10 F.4th 1358
Fed. Cir.2021Background:
- MLC sued Micron for infringement of U.S. Patent No. 5,764,571, asserting only claim 30 (an apparatus for programming a multi‑level non‑volatile memory cell).
- Micron’s accused products are NAND flash dies/wafers/packages containing many non‑patented components (error correction, clocking, addressing, cache, DACs).
- MLC’s damages expert (Milani) proposed a reasonable royalty using (1) comparable licenses (Hynix and Toshiba lump‑sum licenses) and (2) an SSPPU approach (bare die), deriving a 0.25% royalty from a “most‑favored customer” clause and then adjusting to 0.375% after attributing 50% of portfolio value to the asserted patent.
- Micron moved to exclude Milani’s testimony: (a) prevent him from characterizing the Hynix/Toshiba licenses as reflecting a 0.25% running royalty, (b) strike expert opinions under Rule 37 for failure to disclose damages theory/documents in fact discovery, and (c) exclude his reasonable‑royalty opinion under Daubert for failure to apportion non‑patented features.
- The district court (1) barred testimony that the Hynix/Toshiba licenses “contain or reflect” a 0.25% royalty, (2) struck portions of Milani’s report under Rule 37(c)(1) for nondisclosure of the factual underpinnings and extrinsic documents, and (3) excluded Milani’s reasonable‑royalty opinion for failing to apportion the royalty base and rate. The Federal Circuit affirmed.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| May expert testify that Hynix/Toshiba licenses "reflect" a 0.25% royalty? | Milani relied on the MFN clause and extrinsic documents to infer a 0.25% rate. | Licenses are lump‑sum and contain no stated rate; expert gave no reliable method converting lump sums to a running rate. | Excluded as unreliable under Rule 702/Daubert. |
| May portions of expert report be struck under Rule 37(c)(1) for nondisclosure? | MLC says its interrogatory answers and later expert disclosures were sufficient; expert discovery suffices. | MLC failed to disclose the contention that licenses reflect 0.25% and the extrinsic evidence during fact discovery, depriving Micron of targeted fact discovery. | Striking affirmed; nondisclosure was neither justified nor harmless. |
| Is Milani’s reasonable‑royalty opinion admissible without apportionment? | Comparable licenses (and SSPPU) already account for apportionment; no further apportionment needed. | Milani failed to apportion either royalty base or rate and did not compare licensed technology to accused technology. | Excluded under Daubert for failure to apportion value to the patented feature. |
| Did the court improperly force disclosure of privileged material / overreach Rule 26? | MLC contends requiring disclosure of factual basis would force privileged communications and is improper before expert report. | Facts underlying damages theories are not privileged; Rule 26 and contention interrogatories require disclosure of factual underpinnings. | Rejected; factual underpinnings must be disclosed and are not protected by privilege. |
Key Cases Cited
- Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (gatekeeping standard for expert reliability)
- Gen. Elec. Co. v. Joiner, 522 U.S. 136 (abuse of discretion standard for evidentiary rulings)
- Georgia‑Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116 (framework for reasonable‑royalty factors)
- Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301 (limits on using lump‑sum vs running‑royalty comparators)
- Whitserve, LLC v. Computer Packages, Inc., 694 F.3d 10 (rejecting speculative royalty calculations)
- VirnetX, Inc. v. Cisco Sys., Inc., 767 F.3d 1308 (apportionment requirement when accused product contains non‑patented features)
- Commonwealth Sci. & Indus. Rsch. Org. v. Cisco Sys., Inc., 809 F.3d 1295 (when comparable licenses can supply apportionment)
- Elbit Sys. Land & C4I Ltd. v. Hughes Network Sys., LLC, 927 F.3d 1292 (comparability requires assessing licensed vs accused technology)
- Bio‑Rad Labs., Inc. v. 10X Genomics Inc., 967 F.3d 1353 (expert must account for differences when using comparable licenses)
- Upjohn Co. v. United States, 449 U.S. 383 (attorney‑client privilege protects communications but not underlying facts)