Case 1:17-cv-00770-JDW Document 246 Filed 10/19/23 Page 1 of 49 PageID #: 24919
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
`
`WIRTGEN AMERICA, INC.
`
`Plaintiff/Counterclaim-Defendant,
`
`v.
`
`CATERPILLAR INC.
`
`Defendant/Counterclaim-Plaintiff.
`
`)
`)
`)
`)
`)
`)
`)
`)
`)
`
`C.A. No. 17-770-JDW-MPT
`
`JURY TRIAL DEMANDED
`
`REDACTED VERSION
`
`WIRTGEN AMERICA, INC.’S OPPOSITION TO CATERPILLAR INC.’S MOTIONS
`TO EXCLUDE CERTAIN EXPERT TESTIMONY AND FOR SUMMARY JUDGMENT
`
`

`

`Case 1:17-cv-00770-JDW Document 246 Filed 10/19/23 Page 2 of 49 PageID #: 24920
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`
`I.
`
`TABLE OF CONTENTS
`
`THE COURT SHOULD DENY CATERPILLAR’S MOTIONS TO EXCLUDE
`WIRTGEN’S EXPERT TESTIMONY UNDER DAUBERT. ............................................1
`
`A.
`
`Daubert #1: Dr. Seth’s Opinions Regarding Damages are Not Deficient ...............1
`
`1.
`
`2.
`
`3.
`
`Wirtgen’s Foregone Profits Are Properly Considered in
`Determining the Royalty Amount Wirtgen Would Be Willing to
`Accept in the Hypothetical Negotiation .......................................................3
`
`The Correct Parties’ Interests Were Represented at Dr. Seth’s
`Hypothetical Negotiation ...........................................................................10
`
`Dr. Seth Conducted a Proper Apportionment Analysis .............................11
`
`Daubert #2: Wirtgen America’s Experts Can Establish that Wirtgen-
`Branded Machines Practice the Asserted Patents ..................................................12
`
`Daubert #3: Wirtgen America’s Experts Do Not Purport to Opine
`Regarding Mental State or Subjective Intent .........................................................16
`
`Daubert #4: Wirtgen America’s Experts Can Testify Regarding
`Infringement Under the Doctrine of Equivalents ...................................................18
`
`1.
`
`2.
`
`Wirtgen’s experts applied the correct standard for DOE. ..........................19
`
`Caterpillar’s arguments go to weight, not admissibility. ...........................21
`
`B.
`
`C.
`
`D.
`
`II.
`
`CATERPILLAR HAS NOT SHOWN ENTITLEMENT TO SUMMARY
`JUDGMENT ON ANY ISSUE. ........................................................................................22
`
`A.
`
`B.
`
`C.
`
`D.
`
`E.
`
`MSJ #1: Claim 17 of the ’641 Patent. ....................................................................22
`
`MSJ #2: Claims 17 and 18 of the ’641 Patent .......................................................24
`
`MSJ #3: Claim 10 of the ’309 Patent .....................................................................27
`
`MSJ #4: Claim 13 of the ’972 Patent .....................................................................29
`
`MSJ #5: The ’474 and ’788 Patents .......................................................................31
`
`1.
`
`2.
`
`Disputed facts preclude summary judgment on the “plurality of
`indication and setting devices” limitation ..................................................31
`
`Disputed facts preclude summary judgment on the “indicate the
`current actual value” limitation. .................................................................34
`
`F.
`
`MSJ #6: Caterpillar’s Willful Infringement ...........................................................35
`
`ii
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`

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`Case 1:17-cv-00770-JDW Document 246 Filed 10/19/23 Page 3 of 49 PageID #: 24921
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`G.
`
`MSJ #7: The ’268 Reissue Patent ..........................................................................38
`
`III.
`
`CONCLUSION ..................................................................................................................40
`
`
`
`
`
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`
`
`iii
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`

