C.D. Cal. excludes do-over damages opinions for failure to apportion and allows second do-over if case proceeds to damages phase

The Central District of California, in Enovsys LLC v. AT&T Mobility LLC, et al., Case No. 11-5210 SS (Judge Suzanne H. Segal) (August 10, 2015), granted Defendant AT&T's motion to exclude the supplemental opinions of Plaintiff Enovsys' damages expert. The Court also bifurcated the trial into liability and damages phases, and allowed for a second supplemental damages opinion in the event the case proceeded to the damages phase.

In June 2015, the Court granted AT&T's Motion in Limine to Exclude Enovsys' damages expert, Russell Parr because Mr. Parr's "did not sufficiently tie damages to the 'limited features' of the patented invention." (slip op. at 3). The Court allowed Enovsys a do-over. AT&T took the position that the do-over report suffered from the same defect as the original report - the damages calculations were not tied to the value of the patented invention.

The do-over report included 4 damages calculations. AT&T said that Calculations 1 and 2 attempted to exclude certain non-infringing revenue from the royalty base, but did not address apportionment at all. (slip op. at 4). AT&T argued that Mr. Parr "'takes the whole of the LBS applications revenue and the whole of the LBS data revenue as the starting point for his base'" on the erroneous assumption that 'the importance of location privacy justifies including in his royalty base the entire market value of AT&T's products and services.'" (slip op. at n. 2). As a result, AT&T argued that Calculations 1 and 2 "run afoul of the entire market value rule because they 'derive damages using all of AT&T's LBS revenue' without 'consideration of revenue obtained or sales that would have been lost on account to the selective location disclosure feature' at issue in this action." (slip op. at 4).

Calculations 3 and 4 applied a 57% adjustment to Calculations 1 and 2. AT&T argues that the 57% adjustment was based on a 2012 Internet-published PEW Study measuring "the perceived customer value of protecting 'personal information' in general and was not focused on location privacy, much less the selective location disclosure feature at issue here." (slip op. at 5).

Enovsys argued that Calculations 1 and 2 "appropriately apportion[ed] revenue to include 'only that which is associated with sales that AT&T would have lost without the inclusion of the patented invention.'" (slip op. at 5).

Even though the LBS products and services might present other benefits and attractions to AT&T customers, the invention of the '461 patent was the only way that AT&T could make those benefits and attractions available to AT&T customers while allowing AT&T to be in compliance with the Telecommunications Act and to give its customers the comfort of knowing that their private location data would remain private . . . .

(slip op. at 5).

For Calculations 3 and 4, Enovsys "defend[ed] the PEW Study and other studies and reports that Parr relied on as 'uncontroverted consumer research.'"

The Court concluded that the revenue bases established by Calculations 1 and 2 "fail to even attempt apportionment and improperly 'skew the damages horizon.'" (slip op. at 14 (quoting Uniloc, 632 F.3d at 1320)). The Court noted:

Parr's "limitation" of the royalty base "to only the revenue for data consumed by LBSapplications" still attributes to Enovsys the entirety of that revenue without showing that the patented feature, selective location disclosure, "creates the basis for customer demand or substantially creates the value of the component parts." AstraZeneca, 782 F.3d at 1337 . . . . AT&T submitted evidence with its Motion, which Enovsys does not challenge, showing that AT&T Navigator offers "turn-by-turn driving directions, full-color moving maps, a fuel finder feature that lets customers identify the cheapest nearby gas and access to YELLOWPAGES.COM's database of millions of business locations." (Williams Decl., Exh. D). Other location-based applications available to AT&T subscribers include traffic alerts with alternate routes, 3-D moving maps, and quick route recalculation for missed turns, among others. (Id.). Parr's royalty base assumptions appear predicated on the belief that none of the LBS features besides selective location disclosure has an impact on LBS revenues.

(slip op. at 15).

Relying on LaserDynamics, the Court held:

Parr has failed to show in any reliable way that Enovsys' selective location disclosure invention is what motivates consumers to subscribe to AT&T's network. Without such proof, the royalty bases established by Calculation 1 and Calculation 2 are impermissibly broad and unreliable. Even to the extent that Calculation 1 and Calculation 2 could be construed as arguably relevant under the Federal Rules' generous relevancy standards, any probative value they may have is outweighed by the dangers of prejudice, confusion of the issues, and the risk of misleading the jury.

(slip op. at 17).

With regard to Calculations 3 and 4, the Court held that they were "similarly unreliable as they also fail to tie damages to specific features of the invention." (slip op. at 18). The Court found that the Pew Study did not support Mr. Parr's conclusions. The Court observed:

The Pew Study addresses concerns about the privacy of photos, contacts and other files stored on cell phones, as well as browsing and search history, in addition to location tracking features. . . . Indeed, even the Pew Study shows that only "19% of cell owners have turned off the location tracking feature on their cell phone because they were concerned that other individuals or companies could access that information." . . . Parr appears to conclude that any type of privacy concern expressed by cell phone app users is a proxy for location-based privacy concerns, and that location-based privacy concerns necessarily measure how consumers value Enovsys' selective location disclosure technology. The Pew Study does not specifically address selective location disclosure technology and therefore is not a reliable source for the conclusions Parr attempts to draw from it in his Supplemental Report.