The District of Delaware, in Masimo Corp. v. Philips Elec. North Am. Corp., (Judge Leonard P. Stark) (October 31, 2016), addressed motions to strike opinions of several experts related to damages. The experts in question were Michael Keeley (Finance), Joseph Dyro (Technical), Nitin Shah (Technical), Vijai Madisetti (Finance), and Michael Wagner (Finance). The court granted in part and denied in part the motions. The key motions are addressed below.

Masimo’s motion to preclude Dr. Keeley’s testimony regarding the Basis-for-Customer-Demand Test for Lost Profits: The court noted that Dr. Keeley’s testimony on the basis-for-customer-demand test is inconsistent with the jury instructions in an earlier companion case, which correctly stated the law. Slip op. at 6. The issue related to consumables used with pulse oximetry sensors and cables. Philips contended that Masimo would have to satisfy two factors for lost profits on consumables: (1) that they form the basis for customer demand, and (2) that they form a functional unit with the pulse oximetry sensors and cables. Masimo contended that only the second test was relevant and observed that in the prior trial the jury instructions did not require Masimo to satisfy the basis-for-customer-demand test to provide lost profits on consumables. Id. Masimo also noted that Philips had never disputed the prior instructions. The court stated that that the same instruction will be given in this case, and that Dr. Keeley would not be permitted to present testimony applying the basis-for-customer-demand test at trial. Id. at 6-7. The court also stated, importantly, that the prior instruction “correctly stated the law.” Id. at 6. As such, the court granted Masimo’s motion. Id. at 7.

Later in the opinion, addressing an MSJ on this same point, the court observed in a footnote: “Among the many cases cited by Philips is Rite-Hite Corp. v. Kelly Corp., 56 F.3d 1538, 1549-51 (Fed. Cir. 1995) (en bane). Rite-Hite holds, among other things, that a non-practicing patentee may potentially recover lost profits damages. See id. at 1546-4 7. It is difficult to understand how this holding could be correct if, as Philips argues, any party seeking lost profits damages must always satisfy the basis-for-consumer-demand test. How can a patentee that does not sell an embodiment of its patent ever prove that the patented technology is the driver of demand for its non-existent product?” Slip op. at 19 note. 9.

Masimo’s motion to preclude Dr. Keeley’s testimony on the Functional-Unit test: Masimo argued that Dr. Keeley’s testimony on the functional unit test should be excluded because the relationship between the consumables and the pulse oximeters was contrary to Federal Circuit law. Slip op. at 7. More specifically, Philips contended that the two items were sold together merely for business advantage and not because they were a functional unit. At this juncture, ruled, the court, the proposed testimony would be probative of the functional unit test and would not cause jury confusion, or otherwise be unduly prejudicial, and thus the court denied the motion. Id. at 8.

Phillips’ motion to preclude Dr. Shah’s testimony on acceptability of certain testing data: Philips argued that Dr. Shah’s testimony is inadmissible on ground that Dr. Shah’s opinions are based on three data samples selected by Masimo, and that because Masimo had not disclosed which data samples it provided to Dr. Shah, Philips could not recreate or challenge the testing. Slip op. at 9. Masimo rebutted on the ground that the tests were used to rebut an opinion by Philips’ expert. The court denied the motion by stating that Dr. Shah does not need to examine every possible sample, and that his testimony is sufficiently reliable because he previously personally performed and observed testing. Id. at 10.

Phillips’ motion to preclude Mr. Wagner’s testimony regarding a reasonable royalty because it fails to apportion: Phillips argued that Dr. Wagner’s testimony regarding reasonable royalty should be excluded because Mr. Wagner “fails to apportion” royalties to the asserted claims and because he fails to “use any discernible methodology” in his calculations. Slip op. at 11. Masimo argued, inter alia, that Mr. Wagner’s methodology had been approved by the Federal Circuit in other litigation and that it had been subjected to peer review and publication. The court denied the motion, holding that Mr. Wagner’s conclusions were based on a sufficiently reliable, peer-reviewed methodology, and such analysis is widely used in royalty cases. Id.