BACKGROUND

Plaintiff S3G Technology LLC (“S3G”) accuses Defendant UniKey Technologies, Inc. (“UniKey”) of infringing U.S. Patent Nos. 9,081,897 (“the '897 Patent”); 8,572,571 (“the '571 Patent”); and 9,304,758 (“the '758 Patent”), collectively “the patents-in-suit.” Doc. No. 1. The patents-in-suit generally relate to a “computerized system to provide efficient modification of remote software.” '897 Patent at 1:18-19.

Phil Dumas is UniKey's Chief Executive Officer, who will serve as UniKey's technical expert on the accused technology and will rebut Plaintiff's retained technical expert, David Cartt. Doc. No. 92 at 3. Tam Hulusi is UniKey's Executive Vice President and a member of UniKey's Board of Directors, who will serve as UniKey's damages expert and as a rebuttal expert for Plaintiff's retained damages expert, Nick Burkett. Doc. No. 92 at 3.

APPLICABLE LAW

Under Federal Rule of Evidence 702, a witness who is qualified as an expert by knowledge, skill, experience, training or education may testify in the form of an opinion or otherwise if: (a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case.

The trial judge has a gate-keeping role to ensure that expert testimony is relevant and reliable. Daubert v. Merrill Dow Pharm., Inc., 509 U.S. 579 (1993). Indeed, “[t]he proponent [of the expert testimony] need not prove to the judge that the expert's testimony is correct, but she must prove by a preponderance of the evidence that the testimony is reliable.” Moore v. Ashland Chemical, Inc., 151 F.3d 269, 276 (5th. Cir. 1998). “The reliability prong [of Daubert] mandates that expert opinion ‘be grounded in the methods and procedures of science and ... be more than unsupported speculation or subjective belief.’ ” Johnson v. Arkema, Inc., 685 F.3d 452, 459 (5th Cir. 2012) (quoting Curtis v. M & S Petroleum, Inc., 174 F.3d 661, 668 (5th Cir. 1999) ).

Factors to consider in determining whether a proposed expert's methodology is scientifically valid or reliable are:

See Daubert, 509 U.S. at 593–95. A court must decide whether the Daubertfactors are appropriate, use them as a starting point, and then ascertain if other factors should be considered. Hathaway v. Bazany, 507 F.3d 312, 318 (5th Cir. 2007).

*2 In Kumho Tire Company, Limited v. Carmichael, the Supreme Court applied the Daubert principles to technical or specialized expert testimony. 526 U.S. 137 (1999). The Court explained that the overarching goal of Daubert's gate-keeping requirement is to “ensure the reliability and relevancy of expert testimony. It is to make certain that an expert, whether basing testimony upon professional studies or personal experience, employs in the courtroom the same level of intellectual rigor that characterizes the practice of an expert in the relevant field.” Id. at 152. A trial court has the discretion to exclude expert testimony if there is “simply too great an analytical gap” between the expert's reasoning and the conclusion. Gen. Elec. Co. v. Joiner, 522 U.S. 136, 146 (1997).

“At base, ‘the question of whether the expert is credible or the opinion is correct is generally a question for the fact finder, not the court.’ ” Eidos Display, LLC v. Chi Mei Innolux Corp., No. 6:11-CV-201-JRG, 2017 WL 1079441, at *2 (E.D. Tex. Mar. 22, 2017) (quoting Summit 6, LLC v. Samsung Elecs. Co., Ltd., 802 F.3d 1283, 1296 (Fed. Cir. 2015) ). “Under Rule 702, the question is whether the expert relied on facts sufficiently related to the disputed issue.” i4i Ltd. P'ship v. Microsoft Corp., 598 F.3d 831, 856 (Fed. Cir. 2010), aff'd, 564 U.S. 91 (2011). “To properly carry this burden, the patentee must ‘sufficiently [tie the expert testimony on damages] to the facts of the case.’ ” Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1315–16 (Fed. Cir. 2011) (citation omitted). “Questions about what facts are most relevant or reliable to calculating a reasonable royalty are for the jury.” i4i Ltd. P'ship, 598 F.3d at 856. “The jury [is] entitled to hear the expert testimony and decide for itself what to accept or reject.” Id.

