker 02:
That's a direct quote from page 798, 10798 of the appendix.

[00:32:06] Speaker 02:
We are applying the rates.

[00:32:08] Speaker 02:
Johnson said it.

[00:32:09] Speaker 02:
Not EcoFactor, Johnson.

[00:32:10] Speaker 03:
I just, I hate to interrupt your chance off, but can we rely on the emails?

[00:32:16] Speaker 03:
And I thought the judge excluded, precluded him from relying on emails.

[00:32:22] Speaker 03:
So why is that, if I'm right about that, why is that a relevant point to make?

[00:32:28] Speaker 03:
to rehabilitate the question of whether or not Kennedy's assertion of the particular rate applicable here.

[00:32:36] Speaker 02:
Sure.

[00:32:37] Speaker 02:
So two points to that.

[00:32:38] Speaker 02:
First, to correct something that was discussed with my friend, I think Mr. Kennedy didn't specifically reference those emails in his report, which is why the court didn't allow him to testify that he relied upon them, because that wasn't part of his report.

[00:32:53] Speaker 02:
It wasn't.

[00:32:54] Speaker 02:
specific to some question of privilege or anything like that.

[00:32:58] Speaker 02:
They were ultimately admitted, and because we're here reviewing a motion to grant a new trial, the record is the record.

[00:33:08] Speaker 03:
from relying or testifying about those emails?

[00:33:11] Speaker 02:
I believe the judge did preclude Mr. Kennedy from specifically testifying about those emails.

[00:33:16] Speaker 03:
So they weren't part of his consideration.

[00:33:19] Speaker 03:
They're not part of his testimony or his report, the reliance on the emails.

[00:33:22] Speaker 02:
But his testimony was, one of the facts that I considered is that these are licenses that were based on a particular rate.

[00:33:30] Speaker 02:
The jury then gets to evaluate, do I believe that that fact is true or not?

[00:33:35] Speaker 02:
The sufficiency of the evidence test is, is that a fact that if true, if the jury believes it, is sufficient to support his opinion?

[00:33:42] Speaker 02:
So if the jury concludes that these licenses were in fact based on the stated rate,

[00:33:49] Speaker 02:
Will that fact support Mr. Kennedy's use of that information in his opinion?

[00:33:54] Speaker 02:
I don't think there's really a dispute that that would be sufficient facts to support him or be an underpinning of his opinion.

[00:34:01] Speaker 02:
So then the question is, well, is there enough evidence for the jury to conclude that that fact is true?

[00:34:07] Speaker 02:
That's a substantial evidence question, and it's one that we think is more than completely answered by the evidence.

[00:34:15] Speaker 02:
So the email alone we think is confirmatory.

[00:34:19] Speaker 02:
And what happened after that email?

[00:34:20] Speaker 02:
Well, they negotiated and ultimately entered into a contract where the recital that we've seen in various of these agreements

[00:34:27] Speaker 02:
was included in the agreement with Johnson.

[00:34:30] Speaker 02:
There is not one word of contradiction in the Johnson agreement that that's not the rate that's applied.

[00:34:35] Speaker 09:
What the Johnson agreement says is that echo factor believes that x was the rate that was used to calculate.

[00:34:42] Speaker 02:
That's correct.

[00:34:43] Speaker 02:
And Johnson?

[00:34:44] Speaker 09:
Isn't that sufficient?

[00:34:45] Speaker 09:
I mean, there's a risk here, isn't there, that in framing these license agreements, the patentees will put in recycles like that, that they intend to use later on, even though it doesn't really reflect the reality of the agreement?

[00:34:59] Speaker 02:
Well, I think, first of all... Is there such a risk?

[00:35:02] Speaker 02:
I don't really think so.

[00:35:03] Speaker 02:
I mean, Mr. Kennedy testified, for example, that it's incredibly rare to find a provision like this in a license.

[00:35:09] Speaker 02:
He explained that he's not familiar with seeing this almost ever in litigation settlements.

[00:35:14] Speaker 02:
So it's not as though this is a provision that's very common.

[00:35:17] Speaker 02:
He acknowledged and noted that it's unusual to see this kind of a recitation.

[00:35:22] Speaker 02:
He also explained that he didn't just rely on the recitation.

[00:35:26] Speaker 02:
He relied on Mr. Khabib.

[00:35:29] Speaker 02:
who didn't simply say, well, I think that's what we were doing.

[00:35:32] Speaker 07:
What was the purpose of the recitation?

[00:35:36] Speaker 07:
Why did EcoFactor want to have this recital in there at all, given that it has no effect?

[00:35:43] Speaker 02:
Well, I wouldn't necessarily agree that it has no effect.

[00:35:45] Speaker 07:
Well, it has an effect here.

[00:35:47] Speaker 07:
I know that.

[00:35:48] Speaker 07:
I'm talking about it's for purposes of that contract.

[00:35:52] Speaker 02:
Well, I think, you know, if you're an entity that's entering into these agreements and wanting to, you know, maintain your position, you're not only talking to one licensee.

[00:36:05] Speaker 02:
And for the same reasons we're talking about it here, it's important that other licensees

[00:36:10] Speaker 02:
recognize the same rates.

[00:36:12] Speaker 02:
And when ecofactors negotiating with subsequent, they want to be able to say, look, we negotiated based on this rate.

