The Southern District of Florida, in Atlas IP, LLC v. Medtronic, Inc., Civil Action No. 13-CIV-23309 (Judge Cecilia Altonaga) (Oct. 6, 2014), granted a motion to exclude testimony from Atlas’ damages expert Donald Merino. First, Medtronic alleged that Merino’s royalty base was “inflated and unreliable because it is derived from the entire market value of Medtronic end products, instead of the smallest salable patent-practicing unit.” The Court held that “while undoubtedly the end product derives value from the allegedly infringing technology, Medtronic buys a chip from third parties, and the chip includes the allegedly infringing technology.” Because of that, the chip was the SSPPU. But rather than start an apportionment analysis with the chip, Merino started with the end product, and apportioned from there. Atlas argued that this was permissible under the Rembrandt v Facebook decision, but the Court disagreed. Instead, the Court held that starting with a base larger than the SSPPU and then apportioning down was simply “form over substance,” and rejected Merino’s approach based on “his improper use of the EMVR.”
Separately, the Court also found the apportionment analysis was not sufficiently reliable, as it was conclusory in nature regarding the portion of profits attributable to the claimed invention. Atlas argued that no more specific apportionment was possible, as Medtronic had allegedly not produced sufficient documents from which to draw a better nexus between the invention and the accused products, but the Court shot this down, noting that the burden to prove damages always lies with the plaintiff (citing LaserDynamics).
Finally, the Court also found Merino’s royalty rate opinions should be excluded. Merino’s royalty rate was determined based on prior Medtronic settlement agreements, and also industry royalty rates in the field of “Cardiovascular, Devices & Instruments, Software.” Relying on Hanson, the Court held that licenses resulting from threatened litigation were not sufficiently comparable to arm’s length negotiations. And relying on Multimedia Patent Trust v Apple, the Court held that Merino had not sufficiently tied generic industry to the specific claims at issue.
It is unclear from the opinion whether the Court would allow Atlas and Merino to supplement with a new damages report.