“Daubert and Rule 702 are safeguards against unreliable or irrelevant opinions, not guarantees of correctness.” Id. at 854. Also, the “existence of other facts ... does not mean that the facts used failed to meet the minimum standards of relevance or reliability.” Id. at 855–56. For example, “any reasonable royalty analysis necessarily involves an element of approximation and uncertainty.” Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1325 (Fed. Cir. 2009) (citation and internal quotation omitted).

Witnesses who are not retained by a party are not required to provide a written report. Fed. R. Civ. P. 26(a). Federal Rule of Civil Procedure 26(a)(2)(C) dictates that the disclosure for unretained experts must state:

DISCUSSION

Plaintiff seeks to exclude Hulusi's damages opinion and Dumas's rebuttal opinion as set forth in Defendant's Rule 26(a)(2)(C) disclosures. Doc. No. 90 at 1.

I. Hulusi's Expert Opinion Regarding Settlement Licenses

Plaintiff seeks to exclude the entirety of Hulusi's expert opinions because of his reliance on prior settlement agreements. Id. Plaintiff argues that Defendant's Rule 26(a)(2)(C) disclosure indicates that Hulusi intends to rely on: (1) a UniKey Settlement Agreement involving a patent unrelated to the patents-in-suit without demonstrating its technical or economic comparability; and (2) an OpenKey Settlement Agreement that Hulusi has not reviewed and cannot review. Id.

Plaintiff generally argues that the use of prior settlement licenses would likely confuse the jury and are inadmissible under Federal Rule of Evidence 403. See Doc. No. 90 at 7-8. However, the Federal Circuit recognizes the relevance of settlement agreements to the issue of reasonable royalties in patent cases. In re MSTG, Inc., F.3d 1337, 1348 (Fed. Cir. 2012). “There is no per se rule barring reference to settlements simply because they arise from litigation.” AstraZeneca AB v. Apotex Corp., 782 F.3d 1324, 1336 (Fed. Cir. 2015). On the other hand, litigation licenses are not per se admissible. See Res-Q-Net.com, Inc. v. Lansa, Inc., 594 F.3d 860, 872 (Fed. Cir. 2010). Because litigation licenses are influenced to some degree by the coercive environment of patent litigation, “the Court assesses litigation licenses on a case-by case basis in determining their admissibility.” ReedHycalog, UK, Ltd. V. Diamond Innovations Inc., 727 F. Supp. 2d 543, 547 (E.D. Tex. 2010).

*3 Litigation licenses generally involve: (1) licenses to the patent-in-suit, which are probative of the value of the patented technology; or (2) licenses to patents of comparable technology. The Federal Circuit requires that the use of past licenses to technologies other than the patents-in-suit “must account for differences in the technologies and economic circumstances of the contracting parties.” Finjan, Inc. v. Secure Computing Corp., 626 F.3d 1197, 1211 (Fed. Cir. 2010); see also VirnetX, Inc. v. Cisco Sys., Inc. 767 F.3d 1308, 1330-31 (Fed. Cir. 2014); Ericsson, Inc. v. D-Link Sys., Inc., 773 F.3d 1201, 1227-28 (Fed. Cir. 2014).

The UniKey Settlement Agreement is between UniKey and SmartLock, LLC (“SmartLock”) for U.S. Patent No. 7,012,503 (“the '503 Patent”). SmartLock accused UniKey of infringing the '503 Patent because UniKey “use[s] electronic key devices to store and transmit user-editable access codes to a corresponding lock control unit, which in turn operates a lock mechanism.” SmartLock, LLC v. Spectrum Brands Inc. f/k/a Kwikset Corp., et. al, No. 2:13-CV-691, Doc. No. 1 at ¶ 14 (E.D. Tex. June 30, 2016).

The parties entered into a “Settlement and License Agreement” to resolve the pending litigation. The Settlement License states:

Doc. No. 93-3.

