Brocade Comm. Sys., Inc. v. A10 Networks, Inc., No. C 10-3428 PSG, slip op. (N.D Cal. May 15, 2013) (Dkt. 998).
Beware the doctrine of unintended consequences. In Brocade, a stipulation led to all sorts of unexpected results. Evidence that was almost certainly inadmissible found its way back into the case via stipulation. And, the oft-disparaged comment from Lucent about using any royalty base as long as the rate is low enough garnered new life. Now, it seems like only an en banc decision will put the Lucent misstatement to rest.
After an initial trial where it failed to provide substantial evidence that asserted patents drove customer demand, the district court concluded Brocade could not rely on the EMVR to use the entire revenue from A10’s accused products as the royalty base. Id. slip op. at 2. The court also concluded Brocade failed to prove the accused product was the “smallest saleable unit of the patented technology. Thus reliance on total revenues from sales of the accused product had to be the result of the EMVR theory. Id. The court thus vacated a verdict and set a new trial. Id. slip op. at 2. (See Feb. 1, 2013 Post)
Prior to the new trial, A10 and Brocade entered into a stipulation that said, in part, evidence from the first trial was admissible at the second trial and waived objections to admissibility on grounds other than Fed. R. Evid. 401, 402, or 403. Id. slip op. at 3, 4.
Based on the court’s ruling after the first trial, A10 moved to exclude all of Brocade’s patent damages evidence in the second trial. Id. slip op. at 1-2. A10 thus sought the entry of judgment in the amount of zero dollars or, in the alternative, the lump sum amount offered by A10’s damages expert. Id. slip op. at 3-4.
Citing the stipulation, the court did not consider Rule 702 challenges to the patent damages evidence and concluded the evidence was at “the very least” relevant to the issue of damages. Id. slip op. at 4. Responding to A10’s argument that Brocade had to apportion the damages, the court said A10 failed to cite any case requiring apportionment in a Panduit lost profits case. Id. slip op. at 4.
Turning to reasonable royalty damages, the court professed confusion as to why Brocade would limit itself to the record of the first trial given the court’s rulings on the EMVR. Id. slip op. at 5. Nonetheless, the court allowed Brocade to present its reasonable royalty evidence at the second trial based on the Lucent statement that “the base used in a running royalty calculation can always be the value of the entire commercial embodiment, as long as the magnitude of the rate is within an acceptable range (as determined by the evidence).” Id. slip op. at 5 citing Lucent Technologies Inc. V. Gateway, Inc., 580 F.3d 1301, 1338-39 (Fed. Cir 2009). Referring to the “Federal Circuit’s variety of opinions,” the district court relied on Lucent even after acknowledging panels in Uniloc and LaserDynaimics had disavowed the language. Id. slip op. at 5, 6.