[00:36:18] Speaker 09:
You're making exactly the point I was asking about, that there's a risk that they're putting it in there to use in future negotiations, rather than as a reflection of what actually happens.

[00:36:30] Speaker 02:
I think.

[00:36:31] Speaker 02:
Whether that risk exists or not, I don't think there's evidence that that is what's happening here.

[00:36:37] Speaker 02:
Because as I said, we have evidence from in the Johnson instance where they acknowledged in pre-license negotiation correspondence that they were applying the rate.

[00:36:47] Speaker 07:
Do we know how EcoFactor calculated this very specific number for the rate?

[00:36:54] Speaker 02:
You mean how they decided that that was what they felt it should be?

[00:36:57] Speaker 07:
So how did they calculate it?

[00:36:59] Speaker 07:
Where did they come up with the number where they said, you know, this lump sum payment converts into this very, very specific rate?

[00:37:09] Speaker 02:
Sure, so I think one place, and Mr. Habib talked about that in his testimony at pages 56-70.

[00:37:16] Speaker 07:
They didn't get the sales data, right?

[00:37:18] Speaker 07:
That's where I tried to break it down like that.

[00:37:20] Speaker 02:
He said, how did they do it?

[00:37:22] Speaker 02:
So what he said is, he was asked exactly, where does this come from?

[00:37:26] Speaker 02:
This is at page 56-70.

[00:37:28] Speaker 02:
And he said it comes from his understanding of the market space.

[00:37:33] Speaker 02:
But this is based on his understanding of these competitors and what their sales volumes generally are.

[00:37:40] Speaker 02:
He may not have the precise numbers, but he knows who his competitors are and more or less where they sit in the marketplace.

[00:37:46] Speaker 02:
Did he say that?

[00:37:47] Speaker 02:
Yes.

[00:37:48] Speaker 05:
Where did he say it's based on my knowledge of the competitors and their sales volume?

[00:37:53] Speaker 05:
Because that's what you just said.

[00:37:54] Speaker 05:
And I didn't see that in his testimony.

[00:37:58] Speaker 02:
He speaks to that.

[00:38:01] Speaker 02:
The page that I mentioned.

[00:38:02] Speaker 05:
Page and line number.

[00:38:03] Speaker 02:
Certainly.

[00:38:04] Speaker 02:
So he specifically talks about this when he talks about each of the licenses, which begins at 5764.

[00:38:15] Speaker 02:
Excuse me.

[00:38:18] Speaker 02:
Sorry.

[00:38:19] Speaker 02:
Not 5764.

[00:38:19] Speaker 02:
5667.

[00:38:22] Speaker 05:
And what line number?

[00:38:31] Speaker 02:
As we go along, I'm trying to get you to the precise line, because there was a lot of discussion of these issues.

[00:38:40] Speaker 05:
I just want to see where he said it was based on their sales volume.

[00:38:44] Speaker 09:
He says it at line 21, but then later on he says, I didn't know what the numbers were.

[00:38:51] Speaker 02:
Right.

[00:38:52] Speaker 02:
So right.

[00:38:53] Speaker 02:
And that's thank you.

[00:38:55] Speaker 02:
That's exactly the right line though.

[00:38:56] Speaker 02:
But he says my understanding is that by taking their past and future projected sales and multiplying that,

[00:39:02] Speaker 02:
Now, he talks about his knowledge of each of these entities in the market.

[00:39:06] Speaker 02:
And it's also the case that he talks about his own companies.

[00:39:13] Speaker 05:
But he expressly says later that he had no idea what their projected sales were.

[00:39:17] Speaker 02:
Well.

[00:39:17] Speaker 05:
Or their actual sales.

[00:39:19] Speaker 05:
And no information was provided to him or anyone at Echo Factor.

[00:39:22] Speaker 05:
And he had not derived any information.

[00:39:24] Speaker 05:
He didn't, you know, back at Ambrook, calculate it himself or anything else.

[00:39:28] Speaker 02:
Well, but I think the suggestion.

[00:39:30] Speaker 02:
So I guess I want to push back a little bit on the notion that that's how we test a license agreement.

[00:39:35] Speaker 02:
Because I would argue that this court's prior precedence, when we have license agreements.

[00:39:42] Speaker 02:
The good news is, this is in bank.

[00:39:46] Speaker 02:
True.

[00:39:47] Speaker 02:
I think the court has really consistently, in cases like WordTech or Wixerve and others, sort of pushed back on the notion that an expert can essentially reverse engineer a rate in a lump sum license.

[00:40:00] Speaker 02:
That it should be based on evidence that's more contemporaneous, that's tied to the license itself in some way, not something that is cooked up later and derived in some fashion.

[00:40:11] Speaker 08:
Did you do the trial, did Google object to the admissibility, or to the admission, rather, of this evidence?

[00:40:18] Speaker 02:
No.

[00:40:19] Speaker 02:
This was admitted without objection.

[00:40:22] Speaker 02:
And the jury is entitled to consider it and give it weight.

[00:40:26] Speaker 02:
I think that the problem we have under 702 here is that this isn't a question about whether there were sufficient facts or data to support Mr. Kennedy's opinion.