Plaintiff argues that Hulusi does not demonstrate the technological or economic comparability between the patents-in-suit and the '503 Patent. Doc. No. 90 at 8. Plaintiff notes that “Smart Lock's patent is focused on hardware whereas the Patents-in-Suit are focused on software.” Doc. No. 90 at 9. Plaintiff also argues that Hulusi does not consider that the Smart Lock settlement agreement may have been entered into for reasons other than the value of the patented invention. Doc. No. 90 at 9.

Defendant points out that Hulusi “personally negotiated UniKey's Smart Lock license, and analyzed it in his expert disclosure” and is thus qualified to opine on a reasonable royalty. Doc. No. 92 at 8. Defendant argues that Hulusi “opined that the patented technology, accused technology, and patent license rates and terms were similar” and thus accounted for the technological and economical differences between the '503 Patent and the patents-in-suit. Id.

Looking at Defendant's disclosure, Hulusi is not qualified to opine on the similarity of the technology. Doc. No. 90-4 at 7. The disclosure states that Hulusi's background and skills are “negotiating technology licenses related to smart locks, access control systems, and mobile keys.” Id. There is no mention of his technical expertise in the accused technology.

Hulusi is unqualified to opine on the technological comparability of the patents-in-suit and the '503 Patent.[1] Because Defendant has failed to show that Hulusi is qualified to opine on the technological comparability of the patents-in-suit and the '503 Patent, Hulusi may not offer opinions based on the UniKey Settlement Agreement.

*4 The OpenKey Settlement Agreement is between S3G and OpenKey, Inc. (“OpenKey”) for the '571 Patent and the '897 Patent, two of the three patents-in-suit. The parties entered into a “Settlement Agreement” that stated that the parties reached a settlement “to avoid the costs and time associated with [the Lawsuit], as well as the uncertainty regarding the outcome of the Lawsuit.” Doc. No. 93-2.

Plaintiff emphasizes that there is a threshold issue because Hulusi cannot review the OpenKey Settlement Agreement because Hulusi is Defendant's Executive Vice President. Doc. No. 90 at 10. Plaintiff points out that under the Protective Order entered in this case, Hulusi cannot see Plaintiff's highly confidential OpenKey Settlement Agreement. Id. Plaintiff contends that because Hulusi cannot review the terms of the OpenKey Settlement Agreement, “he cannot offer any opinion about whether the terms of the [OpenKey] Settlement Agreement are a reliable indicator of a reasonable royalty.” Id.

Plaintiff also emphasizes that the OpenKey Settlement Agreement explicitly states that it was entered into “to avoid the costs and time associated with [the Lawsuit], as well as the uncertainty regarding the outcome of the Lawsuit.” Doc. No. 93-2. Plaintiff argues that this disclaimer indicates that the OpenKey Settlement Agreement is not a reliable indicator of the value of the patented technology. Doc. No. 93 at 4.

Defendant argues that Hulusi has a sufficient basis to testify about the OpenKey Settlement Agreement. Doc. No. 92 at 6. Defendant notes that Plaintiff authorized Hulusi to review Plaintiff's damages expert, Burkett's, report, which analyzes the OpenKey Settlement Agreement in the context of the Georgia-Pacific factors. Id. at 7. Defendant argues that Hulusi's knowledge of the circumstances surrounding the OpenKey Settlement Agreement from Burkett's report is sufficient. Doc. No. 94 at 4.

Neither Plaintiff nor Defendant have provided case law to support their position regarding Hulusi's ability to rely on an expert report to opine on the OpenKey Settlement Agreement. Defendant's argument that Hulusi can determine the circumstances surrounding the OpenKey Settlement Agreement from Burkett's report alone is flawed. Plaintiff notes that Burkett's expert report does not disclose the full terms or circumstances of the OpenKey Settlement Agreement, and points out that the report states that Burkett was unable to draw any meaningful conclusions from the OpenKey Settlement Agreement under the Georgia-Pacific analysis. Doc. No. 93 at 4. Thus, it seems implausible that Hulusi knew of the circumstances or even the terms of the OpenKey Settlement Agreement.

Since Hulusi cannot review the terms of the OpenKey Settlement Agreement, Hulusi may not rely on the OpenKey Settlement Agreement in offering his opinion.

