Wednesday, November 24, 2021

Another Decision Excluding All Evidence on Damages

The case is NexStep, Inc. v. Comcast Cable Communications, LLC, Civil Action No. 19-1031-RGA (D. Del. Nov. 17, 2021).  I first read about it in an article by Ryan Davis on Law360, titled Fed. Cir. Case Sunk Bid for $600M Damages in Comcast Trial and published on November 19.  Basically, Judge Andrews reads the Federal Circuit's August 2021 decision in MLC Intellectual Property, LLC v. Micron Technology, Inc. (for previous discussion of which, see here, here, and here) as authorizing the exclusion of opinion testimony on damages where a party fails to "meet the disclosure requirements of [Federal Rule of Civil Procedure] Rule 26(a)" (p.6).  More precisely, the court had previously granted Comcast's motion to exclude testimony by the plaintiff's proposed expert witness that an appropriate royalty rate for the patents in suit would be 40%, based on the cost savings resulting from the use of the patents (pp. 2, 5).  (It's not clear from the November 17 decision what the proposed base would have been.)  Then on the Friday before trial, NexStep proposed that its CEO be allowed to testify that a 30% royalty rate would be appropriate (p.2).  According to Judge Andrews

It is not as though NexStep provided alternative damages theories, and the exclusion of one leaves another one to be litigated. NexStep simply has cobbled together a new theory using some parts of the old theory and some parts that were previously ignored by both sides.

The Pennypack factors counseled in favor of my decision to exclude NexStep’s damages theory under Rule 37(c)(1). There was no bad faith on NexStep’s part, but the inclusion of such evidence would have been prejudicial to Comcast and Comcast would have been unlikely to be able to cure that prejudice. Comcast had been preparing to respond to an expert’s opinion on NexStep’s royalty rate, not factual testimony. Allowing the new theory would have meant that Comcast could not have obtained targeted discovery around the factual basis of the theory (p.6).

According to Mr. Davis, the court had previously rejected NexStep's argument that courts are obligated to award some royalty for the infringement of a valid and infringed patent, even in the absence of damages evidence.  I believe the court was right to reject that argument, based on (among other things) the Federal Circuit's decision in TecSec, Inc. v. Adobe Inc., 978 F.3d 1278 (Fed. Cir. 2020), previously mentioned on this blog here.  I will probably add some discussion of NexStep to my draft article titled Nominal Damages-and Nominal Damages Workarounds-in Intellectual Property Law, which I am planning to send out to the journals in the spring.

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