[00:40:36] Speaker 02:
The facts or data, one of them, and it's certainly not the only one, was, is there a light?

[00:40:42] Speaker 02:
Were there licenses that were based on a particular rate?

[00:40:46] Speaker 02:
He's saying, I take as a fact that there were.

[00:40:49] Speaker 02:
To be sure, that's not an undisputed fact.

[00:40:54] Speaker 02:
But experts aren't required to rely solely on undisputed facts.

[00:40:58] Speaker 02:
And the question for is that fact true or not?

[00:41:01] Speaker 05:
Here's the problem.

[00:41:02] Speaker 05:
For me, Mr. Kennedy walked through three different licenses and said each of these represent the licensee and the licensors agreed upon royalty rate.

[00:41:14] Speaker 05:
What do I do if I see absolutely no evidence that supports that, per se, one of the licenses or two of the licenses?

[00:41:24] Speaker 05:
What do I do then if Mr. Kennedy's testimony hinged on the concept of an industry-wide rate?

[00:41:30] Speaker 05:
Everybody's paying this percentage.

[00:41:33] Speaker 05:
But when, in fact, multiple of those licenses, I can find no record evidence to support it.

[00:41:39] Speaker 05:
What do I do?

[00:41:40] Speaker 02:
So I guess I would disagree with a couple of the premises.

[00:41:42] Speaker 05:
Well, I don't want you to disagree with the premises.

[00:41:44] Speaker 05:
I want to try and figure out what we do from a legal standpoint.

[00:41:46] Speaker 05:
Sure.

[00:41:46] Speaker 05:
Does it then become a sufficiency of the evidence question that the court would look to rather than a question for the jury?

[00:41:55] Speaker 02:
Well, I think, so first, I don't think there's any dispute, and in fact, I think Google's expert conceded this at trial.

[00:42:02] Speaker 02:
One is enough.

[00:42:03] Speaker 02:
One license would be enough to support an opinion in this regard.

[00:42:06] Speaker 02:
I don't think that was contested at trial.

[00:42:09] Speaker 02:
That one, you know, it doesn't need to be three licenses.

[00:42:13] Speaker 02:
Any one would be sufficient.

[00:42:15] Speaker 02:
And I think that that's, I don't think that's a controversial principle.

[00:42:20] Speaker 05:
I think it probably is a controversial principle because, I'll be honest, it doesn't make sense to me in light of what Mr. Kennedy testified to, which was effectively, without using these exact words, this is an industry-wide rate.

[00:42:33] Speaker 05:
And I don't see any testimony by Mr. Kennedy that specifies that the Johnson license in particular is indicative of what the whole industry would pay.

[00:42:41] Speaker 05:
And even worse for you, the Johnson license is the only one that never calls out the patented issue here in this litigation.

[00:42:50] Speaker 05:
particularly and Mr. Kennedy actually testified that we know the value derives from the expressly listed patents and he goes further and says the rest of the portfolio is thrown in for nothing.

[00:43:01] Speaker 05:
So this patent actually falls for the Johnson rate, Johnson license in the category of thrown in for nothing.

[00:43:08] Speaker 02:
Let me start by by saying at a high level I

[00:43:23] Speaker 02:
That I don't I don't think I certainly don't read mr. Kennedy's testimony as saying it's only valid valid information because it's an industry-wide practice in some fashion I don't think he said anything to that effect second.

[00:43:37] Speaker 02:
I don't think On the issue of is the Johnson license well page five seven six seven of the appendix

[00:43:49] Speaker 05:
Starting at line 19, Mr. Kennedy explains, in a hypothetical negotiation, you would consider that.

[00:43:55] Speaker 05:
Google would say, we got two patents here.

[00:43:57] Speaker 05:
These license agreements are for the portfolio.

[00:44:00] Speaker 05:
That's true.

[00:44:01] Speaker 05:
But in the real world, what the focus is on is the asserted patents.

[00:44:04] Speaker 05:
And then when the Green New is done, the rest of the patents are usually thrown in either for nothing but for very little additional value.

[00:44:13] Speaker 05:
And with regard to the Johnson license, do I remember the facts correctly that the patent at issue in this litigation is not called in.

[00:44:20] Speaker 05:
It's in the category of thrown in for little to nothing.

[00:44:23] Speaker 02:
So the Johnson license, first of all, I think the issue you're raising about does the Johnson license relate to this patent and is it adequately adjusted for that, that's more of an apportionment question that the court has indicated is not the subject of this proceeding.

[00:44:37] Speaker 05:
No, you said any one of these licenses, you brought this up by saying any one of these licenses could establish an industry wide rate with regard to this patent.

[00:44:48] Speaker 05:
And I'm saying the one license, the only license you've talked about,

[00:44:52] Speaker 05:
your own expert said was basically thrown in for nothing.

[00:44:57] Speaker 02:
And you disagree with that because what he pointed to was the technical expert's opinion explaining that although this – and he also discussed this – that although this particular patent was not one of the asserted ones, a related patent that covered the exact same benefit and that conveyed the exact same benefit technologically to the licensee,

[00:45:15] Speaker 02:
was included, and that's what made it technologically and relevantly comparable.

[00:45:20] Speaker 02:
And that wasn't meaningfully disputed at all.

