The Southern District of Florida, in Arctic Cat Inc. v. Bombardier Recreational Producs, Inc., Case No. 0-14-cv-62369 (May 3, 2016) (Judge Beth Bloom), addressed motions to strike and summary judgment. Arctic Cat (patentee) filed a Daubert motion against defendant BRP’s expert, Dr. Keith Ugone. Arctic Cat contended that Dr. Ugone’s methodology was a “black box” and that his use of Arctic Cat’s licensing proposals as an indicator of value was impermissible. Slip op. at 9. The court denied this motion—on the “black box” issue, stating that Dr. Ugone’s methodology was “based on specific evidence, and his report clearly explains each step in his methodology.” Id.
Turning the Arctic Cat’s licensing proposals to BRP, the court held it was acceptable for Dr. Ugone to use these proposals to establish the top of his royalty range. We quote in full the relevant portion of the opinion:
Arctic Cat argues that Dr. Ugone failed to consider the differences in the technological and commercial circumstances between the time that Arctic Cat made its licensing proposals to BRP and the 2004 hypothetical negotiation. However, to the contrary, Dr. Ugone’s report specifically explains why Arctic Cat’s licensing proposals in 2000 are both technologically and commercially comparable to a late 2004 hypothetical negotiation. See Ugone Report ¶ 14. For example, within this argument, Arctic Cat claims that Dr. Ugone failed to consider the impact of “2004 regulations requiring off-throttle steering on PWC were in the offing.” AC Mot. at 14. However, Dr. Ugone testified that he did not give these pending regulation [sic] additional weight because, regardless of the regulatory environment, by 2004 all of the major competitors in the PWC market were offering some form of assisted steering technology, so the PWC market had already moved in that direction. ECF No. [82-9] (Ugone Deposition) at 102:18-25. The parties simply have competing beliefs as to how similar or dissimilar the circumstances in 2000 and 2004. The parties also disagree as to what information would have been considered in a hypothetical negotiation. However, none of these concerns bear on reliability. Furthermore, the cases to which Arctic Cat cites do not support the proposition that Dr. Ugone’s reliance on Arctic Cat’s licensing proposals to BRP renders his report inadmissible. See, e.g., ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 869 (Fed. Cir. 2010). In ResQNet, for example, the patentee’s expert testified that the royalty rate should be an average of seven licensing agreements into which the patentee had entered. 594 F.3d at 870. But, five of those agreements did not show “any discernible link to the claimed technology,” and the expert “did not even attempt to show that these agreements embody or use the claimed technology or otherwise show demand for the infringed technology.” Id. at 870-71. The Federal Circuit vacated the damages award because the expert’s use of those five agreements without any discernible link to the claimed technology drove the royalty rate up to an unjustified level. Id. at 869-70.
Dr. Ugone’s use of Arctic Cat’s licensing proposals for its OTS (also referred to by Dr. Ugone as controlled thrust steering (“CTS”) technology) is nothing like the ResQNet expert’s use of licenses that had nothing to do with the disputed technology. As Dr. Ugone’s Report notes in ¶ 63(a)(i), Arctic Cat demonstrated its CTS technology to BRP in March 2000 and informed BRP that a license for the technology would be between $1 and $5 per unit. Arctic Cat’s proposals to BRP were for the same technology that was already present in Arctic Cat’s pending patent applications (which later issued as the ‘059 Patent and the ‘410 Patent). The ‘059 Patent and the ‘410 Patent share the same specification as the patents in-suit. See ECF No. [75-2] (“Taylor Report”) ¶ 228. In addition, the claims of the ‘059 and ‘410 Patents are “substantially similar in scope to those of the Patents-in-Suit.” Id. at ¶ 229. Thus, the technology Arctic Cat was offering to license in 2000 was the same technology covered by the patents-in-suit.