United States District Court, E.D. Virginia, Norfolk Division
OPINION AND ORDER
HENRY COKE MORGAN, Jr., Senior District Judge.
This matter came before the Court on the numerous Motions in Limine filed by Plaintiff LifeNet Health ("Plaintiff" or "LifeNet") and Defendant LifeCell Corp. ("Defendant" or "LifeCell"). Docs. 220. 226, 228, 230, 232, 234, 237, 240, 243. 283. A hearing was held on October 22, 2014. The Court ruled from the bench, and now issues this Opinion and Order further explaining its reasoning.
A more complete account of the facts and procedural background of this case can be found in the Court's Opinion and Order denying the parties cross-motions for summary judgment. Doc. 298.
On October 6, 2014, the Court entered an agreed Order setting forth a briefing schedule for motions in limine in this case. Doc. 212. The motions in limine were filed on October 7, 2014. Briefs in opposition were filed on October 17, 2014.
A two-week jury trial in this case is scheduled to commence on November 3, 2014.
2. LEGAL STANDARD
The Federal Rules of Evidence broadly allows for relevant evidence to be admitted, subject to certain exceptions. Fed.R.Evid. 402. "Evidence is relevant if: (a) it has any tendency to make a fact more or less probable than it would be without the evidence; and (b) the fact is of consequence in determining the action." Id . 401. However, relevant evidence may be excluded by the Court if "its probative value is substantially outweighed by a danger of one or more of the following: unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence." Id . 403.
Additionally, the standards governing the admissibility of expert testimony are well-established. Under Federal Rule of Evidence 702, a qualified expert may present opinion testimony 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.
Fed. R. Evid. 702. "Put another way, a trial judge faced with a proffer of expert scientific or technical testimony must determine whether the expert is proposing to testify to (1) scientific knowledge that (2) will assist the trier of fact to understand or determine a fact in issue.'" United States v. Fultz, ___ F.Supp.2d ___, 2014 WL 1870785, at *5 (E.D. Va. May 9, 2014) (quoting Daubert v. Merrell Dow Pharm., Inc. , 509 U.S. 579, 592 (1993)). This requires the court to assess "whether the reasoning or methodology underlying the testimony is scientifically valid and of whether that reasoning or methodology properly can be applied to the facts in issue." Daubert , 509 U.S. at 592-93. The trial court has broad discretion in determining how to resolve a Daubert challenge. Fultz, 2014 WL 1870785, at *5 (citing United States v. Beasley , 495 F.3d 142, 150 (4th Cir. 2007)); see also Sundance, Inc. v. DeMonte Fabricating Ltd. , 550 F.3d 1356, 1360 (Fed. Cir. 2008).
The Supreme Court identified four factors to assist judges in undertaking this assessment, although these factors are neither exhaustive nor definitive. Daubert , 509 U.S. at 593. "In evaluating the reliability of expert opinion evidence, a court should consider: (1) whether the theory or technique used by the expert can, and has been tested; (2) whether the theory or technique has been subjected to peer review and publication;' (3) the known or potential rate of error' of the technique or method used; and (4) the degree of the method's or conclusion's general acceptance within the relevant scientific community." Fultz, 2014 WL 1870785, at *5 (quoting Daubert , 509 U.S. at 593-94). "The proponent of the evidence bears a significant burden in proving reliability; a proffer of expert testimony must include the substantive area of the proposed testimony, as well as sufficient information regarding the bases for the expert's opinion." Fultz, 2014 WL 1870785, at *5 (quoting United States v. Lester , 234 F.Supp.2d 595, 598 (E.D. Va. 2002) (internal quotation marks and citation omitted)). "Where the proponent of the testimony fails to present enough evidence to demonstrate to the court the scientific validity of the research supporting the expert's conclusions, the trial court cannot determine whether the testimony is well-founded.'" Fultz, 2014 WL 1870785, at *5 (quoting Lester , 234 F.Supp.2d at 598).
A. Defendant's Motion to Exclude Mark Gallagher, Plaintiffs Damages Expert, Doc. 220, and Defendant's Motion in Limine #7 to Exclude the NERA Report and MTF Jury Verdict and Settlement Agreement
Defendant moved to exclude the testimony of Plaintiffs damages expert Mark Gallagher, challenging the basic assumptions underlying Mr. Gallagher's report, his method of calculating damages, and certain materials he relied on in forming his opinions.
In Mr. Gallagher's opening report submitted on August 4, 2014, Mr. Gallagher proposed a running royalty of[REDACTED/] of total accused product revenue. Doc. 251-1 at 4, 251-2 at 6. This amounts to a total royalty of [REDACTED/]. Doc. 251-1 at 4. No lost profits were calculated, because Plaintiff does not have the capacity to make all of the sales Defendant can, and is thus not eligible to claim lost profits. Doc. 251-2 at 14.
The first basis for this [REDACTED/] figure is an opening offer that Plaintiff extended to Edwards Lifesciences ("Edwards"), in which it offered a one-time lump sum payment of $7.2 million plus a 5% running royalty payment on net sales. Id at 19. Plaintiff and Edwards were not competitors, the proposed agreement included rights under multiple patents, and the proposed agreement was in an area Plaintiff did not operate, nor intended to operate. Id . Mr. Gallagher then increased the [REDACTED/] figure by [REDACTED/] because Plaintiff and Defendant are competitors, Plaintiff operates or intended to operate in the market, and the patented technology provided cost savings. Id. at 29.