[00:45:22] Speaker 05:
If I think it's important that we have to also look at what Mr. Kennedy said about Schneider and Deakin in order to assess the reliability of his testimony, what is your best evidence on those two licenses and why they established that the licensee was willing to pay X-Rate?

[00:45:42] Speaker 02:
Sure.

[00:45:43] Speaker 02:
So in the case of Deakin,

[00:45:44] Speaker 02:
Let's start there.

[00:45:46] Speaker 02:
In Deiken, there was once again pre-licensed negotiation correspondence.

[00:45:52] Speaker 02:
Now, it wasn't presented to the jury, but it was something Mr. Kennedy relied upon, and it was addressed in the Dalgert motion presented in his report and to the court.

[00:46:01] Speaker 02:
But there was also a pre-licensed negotiation correspondence specific to this rate in connection with the Deiken agreement.

[00:46:08] Speaker 02:
That's at page 16.

[00:46:09] Speaker 09:
Did he testify about that before the jury?

[00:46:11] Speaker 02:
He did not testify about it before the jury, but it is.

[00:46:14] Speaker 02:
If the question is, did he have information on which he could rely, it's information he relied upon.

[00:46:19] Speaker 02:
He didn't necessarily have to cite every piece.

[00:46:22] Speaker 02:
I mean, we're kind of cutting back.

[00:46:24] Speaker 09:
We have to judge him by what he said, not by what he might have said.

[00:46:29] Speaker 02:
I think it's information he relied upon.

[00:46:32] Speaker 02:
He also had Mr. Habeed's testimony about the market and information specifically.

[00:46:37] Speaker 05:
But where is it in the record?

[00:46:38] Speaker 05:
And the reason I ask is because Judge Prost asked you about a colloquy back and forth between your client and Judge Albright.

[00:46:46] Speaker 05:
And your client represented to Judge Albright that Mr. Kennedy was relying exclusively on the licenses.

[00:46:53] Speaker 05:
that he was not relying on anything else.

[00:46:56] Speaker 05:
And so that, I'm a little confused about how now he's relying on a document that's not in the record and that I have no access to.

[00:47:03] Speaker 05:
And he wasn't presented to the jury, and he offered no testimony on, and he didn't discuss anywhere.

[00:47:08] Speaker 02:
It is in the record.

[00:47:09] Speaker 02:
It's at page 1618 of the appendix, to be clear.

[00:47:13] Speaker 02:
The email I'm referring to is at page 1618 of the appendix.

[00:47:18] Speaker 02:
It was an exhibit in opposition to the Daubert motion presented to the district court.

[00:47:23] Speaker 02:
So I kind of dispute the characterization of what was done there.

[00:47:30] Speaker 02:
And I don't think that's really what was said at the hearing either.

[00:47:35] Speaker 02:
But in that case, in that instance, as I said, the Diken license, there was this pre-license negotiation correspondence as well.

[00:47:43] Speaker 02:
Once again, the recitation.

[00:47:45] Speaker 02:
Once again, Mr. Khabib's testimony about his understanding based on the market in which he operates, that that's a reasonable conclusion, and that this is not something.

[00:47:54] Speaker 05:
But also, again, this email at 161A is simply an email from Echo Factor saying what it wants for a royalty.

[00:48:05] Speaker 05:
And indicate what the licensee is paying.

[00:48:08] Speaker 02:
Well, you're right, Your Honor.

[00:48:09] Speaker 02:
It says what the licensee wants.

[00:48:10] Speaker 02:
It follows an email from Deikin offering a certain amount.

[00:48:15] Speaker 02:
An eco factor says, well, the license needs to be based on this rate.

[00:48:20] Speaker 03:
Is it Deikin or Johnson?

[00:48:21] Speaker 02:
Deikin, we're talking about now.

[00:48:23] Speaker 02:
And DICAN – DICAN has given that response.

[00:48:27] Speaker 02:
No, it has to be based on this rate.

[00:48:29] Speaker 02:
And ultimately, the negotiated license is about 50 percent higher number in the lump sum than what DICAN had originally proposed before receiving that email about the rate.

[00:48:41] Speaker 02:
So DICAN proposed a number of approximately $1 million.

[00:48:44] Speaker 02:
The end license was about 1.5, as I recall, 1.6.

[00:48:49] Speaker 02:
This is part of the negotiation that a reasonable fact finder could consider, certainly, and certainly that Mr. Kennedy could consider, in determining is this really how these licensees paid this rate, if that's even a rule 702 question.

[00:49:04] Speaker 02:
With respect to Schneider, I think there's been some colloquy already about the language of the clause itself, that Schneider negotiated language that reasonably can be understood as indicating that they were paying this rate.

[00:49:18] Speaker 09:
If that's all true, why isn't it possible for you to make the case and to provide your expert with a basis for his opinion to call the Schneider and Deakin and Johnson witnesses and have them testify as to what their understanding was so that there's a sound basis for the expert opinion?

[00:49:37] Speaker 09:
Why is that not possible?

[00:49:39] Speaker 02:
I don't necessarily want to suggest it's impossible.

[00:49:41] Speaker 02:
I just don't think it's necessary.

[00:49:43] Speaker 02:
I think the question becomes, is there substantial evidence for which a fact finder could reach the factual conclusion that these licenses were based on this rate?

