Introduction

MLC Intellectual Property, LLC (“The Appellant”) instituted an action against Micron Technology, Inc. (“The Respondent”) on patent infringement. The Appellant brought the suit before the United  States  District  Court for the Northern District of California (“The District Court”).

The alleged patent infringement was in respect of computer memory. Particularly memory chips that could store more than one bit of memory per cell. The patent’s claim was an apparatus for programming an electrical alterable non-volatile memory cell with more than two predetermined memory states. The Appellant relied on an expert (“Mr. Milani”) to provide a damages opinion.

Discussion

Mr. Milani relied primarily on license agreements between the Appellant’s predecessor and third parties (including Hynix and Toshiba). Accordingly, the Respondent filed three motions in limine concerning Mr. Milani’s expert opinion. 

The first motion sought to preclude Mr. Milani from providing an opinion on Hynix and Toshiba’s agreement reflecting a 0.25% royalty rate, while the second motion was to strike out a particular portion of Mr. Milani’s expert report on the licenses’ documents. Finally, the third motion sought to preclude Mr. Milani from offering any opinion concerning reasonable royalty because Mr. Milani failed to apportion out the value of non-patented features.

The District Court granted all the three motions of the Respondent. Then, proceeded to certifying the three damages orders for interlocutory appeal pursuant to 28 U.S.C section 1292(b).

The Respondent brought an interlocutory appeal before the United States Court of Appeal (“The Federal Circuit”). The Federal Circuit granted the petition for an interlocutory appeal and affirmed the District Court’s ruling.

The Federal Circuit found that Mr. Milani’s opinion relating to the 0.25% royalty rate rested on an inference. The inference was from the most favored customer clause that went beyond what the whole clause implied and untethered evidence presented. The Federal Circuit relied on existing decisions regarding lump sum payment and unsupported conversions to royalty rates.

The Federal Circuit stated that Mr. Milani’s opinion would have been proper if he merely asserted the considered royalty rate. Accordingly, the royalty rate in favored customer provision reflects a relevant consideration for evaluating reasonable royalty.

However, the Federal Circuit pinpointed that Mr. Milani crossed the line when he stated that he understood the 0.25% rate applied to Hynix’s sales worldwide. Thus, Mr. Milani’s characterization of the agreements rendered his opinion unreliable.

In addition, the Federal Circuit addressed the District Court’s exclusion of information under Rule 37(c)(1) of the District Court Rules. It also rejected the Appellant’s argument that it was not required to disclose specific facts and documents (particularly facts and documents that supported the Appellant’s damages theory during fact discovery) because the facts and documents were ultimately disclosed during expert discovery.

Conclusion

The Federal Circuit noted that the District Court was afforded broad discretion in applying Rule 37(c)(1) to exclude the “failed to be provided” principle in Rule 26. The District Court was found to have acted well within the discretion by rejecting Mr. Milani’s opinion.

Source: https://cafc.uscourts.gov/sites/default/files/opinions-orders/20-1413.OPINION.8-26-2021_1825247.pdf 

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