On September 19, 2014, Mr. Gallagher submitted a rebuttal report. Doc. 251-1 at 4. In his rebuttal report, Mr. Gallagher admitted that based on new information, his initial assumption of cost savings was too high. Doc. 251-4 at 35. Accordingly, he reduced his overall royalty rate to between [REDACTED/] of net revenues, creating a range of [REDACTED/]. Id . Moreover, his rebuttal report included an additional basis for his royalty award: a settlement after litigation with the Musculoskeletal Transplant Foundation ("MTF"), in which the parties reached a 5.6% royalty rate after the jury awarded a 6% rate after a verdict involving Plaintiffs Allowash technology. Id. at 14. Defendant states it did not receive this settlement document until well after it received Mr. Gallagher's initial report. Doc. 251-1 at 20. Additionally, at his deposition, Mr. Gallagher identified a report by the consulting group NERA as additional support for the 5% royalty calculation, but the report was not produced by Plaintiff as it is asserting the attorney-client privilege. However, Mr. Gallagher did speak with Mr. Wilson, a LifeNet executive, regarding the 5% royalty figure.
Defendant offered four reasons why this Court should exclude all or part of Mr. Gallagher's opinions. First, it argued that the 5% royalty rate is not based on a reliable foundation, as it relies only on the Edwards offer. Doc. 251-1 at 1. Second, it argued that the [REDACTED/] adjustment to this royalty rate has no factual support, and is thus arbitrary. Id. at 2. Third, it argued that using total sales revenue is improper in this case, as this case is not one where the Federal Circuit has approved the use of the Entire Market Value Rule ("EMVR"). Id . Finally, it asked that the Court exclude all references to the MTF settlement and jury verdict by either Mr. Gallagher or any of Plaintiffs witnesses because it should have been produced earlier and has no probative value in this case. Id. at 3. Additionally, it asked that all references to the NERA report be excluded.
After hearing argument from the parties, the Court DENIED the Motion as to the 5% royalty rate, as the Edwards offer does have probative value. See Whitserve, LLC v. Computer Packages, Inc. , 694 F.3d 10, 29-30 (Fed. Cir. 2012) (noting the probative value of proposed licenses, but cautioning that such value may be limited). The Court RESERVED RULING on the [REDACTED/] increase to the base royalty rate included in Mr. Gallagher's opinion, instructing Plaintiff to provide notice to the Court prior to calling Mr. Gallagher, and providing a more detailed explanation for the basis of the proposed [REDACTED/] increase to the royalty rate. The Court also RESERVED RULING on the applicability of the EMVR. The Court GRANTED the Motion in Part as to the MTF settlement and jury verdict. The MTF settlement may come in as rebuttal evidence; however, Plaintiff may not state that the MTF jury verdict was in its favor, but Defendant may bring this fact to the jury's attention if it so chooses. Finally, the Court RESERVED RULING on the admissibility of the NERA report.
B. Plaintiffs Motion in Limine #1, excluding the two-minute rinse defense, Doc. 226
Plaintiff moved the Court to exclude Defendant's two-minute rinse defense. As the Court explained in its Opinion and Order denying the motions for summary judgment, the defense is relevant in this case because of the claim language. See Doc. 298 at 11-13. Accordingly, the Court DENIED this Motion.
C. Plaintiffs Motion in Limine #2, excluding prior art references that do not pre-date the invention in the '200 patent, Doc. 228
Plaintiff moved the Court to exclude prior art references that do not pre-date the conception date of the '200 patent, arguing that the conception date is March 4, 1998. Defendant argued that the evidence Plaintiff provided addressed bone grafts, not soft tissue grafts, and furthermore did not sufficiently establish the necessary diligence.
"Conception is the formation in the mind of the inventor of a definite and permanent idea of the complete and operative invention, as it is therefore to be applied in practice.'" Spansion, Inc. v. Int'l Trade Com'n , 629 F.3d 1331, 1356 (Fed. Cir. 2010) (quoting Singh v. Brake , 317 F.3d 1334, 1340 (Fed Cir. 2003)). "An idea is sufficiently definite for conception when the inventor has a specific, settled idea, a particular solution to the problem at hand, not just a general goal or research plan he hopes to pursue.'" Spansion. Inc. , 629 F.3d at 1356 (quoting Burroughs Wellcome Co. v. Barr Labs., Inc. , 40 F.3d 1223, 1228 (Fed Cir. 1994)). The idea need not be perfect: "conception is complete when the idea is so clearly defined in the inventor's mind that only ordinary skill would be necessary to reduce the invention to practice, without extensive research or experimentation.'" Spansion. Inc. , 629 F.3d at 1356 (quoting Burroughs Wellcome Co. , 40 F.3d at 1228). While the inventor's oral testimony is relevant, it "must be corroborated by 'evidence which shows that the inventor disclosed to others his completed thought expressed in such clear terms as to enable those skilled in the art to make the invention.'" Spansion, Inc. , 629 F.3d at 1356 (quoting Coleman v. Dines , 754 F.2d 353, 359 (Fed. Cir. 1985)). Conception is a question of law, based on factual findings. Spansion, Inc. , 629 F.3d at 1356. The Federal Circuit has held that to remove a patent as a prior art reference, the inventor must prove either (1) a conception and reduction to practice before the filing date ...