[00:49:53] Speaker 02:
There definitely is.

[00:49:54] Speaker 02:
Once that's true, this is a question for the jury, not for a judge to decide.

[00:50:00] Speaker 06:
As the proponent of the expert testimony, you agree that the burden is on you to show that it meets all of the requirements of 702.

[00:50:07] Speaker 06:
And by not subpoenaing

[00:50:09] Speaker 06:
the licensees, I guess you are taking the risk that you are not going to meet that burden.

[00:50:14] Speaker 02:
I agree that it's the burden of the proponent to satisfy the requirements of 702, but let's be clear about what the requirements of 702 are.

[00:50:24] Speaker 02:
702 requires that an expert's opinion be based on sufficient facts or data.

[00:50:30] Speaker 02:
The fact or data is there are licenses there at this rate.

[00:50:35] Speaker 02:
It's not sufficient evidence to prove that that fact is true.

[00:50:39] Speaker 02:
That's not what 702 demands because that's a question of how do you assess the factual truth of the fact that the expert is using in his opinion.

[00:50:49] Speaker 02:
Obviously, I don't think there's any dispute that

[00:50:52] Speaker 02:
Experts need not rely on undisputed evidence only, or that if an evidence is controversial, the expert can't rely on it.

[00:51:00] Speaker 02:
Experts can rely on disputed facts.

[00:51:02] Speaker 02:
That's painfully clear in the advisory committee notes to writing Rule 702, that that's not what the rule is about.

[00:51:09] Speaker 02:
It's not about resolving the factual dispute of is the fact that the expert is considering true.

[00:51:14] Speaker 02:
It's about is the fact, if it's true, sufficient to support the opinion.

[00:51:19] Speaker 07:
There's a confusion here, though, because what you just said really could be going to wait and not admissibility.

[00:51:27] Speaker 07:
And we have to try to understand

[00:51:31] Speaker 07:
whether the expert's basis for his opinion was based on sufficient facts.

[00:51:38] Speaker 07:
I mean, that's step one before we get to the weight of the ultimate question of what could the jury decide was the actual rate.

[00:51:49] Speaker 07:
We have to figure out whether the experts allowed in the front end, even applying on these contested questions.

[00:51:56] Speaker 07:
And so therefore,

[00:51:58] Speaker 07:
702 has some work to do.

[00:52:00] Speaker 07:
And so you have to acknowledge that and try to explain to us where the line is between admissibility and weight.

[00:52:09] Speaker 02:
So I agree with you that 702 does have some work to do.

[00:52:13] Speaker 02:
But I think the work to do for 702 in this specific context is if that fact is proven to be true, is it sufficient?

[00:52:22] Speaker 02:
Is that a sufficient fact?

[00:52:24] Speaker 07:
But what if there are times where

[00:52:26] Speaker 07:
What you are relying on is just two, two slender of a read.

[00:52:30] Speaker 07:
Sure.

[00:52:31] Speaker 07:
And be something that anybody could regard as a sufficient fact.

[00:52:35] Speaker 07:
And I think that- And if they were just to isolate down on the Johnson license, and we just had this one bare recital with nothing else to go on, I guess the question is, why is that alone?

[00:52:51] Speaker 07:
enough to be deemed a sufficient fact under these circumstances?

[00:52:54] Speaker 02:
Sure.

[00:52:57] Speaker 02:
Let's be clear.

[00:52:58] Speaker 02:
I don't think the Johnson license, again, is it a sufficient fact that the license was based on this rate?

[00:53:06] Speaker 02:
That's the sufficient fact question.

[00:53:08] Speaker 02:
There is a separate question.

[00:53:11] Speaker 01:
Isn't the question whether licenses bear recital of a rate?

[00:53:17] Speaker 01:
Whether that is a sufficient fact to support the conclusion that at rate represents both the licensee and the licensors view of what the rate was.

[00:53:29] Speaker 02:
So I think that this gets to a question not so much.

[00:53:33] Speaker 01:
Yes or no?

[00:53:33] Speaker 01:
Do you think that is the question or do you have a different framing of the question?

[00:53:39] Speaker 02:
I have a different framing of the question.

[00:53:40] Speaker 02:
Okay.

[00:53:40] Speaker 02:
So I think that what you're addressing is how much evidence is there to support that fact?

[00:53:46] Speaker 01:
And is there enough evidence?

[00:53:48] Speaker 02:
And that is actually the question that I would argue is part of 702A, the relevance question.

[00:53:56] Speaker 02:
The courts have consistently looked to that relevance question as, is there a tie?

[00:54:01] Speaker 02:
So let's say the expert says, I'm assuming fact x.

[00:54:05] Speaker 02:
But there's nothing anywhere in the record that has any bearing on Fact X or that might tend to show that Fact X is true.

[00:54:11] Speaker 02:
That would make the opinion, while perhaps based on sufficient facts, irrelevant under 702A because it's not actually connected to the evidence.

[00:54:20] Speaker 02:
That's the circumstance in which there's an opportunity to evaluate, is there some evidence that a reasonable fact finder could look at and say, OK, I believe that this fact is true.

[00:54:34] Speaker 02:
But that's the level of inquiry.

[00:54:35] Speaker 02:
It's not, do I, the district judge, decide that I believe the fact to be true.

