Intellectual Property

A Damages Drone Strike

Savvy observers of Judge Alan Albright were treated at the end of 2021 to a set of decisions on Alice issues.

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Drone thingyFor all the ink spilled on Judge Alan Albright’s handling of transfer motions, as well as the Federal Circuit’s handling of his transfer decisions on mandamus, it would be a mistake to give his substantive decisions on other areas of patent law short shrift. For one, he remains the district court judge with the heaviest patent docket. Moreover, many of the cases that were filed around the time of his elevation to the bench are now reaching critical pretrial and trial milestones, raising the stakes on many of the decisions he is reaching now. Those interested in monitoring developments in patent law, therefore, must continue to focus on decisions coming out of Albright’s court — especially those that provide insight into his views on critical patent issues other than the well-trodden transfer path.

As an example, savvy observers of Albright were treated at the end of 2021 to a set of decisions on Alice issues. In the first case, Albright granted summary judgment in favor of Facebook, finding that the asserted patent was ineligible under Alice. What caught the eye of many was that Albright reached that decision on the eve of trial, suggesting that Alice risk was borne by patentees even deep into a case in his court. In another decision, Albright granted a motion to dismiss with leave to amend in favor of Intel, providing an example of early stage Alice challenges having success in his court as well. In addition to the timing, the decision in the Intel case also laid out Albright’s approach toward reconciling the morass of Federal Circuit guidance on Alice, making this set of decisions a must-consider for litigants in his courtroom.

While Alice is always an interesting aspect of modern patent litigation, judicial discussion of damages issues can be of even more value, particularly for litigation funders and their patentee investment beneficiaries. In today’s age, where third-party funded patent cases may constitute the majority of patent disputes that progress toward trial, both litigants and funders alike are keen to introduce some certainty to perhaps the most inherently uncertain aspect of patent law — damages. Add in Albright’s share of funded (and all) patent cases to that scarcity of published opinions and close study of his damages opinions is warranted. Yet, despite the number of patent cases on his docket, visibility into Albright’s treatment of damages issues has been limited to date. Thankfully, we now have a significant decision to evaluate.

On February 24, 2022, Albright granted a motion to strike and a motion to exclude the opinions of the damages expert for a nonpracticing entity that was enforcing IBM-sourced patents against well-known DJI-branded drone maker SZ DJI Technology. Both of Albright’s decisions centered on a key error made by the damages expert early in the expert discovery process.

The patentee’s damages expert’s original sin in his opening report was setting the hypothetical negotiation between the plaintiff and DJI, not between IBM and DJI. Once his mistake was called out by the rebuttal expert, the plaintiff had him submit a supplemental report — which came up with the same damages numbers despite the change in licensor at the hypothetical negotiation. DJI moved to have his opinion thrown out. Albright agreed, both in terms of the motion to strike the supplemental report, as well as with respect to DJI’s Daubert motion.

On the motion to strike, Albright pointed to the fact that the supplemental report was more of a do-over than supplementing a prior opinion. Moreover, it was filed late and thus was an untimely new opinion as well. Interestingly, Albright pointed out that because a damages expert is not necessary for an award of reasonable royalty damages, the upcoming trial in the case could go on even without the patentee’s damages expert able to testify. That fact, coupled with the obvious prejudice to DJI based on the plaintiff’s untimely filing, as well as the need to get the case tried, led to the striking of the supplemental report.

With the supplemental report stricken, Albright turned to whether the original report passed muster under Daubert — and concluded that it did not. Because the analysis of the relevant damages factors was made between the wrong parties to the hypothetical negotiation, Albright ruled that the plaintiff had forfeited its right to rely on its opening damages report. In short, setting the negotiation between the wrong parties was enough to render the expert’s opinion unreliable.

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Ultimately, this decision from Albright is worth consideration on a number of fronts. First, it shows Albright’s continued willingness to make case-altering rulings on the eve of trial, perhaps serving as caution to litigants before him to settle before they lose control over the result of their case. Second, it gives us an indication that Albright will brook no shortcuts when it comes to a plaintiff presenting its damages case, which can be a particular challenge for nonpracticing entities appearing before him. Lastly, it reinforces that when it comes to the merits, we have further proof that Albright is just as likely to rule for the defendant on a key issue as he is for the patentee. For the legions of litigants before him, this decision serves notice that Albright is just as capable of a surgical drone strike on damages as he is on any other major patent issue.

Please feel free to send comments or questions to me at [email protected] or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.

Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at [email protected] or follow him on Twitter: @gkroub.

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