Carucel Investments, L.P. v. Novatel Wireless, Inc., 3:16-cv-00118

Background

Carucel sued Novatel, Verizon, and others for alleged infringement of multiple patents (principally the ’904 patent) covering a moving base-station/mobile hotspot technology; action transferred to S.D. Cal.; some defendants previously dismissed; summary judgment denied.
Parties filed competing Daubert motions challenging the opposing damages experts (Dr. McDuff for Defendants; Dr. Kennedy for Plaintiff) and multiple motions in limine; the Court heard argument and ruled.
Central damages disputes involved apportionment methods (use-based and price-based), use of comparable licenses/settlements, hypothetical negotiation counterparty(s) (manufacturer vs. reseller), and reliance on various surveys and industry reports.
Court applied Ninth Circuit Daubert/Rule 702 standards together with Federal Circuit patent-damages jurisprudence (Georgia-Pacific framework; entire-market-value concerns; comparability of licenses).
Rulings: most expert challenges were denied without prejudice (admissibility largely turns on weight and cross-examination), but Court excluded Dr. McDuff’s opinion that there would be no hypothetical negotiation between Carucel and Verizon and excluded the PWC litigation-statistics report; several in limine rulings granted in part (e.g., limits on discussing overall Verizon revenue and on claiming non-asserted patents’ value).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Two-step apportionment by Defendants’ expert (use + price)	Double apportionment is improper and inflates adjustments	Two-step apportionment is permissible; multi-step apportionment has been approved	Allowed — two-step apportionment admissible; challenges go to weight, not exclusion
Use-based apportionment (reducing royalty for non-infringing use)	Devices are apparatus claims; capability to infringe means user behavior shouldn't reduce value	Usage frequency is relevant to commercial benefit and Georgia–Pacific factors	Allowed — use apportionment admissible; relevance goes to weight; Court may revisit after trial development
Reliance on survey/usage data (Verizon survey, ATUS)	Surveys are flawed, speculative, unreliable	Surveys are relevant and any flaws go to weight	Allowed — surveys admissible under Rule 703; methodology challenges for cross-examination
Price-based apportionment & EMVR concerns	Price apportionment violates entire market value rule and requires component analysis	Expert did not rely on entire end-product value; multiple reliable apportionment methods exist	Allowed — no EMVR violation because expert did not use whole end-product as royalty base
Use of comparable licenses (e.g., Gogo, Novatel, Broadcom, SPH-Novatel)	Some licenses are settlement deals or insufficiently comparable; improper face-value reliance	Comparable-license methodology is standard; differences affect weight not admissibility	Allowed — licensing evidence admissible if comparability addressed; factual differences go to weight
Excluding supplemental licenses produced with rebuttal reports	Late production prejudiced Plaintiff; should be struck under Rule 37	Production complied with scheduling order for supplemental reports; harmless	Denied — production timely under schedule; harmless; not excluded
Expert opinion that no hypothetical negotiation would occur with Verizon	Such an opinion is legally improper; hypothetical negotiation must be between patentee and each infringer	If upstream license covers downstream, only manufacturer negotiation matters	Excluded — expert may not opine there would be no hypothetical negotiation with Verizon; separate hypothetical negotiations remain appropriate
Plaintiff’s separate reasonable-royalty analysis for Verizon	Plaintiff may seek full compensation from multiple infringers	Manufacturer indemnity and upstream focus makes downstream analysis irrelevant	Allowed — separate analyses admissible (but plaintiff cannot recover multiple full royalties for same device)
Use of national litigation statistics (PwC report) to boost royalty	Report is standard, relevant background supporting risk premium	Report is untethered to case facts and prejudicial	Excluded — report too generalized and untethered; Rule 403 and tying-to-facts principles require exclusion
Motions re: courtroom language and background (e.g., "patent assertion entity"; non-asserted patents’ value; YouTube ad authentication; Verizon financials)	Plaintiff sought to bar derogatory labels and certain late-produced evidence and the use survey; Defendants sought to exclude background/value and certain exhibits	Defendants agreed to avoid pejoratives; asserted relevance and authenticity for exhibits; sought limits on revenue/per-unit evidence	Mixed — court barred pejorative labels but allowed neutral descriptors; limited Plaintiff’s discussion of non-asserted patents’ value; admitted YouTube ad and use survey; excluded evidence of Verizon’s overall revenue/profit but allowed per-unit revenue/profit evidence

Key Cases Cited

Daubert v. Merrell Dow Pharm., 509 U.S. 579 (expert admissibility gatekeeping under Rule 702)
Kumho Tire Co. v. Carmichael, 526 U.S. 137 (trial court gatekeeping applies to all expert testimony)
Summit 6, LLC v. Samsung Elecs. Co., 802 F.3d 1283 (Federal Circuit approving multi-step apportionment)
Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292 (Georgia–Pacific factors and tying damages to market footprint)
Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301 (frequency of use relates to invention value)
ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860 (vigilance on comparability of past licenses)
Ericsson, Inc. v. D-Link Sys., Inc., 773 F.3d 1201 (license comparability affects weight, not necessarily admissibility)
Apple Inc. v. Motorola, Inc., 757 F.3d 1286 (using comparable licenses is generally reliable)
LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51 (settlement licenses may be admissible in some circumstances)
Stickle v. Heublein, Inc., 716 F.2d 1550 (limits on double recovery once full recovery obtained from one infringer)