[00:54:42] Speaker 02:
The drafters of Rule 702 made very clear that's not the test.

[00:54:45] Speaker 02:
that the test is, do I believe at most that it's sufficiently tied to evidence that's going to be coming in in the record such that a reasonable fact finder could decide, yes, that fact is true.

[00:55:00] Speaker 02:
And that's a question that we review, obviously, through the lens of after a trial, facts supporting the verdict, and is there sufficient evidence

[00:55:10] Speaker 02:
I would like to just briefly touch on, I know we've talked about.

[00:55:14] Speaker 06:
I want to ask before you do that, one of the problems I have here is we don't really have much, if any, explanation from Judge Albright as to how he evaluated all of this.

[00:55:23] Speaker 06:
And your friends Google cite a Carlson case from the Fifth Circuit that says, at minimum, the district court must create a record of its Daubert inquiry and articulate its basis for admitting expert testimony.

[00:55:35] Speaker 06:
You don't respond to that.

[00:55:38] Speaker 06:
Did Judge Albright comply with what the Fifth Circuit requires for a Daubert inquiry?

[00:55:43] Speaker 06:
And if he didn't, why shouldn't we send it back and tell him to do it again?

[00:55:46] Speaker 02:
He did comply.

[00:55:47] Speaker 02:
living for both of those pieces.

[00:55:49] Speaker 02:
He did comply.

[00:55:50] Speaker 02:
First, in Carlson, the facts were that the expert that basically was offered a trial, the district judge admitted the expert without having any proceeding of any kind as to whether there was a reliability problem, whether it met 702 or not.

[00:56:06] Speaker 02:
And the court ultimately determined that that expert should never have been allowed to testify, wasn't a qualified expert.

[00:56:12] Speaker 02:
And therefore, should have not been permitted to testify.

[00:56:16] Speaker 02:
And that the court should have.

[00:56:17] Speaker 06:
And maybe it's not as bad as that.

[00:56:18] Speaker 06:
But what did Judge Albright do?

[00:56:20] Speaker 06:
And why shouldn't we ask him to do it again?

[00:56:22] Speaker 02:
So what Judge Albright did was he received extensive briefing on a fully

[00:56:27] Speaker 02:
brief downward motion with hundreds and hundreds of pages of exhibits and evidence supporting why the opinion was admissible.

[00:56:34] Speaker 02:
He heard oral argument and asked questions about whether, in fact, there would be evidence coming into the record through a witness.

[00:56:40] Speaker 06:
Did he articulate his basis for admitting the expert testimony of Kennedy?

[00:56:45] Speaker 02:
I don't believe he articulated in so many words that's the basis.

[00:56:49] Speaker 03:
I think we heard counsel... He said in so many words.

[00:56:51] Speaker 03:
Did he say anything more than deny?

[00:56:54] Speaker 02:
He stated that he didn't believe that it was inadmissible, which is the conclusion.

[00:56:59] Speaker 02:
He didn't state a reason for that conclusion in that form.

[00:57:03] Speaker 06:
So why shouldn't we have him do it again?

[00:57:05] Speaker 02:
Well, for two reasons.

[00:57:06] Speaker 02:
And it does actually dovetail with my last point, which is the first...

[00:57:12] Speaker 02:
If his opinion, if the testimony was admissible, whether he said it correctly or not, there's no basis to remand just to do the trial over again.

[00:57:21] Speaker 02:
And indeed, the cases make pretty clear that are cited by Google and others in the amici that that's not appropriate.

[00:57:29] Speaker 02:
There's a number of cases that basically say it's pointless for an appellate court to send him out of back to have a retrial with the same evidence.

[00:57:37] Speaker 02:
That makes no sense.

[00:57:39] Speaker 02:
The second point is really the last one I wanted to hit on, which is the harmless error problem, which is never addressed by people.

[00:57:46] Speaker 00:
Did Mr. Kennedy at trial testify that, in his view, these licenses do reflect the

[00:57:55] Speaker 00:
rate has agreed upon, or did he say, on the assumption that they do, I think that's a good basis for a royalty?

[00:58:03] Speaker 02:
So I think his testimony was essentially the licenses.

[00:58:07] Speaker 02:
He said essentially the true facts.

[00:58:09] Speaker 02:
The license says this, and I spoke to Mr. Habib about them.

[00:58:12] Speaker 02:
And so these are licenses at that rate.

[00:58:18] Speaker 02:
He didn't say, I analyzed it and made that conclusion.

[00:58:21] Speaker 00:
It's not an opinion.

[00:58:22] Speaker 00:
So the structure of his testimony

[00:58:28] Speaker 00:
to be, namely, on the assumption that this fact is established elsewhere, here's a conclusion about not the agreed upon.

[00:58:38] Speaker 00:
You want to put these licenses reflect an agreed upon rate at x. You want to put that as the premise and Kennedy as merely drawing an inference about what, therefore, a reasonable royalty rate.

[00:58:51] Speaker 00:
I take it the other framing is he actually testified to

[00:58:58] Speaker 00:
to what the agreements agreed on.

[00:59:01] Speaker 02:
He testified that that was the nature of the agreements as sort of a factual matter, which had been testified to already by Mr. De Beattie.

[00:59:11] Speaker 00:
And that testimony might be quite wavy in the jury.