II. Sufficiency of Disclosures under Rule 26(a)(2)(C)

Plaintiff moves to strike Hulusi's and Dumas's rebuttal opinions because Defendant's Rule 26(a)(2)(C) disclosures do not sufficiently detail the facts and opinions the unretained experts intend to give. Doc. No. 90 at 3-4.

Plaintiff contends that Defendant's disclosure of Hulusi's rebuttal opinion “generally refers to a rebuttal of [Plaintiff's] damages expert's opinion,” which is insufficient under Rule 26(a)(2)(C) and should be stricken. Id. at 11. Plaintiff relies on Motio, Inc. v. BSP Software LLC, where the court found that “Plaintiff failed to comply with the requirements of Rule 26(a)(2)(C) ... [because] Plaintiff merely lists a set of topics that [the expert] may speak toward, but offers no actual fact or opinions.” No. 4:12-CV-647, 2016 WL 74425 at *2 (E.D. Tex. Jan. 6, 2016). Plaintiff argues that Defendant's rebuttal disclosures similarly identify topics rather than actual facts or opinions, which is insufficient under Rule 26(a)(2)(C). Doc. No. 93 at 5.

*5 Defendant argues that its disclosure of Hulusi's rebuttal opinions mirror Plaintiff's rebuttal disclosures, which “reserve[ ] the right to designate the right to designate experts to provide testimony to contradict or rebut evidence on subject matters identified by Defendant.” Doc. No. 92-1 at 2.

Defendant also emphasizes that Motio is distinguishable from the instant suit because in Motio, “the Scheduling Order specifically identifies and emphasizes that parties are to provide their expert reports as set out under [Rule 26(a)(2)(B) ] for ‘ALL experts.’ ” 2016 WL 74425 at *2 (emphasis in original). Defendant notes that its disclosure references each of the Georgia-Pacific factors, which “makes clear that [Hulusi] intends to provide testimony on those elements.” Doc. No. 94 at 3.

In Estate of Lance ex rel. Lance v. Lewisville Independent School District, the court found that the disclosures of defendant's non-retained experts clearly met the minimum requirements of Rule 26(a)(2)(C). No. 4:11-CV-32, 2012 WL 1668198 at *2 (E.D. Tex. 2012). The Court did not analyze what constituted a sufficient disclosure under Rule 26(a)(2)(C), but stated that the disclosures clearly met the requirements. Id. The relevant portion of an exemplary disclosure stated:

Id., No. 4:11-CV-32, Doc. No. 68-1 at 3. Here, Defendant's disclosure of Hulusi's rebuttal opinions reference specific Georgia-Pacific factors, thus giving Plaintiff notice of the facts and opinions that Hulusi intends to rebut. See Doc. No. 90-4 at 7-12. Moreover, Defendant's disclosure references specific portions of Burkett's report, which gives further notice of Hulusi's testimony. See id. at 8. The expert witness designations are sufficient under Rule 26(a)(2)(C).

Despite the sufficiency of the Rule 26(a)(2)(C) disclosures, Hulusi's rebuttal opinions rely on the same facts and opinions as his damages opinion, which has been excluded. Thus, Hulusi may not offer opinions that rely on either the UniKey Settlement Agreement or the OpenKey Settlement Agreement.

Defendant's disclosures regarding Dumas's rebuttal opinion are similarly sufficient under Rule 26(a)(2)(C). In fact, the disclosures regarding Dumas's rebuttal opinion include more specific page citations to exemplary portions of Cartt's expert report.

Thus, Plaintiff's Motion to Strike Dumas's Rebuttal Opinion is DENIED.

CONCLUSION

For the foregoing reasons, Plaintiff's Motion to Exclude Strike the Opinions of Hulusi and Dumas is GRANTED-IN-PART and DENIED-IN-PART.

Hulusi may not offer opinions that rely on either the UniKey Settlement Agreement or the OpenKey Settlement Agreement.

Plaintiff's Motion to Strike Dumas's Rebuttal Opinion is DENIED.

So ORDERED and SIGNED this 8th day of May, 2018.

Defendant's disclosure does not indicate that its technical expert, Dumas, will opine on the technological comparability. Thus Hulusi cannot rely on Dumas's opinions regarding technological comparability of the patents-in-suit and the '503 Patent.