EDTX Allows Defendant's Damages Reduction Based on Foreign Sales But Disallows in Part Defendant's Government Sales Reduction

On April 16, 2012, in PACT XPP Technologies, AG v. Xilinx, Inc., Case No. 2:07-CV-563-RSP (EDTX), Magistrate Judge Payne issued an order on PACT's motion to exclude opinions of Xilinx damages expert Mary Woodford regarding non-U.S. sales and U.S. government sales. Woodford opined that PACT's damages base was too large because it impermissibly included sales of accused products that occurred outside the U.S. and included sales to the U.S. government. PACT argued that Woodford's opinions were not supportable and moved to exclude her proposed reductions in the damages base.

• Sales Outside the U.S.

Woodford had estimated non-U.S. sales of accused products using Xilinx sales reports that included North and South American sales, and reduced the damages base to exclude the estimated non-U.S. sales. PACT argued that Woodford's reduction should be excluded because: 1) Xilinx had actual U.S.-only sales data for the accused products but failed to produce it in discovery, and therefore' Woodford's estimation from the North and South American sales report was improper; and 2) Woodford's estimation methodology was unreliable.

The court rejected PACT's first argument the lesson here is that, if one wishes to complain about estimates based on reports that do not contain precise data when exact data could have been used but was not produced, the complaining party must move to compel production of the exact data. As stated above, Xilinx produced sales reports for the accused products that included North and South America. It could also produce in the ordinary course of business sales reports by country, but not by country and product, and thus did not maintain reports for the U.S that were limited to the accused products. The court found that it would have been difficult for Xilinx to produce such a report. PACT knew that Xilinx had not provided such a report, but PACT did not move to compel. The court thus refused to exclude Woodford's estimate of non-U.S. sales on the ground that Xilinx failed to produce exact data for foreign sales.

The court rejected PACT's second argument that Woodford's estimation methodology was unreliable. PACT pointed out some concerns about how Woodford estimated, but did not suggest that a superior methodology existed. The court concluded it would be preferable to allow the jury to hear Woodford's opinions and to allow PACT to undermine them on cross examination.

• Sales the U.S. Government

The court partially granted PACT's motion to exclude certain opinions by Woodford concerning the exclusion of sales to the U.S. government. 28 U.S.C. Section 1498 prevents a patentee from recovering damages for infringement "by or for the United States." Woodford had access to sales percentages by Xilinx customers to the U.S. government, but those percentages were not broken down to show sales of the Xilinx accused products. Woodford's opinion was based on a flawed assumption: The percentage of Xilinx's customers' total sales of all products to the U.S. government "is similar to the percent of accused unit sales that are sold to the U.S. government ...." The court cited a single example:

"For example, Woodford found that roughly 3% of customer M's sales were made to the government. Dkt. No. 178 at 13. However, there is no evidence supporting the assumption Woodford makes, which is that 3% of the Xilinx product bought by customer M was similarly sold to the government. It is unacceptably likely that 100% of the Xilinx product bought by customer M was sold to other 97% of customer M's customers. Therefore, this part of Woodford's methodology for estimating sales to the U.S. government does not rely on sufficient facts or a reliable methodology as required by Federal Rule of Evidence 702, and PACT's objection is sustained as to ¶ 82.

The court thus granted PACT's motion to exclude the Woodford's estimate of government sales based on this methodology.