[00:59:14] Speaker 02:
I wouldn't necessarily agree with that, because the same rate, for example, comes in.

[00:59:19] Speaker 02:
I think we heard that the licenses come in.

[00:59:21] Speaker 02:
The jury sees that.

[00:59:23] Speaker 02:
The jury sees that that's EcoFactor's expectation, that it's EcoFactor's belief.

[00:59:28] Speaker 02:
All of which lead to this harmless error problem.

[00:59:30] Speaker 02:
But separate from that, there were multiple independent bases, and we laid them out in our brief, why the verdict stands on other evidence unrelated.

[00:59:39] Speaker 02:
OK.

[00:59:39] Speaker 05:
Counsel, I thank you for your argument.

[00:59:41] Speaker 05:
Ms.

[00:59:42] Speaker 05:
Gander, how much time does she have left?

[00:59:44] Speaker 05:
I'll give her five minutes, because that will balance out the time.

[00:59:46] Speaker 05:
Thank you.

[00:59:57] Speaker 04:
Thank you.

[00:59:57] Speaker 04:
I'd just like to make a couple of quick points.

[00:59:59] Speaker 04:
So first, in response to your question, Joe Stirling, your question.

[01:00:02] Speaker 08:
Let me get away too far.

[01:00:04] Speaker 08:
I wanted to address something that was coming up when your friend was arguing.

[01:00:11] Speaker 08:
Now, you, the expert, admitted that just one license can be sufficient to support an expert's challenge and opinion, correct?

[01:00:18] Speaker 04:
He said that in the abstract, it's possible that one could be enough.

[01:00:21] Speaker 04:
It is not enough here.

[01:00:23] Speaker 04:
And let me explain why.

[01:00:24] Speaker 04:
It's because he did say that.

[01:00:26] Speaker 08:
It is possible that one license.

[01:00:28] Speaker 04:
It is possible.

[01:00:28] Speaker 04:
But the testimony would have had to be very different here in Kennedy than the testimony of one.

[01:00:33] Speaker 08:
You did not argue with him that the Johnson license here was not enough.

[01:00:39] Speaker 04:
Yes, we argued that you would still have to order a new trial, even if you thought the Johnson license was enough alone.

[01:00:45] Speaker 08:
That doesn't answer my question.

[01:00:47] Speaker 04:
We said that it was not enough alone.

[01:00:48] Speaker 04:
It's not enough because it only has the unilateral whereas clause, which doesn't go far enough.

[01:00:53] Speaker 04:
You still have to order a new trial because the testimony would have had to be totally different.

[01:00:57] Speaker 04:
What can it be testified to?

[01:00:58] Speaker 08:
If the Johnson license is enough, then the relevancy of the other two licenses doesn't matter.

[01:01:06] Speaker 04:
I think, well, I do think that they should fall out.

[01:01:08] Speaker 04:
The Johnson license is not enough because it just has the unilateral clause.

[01:01:12] Speaker 04:
There's still the same analytical gap.

[01:01:14] Speaker 04:
And the damages theory would have had to be very different.

[01:01:16] Speaker 04:
What Kennedy testified to over and over was all three licenses paid this rate.

[01:01:21] Speaker 04:
It is essentially an established rate.

[01:01:23] Speaker 04:
And therefore, Google should pay the same.

[01:01:24] Speaker 04:
That's at 57, 78 to 79.

[01:01:26] Speaker 04:
Google should pay the same rate as comparable licenses.

[01:01:29] Speaker 04:
he would have had to say something very different if it were only the Johnson license, because that license didn't include the assertive patents, and he would have had to make a lot of adjustments in the apportionment analysis.

[01:01:39] Speaker 04:
Now, if I could just make two quick points.

[01:01:41] Speaker 04:
The first is that, as I was just saying, I think there's no question about what Kennedy actually testified to here.

[01:01:46] Speaker 04:
He testified over and over again that these licensees agreed to use the X royalty rate, and that's why he was so powerful in the damages analysis.

[01:01:54] Speaker 04:
That was the entire theory of damages.

[01:01:55] Speaker 04:
It was the keystone

[01:01:56] Speaker 04:
of their theory, having chosen to have Kennedy testify that the licensees agreed to pay that rate, eco-factor subjected that assertion to the strictures of Rule 702.

[01:02:08] Speaker 04:
So that is what had to be supported.

[01:02:10] Speaker 06:
But that is all in the context of an opinion.

[01:02:13] Speaker 06:
The jury was not misled that he was a fact witness, and he's saying as a factual matter the licensees agreed to it.

[01:02:20] Speaker 06:
It's all in the context of, hey,

[01:02:22] Speaker 04:
as an expert

[01:02:39] Speaker 04:
And I think that these licenses reflect the fact that the licensees paid the X rate.

[01:02:45] Speaker 04:
That is incredibly powerful.

[01:02:46] Speaker 04:
That's exactly why EcoFactor had him testify to that, because that made the damages analysis as a whole incredibly intuitive.

[01:02:54] Speaker 04:
All the licensees paid this.

[01:02:55] Speaker 04:
Google should pay it too.

[01:02:56] Speaker 04:
That's what's fair.

[01:02:57] Speaker 04:
That was the testimony.

[01:02:58] Speaker 04:
And the final point I'd like to make is that I think there is really an important role for this court on lock as an appellate court

[01:03:05] Speaker 04:
in thinking about Rule 702 and enforcing the Outer Bounds of Rule 702.

[01:03:10] Speaker 04:
As this court said, the way we think about expert testimony and reliability is informed by the legal principles that govern the patent damages analysis.

[01:03:20] Speaker 04:
And then the other thing the court has recognized is that those legal principles, what's permissible and what's not at trial, affect primary conduct by patentees and by defendants.

[01:03:30] Speaker 04:
And so I think it's incredibly important here to keep in mind

[01:03:32] Speaker 04:
the principles at stake.

[01:03:35] Speaker 04:
And I think there are a couple that dovetail here.

[01:03:37] Speaker 04:
The first is that the court has repeatedly said that lump sum licenses are not probative of a royalty rate unless there's some basis, some reliable basis to transfer.

[01:03:46] Speaker 04:
to translate the lump sum to the royalty rate.

[01:03:49] Speaker 04:
And then the other thing the court has said that I think is really important here is that while patenting proposals, patenting offers can be relevant, they aren't the be all and end all.

[01:03:57] Speaker 04:
They can't themselves establish what the rate should be in the damages analysis, because the patentee has a natural incentive to inflate the rate.

[01:04:07] Speaker 04:
And so when you put those things together,

[01:04:10] Speaker 05:
Patentee has to come in if it's going to say that these lump-sum licenses are what should be used as comparable licenses It has to proper a reliable basis and count to transfer even just be the patentee that would have that incentive in this case when each of the licensees have an incentive to have an inflated royalty rate that doesn't correspond to what they actually are

[01:04:27] Speaker 05:
paid because then their competitors would have to pay that higher premium?

[01:04:32] Speaker 04:
Well I guess I can't really speak to what the what incentives the licensees would have.

[01:04:36] Speaker 04:
They might have an incentive to not admit that there's any particular royalty rate.

[01:04:39] Speaker 04:
I think what's clear is that they don't have an incentive to negotiate the unilateral

[01:04:42] Speaker 08:
Was there an objection made, and I asked this question to the other side, an objection made at trial as to the admission?

[01:04:51] Speaker 08:
Yes, we preserved an admission.

[01:04:53] Speaker 04:
It was pre-trial and emotion eliminated?

[01:04:55] Speaker 04:
No, no, no.

[01:04:55] Speaker 08:
I mean, during the trial, when the actual evidence was admitted and submitted for consideration of the jury, was there an objection at that time?

[01:05:03] Speaker 04:
We didn't need to make an objection.

[01:05:05] Speaker 04:
There was not.

[01:05:05] Speaker 04:
There was not.

[01:05:06] Speaker 04:
We didn't need to, because under Rule 103B.

[01:05:08] Speaker 04:
I'm sorry.

[01:05:08] Speaker 08:
I didn't hear you.

[01:05:09] Speaker 08:
You said no.

[01:05:09] Speaker 04:
There was not an objection at trial in the moment, because under Rule 103B, we didn't have to make one, because we had preserved it in the motion in Lemonade.

[01:05:16] Speaker 04:
And if I could just make one final point, because going back to the point about how the rules were going to be.

[01:05:22] Speaker 08:
Let me hear something.

[01:05:24] Speaker 08:
It's important to me, because if parties are allowed to seek a new trial,

[01:05:30] Speaker 08:
on the basis of evidence that they did not object to its admission, it seems to me that that kind of sets up the whole process where a party can wait until they get the verdict, make a determination as to whether they like the verdict or not, and then file a motion.

[01:05:46] Speaker 08:
And the way to prevent that is by requiring that there be an objection at the point of admissibility during the trial itself, the admissibility that mission into evidence.

[01:05:57] Speaker 04:
Well, I think under Rule 103B, there wasn't required to be an objection at trial.

[01:06:02] Speaker 04:
So Google complied with 103B by objecting pre-trial.

[01:06:05] Speaker 04:
And I would say that even if you thought that the rate in the licenses was appropriate, I think the testimony was not reliable for all the reasons we've been talking about.

[01:06:13] Speaker 04:
But it's just the last point I'd like to make, just going back to this idea of how the rules affect the conduct.

[01:06:18] Speaker 04:
You know, my friend on the other side said that this kind of unilateral clause just asserting a rate in a license is rare.

[01:06:24] Speaker 04:
It will not be rare in the future if this kind of, if this expert testimony is upheld.

[01:06:30] Speaker 04:
Patentage could enter into small, lump sum licenses.

[01:06:33] Speaker 04:
They could insert unilateral assertions about what the rate they think should be.

[01:06:38] Speaker 04:
Licensees would have little incentive to protest in many cases.

[01:06:41] Speaker 04:
And they could use expert testimony to transform those unilateral assertions into authoritative expert testimony that the licensees actually agree to this rate that I think will undermine the jury's ability to reach fair and apportioned verdicts.

[01:06:54] Speaker 04:
And it will ultimately harm innovation.

[01:06:55] Speaker 04:
So I think for that reason, the court should police the outer bounds of Rule 702 here and order a new trial.

[01:07:00] Speaker 04:
I thank both counsels in this case for taking their submissions.