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`Case 1:17-cv-00770-JDW Document 246 Filed 10/19/23 Page 4 of 49 PageID #: 24922
`
`TABLE OF AUTHORITIES
`
`Cases
`
`ActiveVideo Networks, Inc. v. Verizon Commc'ns, Inc.,
`694 F.3d 1312 (Fed. Cir. 2012)..........................................................................................13, 14
`
`Am. Seating Co. v. USSC Grp., Inc.,
`514 F.3d 1262 (Fed. Cir. 2008)..................................................................................................9
`
`and Warsaw Orthopedic v. Nuvasive, Inc.,
`2016 WL 4536740 (S.D. Cal. 2016) ........................................................................................11
`
`AquaTex Indus., Inc. v. Techniche Solutions,
`419 F.3d 1374 (Fed. Cir. 2005)................................................................................................19
`
`ArcherDX, LLC v. QIAGEN Scis., LLC,
`2022 WL 4597877 (D. Del. Sept. 30, 2022) ............................................................................35
`
`Asetek Danmark A/S v. CMI USA Inc.,
`852 F.3d 1352 (Fed. Cir. 2017)........................................................................................4, 6, 12
`
`Axcess Intern., Inc. v. Savi Technologies, Inc.,
`2013 WL 6839112 (N.D. Tex. 2013) .........................................................................................6
`
`Boehringer Ingelheim Vetmedica, Inc. v. Schering-Plough Corp.,
`320 F.3d 1339 (Fed. Cir. 2003)................................................................................................19
`
`Bombardier Recreational Prod. Inc. v. Arctic Cat Inc.,
`No. CV 12-2706, 2017 WL 758335 (D. Minn. Feb. 24, 2017) ...............................................17
`
`Brilliant Instruments, Inc. v. GuideTech, LLC,
`707 F.3d 1342 (Fed. Cir. 2013)................................................................................................28
`
`C R Bard Inc. v. AngioDynamics, Inc.,
`979 F.3d 1372 (Fed. Cir. 2020)................................................................................................18
`
`Cambrian Science Corp. v. Cox Communications, Inc.,
`617 Fed. App’x 989 (Fed. Cir. 2015).......................................................................................21
`
`Cave Consulting Group, LLC v. Optuminsight, Inc.,
`2016 WL 4658979 (N.D. Cal. 2016) .....................................................................................5, 7
`
`Certain Road Milling Machines and Components Thereof,
`Inv. No. 337-TA-1067, Final Initial Determination (Oct. 1, 2018) ...........................................2
`
`Crown Packaging Tech., Inc. v. Rexam Beverage Can Co.,
`559 F.3d 1308 (Fed. Cir. 2009)................................................................................................19
`
`iv
`
`

`

`Case 1:17-cv-00770-JDW Document 246 Filed 10/19/23 Page 5 of 49 PageID #: 24923
`
`Daedalus Blue LLC v. DJI Technology Co. Ltd.,
`2022 WL 831619 (W.D. Tex. 2022) ........................................................................................11
`
`Deere & Co. v. Int’l Harvester Co.,
`710 F.2d 1551 (Fed. Cir. 1983)..................................................................................................9
`
`Eko Brands, LLC v. Adrian Rivera Maynez Enters., Inc.,
`946 F.3d 1367 (Fed. Cir. 2020)................................................................................................36
`
`EMC Corp. v. Pure Storage, Inc.,
`154 F. Supp. 3d 81 (D. Del. 2016) .....................................................................................19, 21
`
`Exmark Mfg. Co. Inc. v. Briggs & Stratton Power Prod. Grp., LLC,
`879 F.3d 1332 (Fed. Cir. 2018)................................................................................................35
`
`Extang Corp. v. Truck Accessories Grp., LLC.,
`No. 19-923 (D. Del. Feb. 18, 2022) .........................................................................................37
`
`Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., Ltd.,
`172 F.3d 1361 (Fed. Cir. 1999)..........................................................................................33, 34
`
`Fromson v. Western Litho Plate and Supply Co.,
`853 F.2d 1568 (Fed. Cir. 1988)..................................................................................................7
`
`Georgia-Pacific Corp. v. U.S. Plywood Corp.,
`318 F.Supp. 1116 (S.D.NY. 1970) .................................................................................. passim
`
`Golight, Inc. v. Wal-Mart Stores, Inc.,
`355 F.3d 1327 (Fed. Cir. 2004)..................................................................................................4
`
`Inline Connection Corp. v. AOL Time Warner Inc.,
`470 F. Supp. 2d 435 (D. Del. 2007) ...................................................................................13, 21
`
`Kinetic Concepts, Inc. v. Wake Forest Univ. Health Scis.,
`No. SA-11-CV-163-XR, 2014 WL 1612648 (W.D. Tex. June 18, 2014) ...............................15
`
`Knickerbocker Toy Co. v. Azrak-Hamway Int'l, Inc.,
`668 F.2d 699 (2d Cir. 1982).....................................................................................................17
`
`Lemelson v. United States,
`752 F.2d 1538 (Fed. Cir. 1985)................................................................................................30
`
`Lucent Techs., Inc. v. Gateway, Inc.,
`580 F.3d 1301 (Fed. Cir. 2009)..................................................................................................7
`
`Medtronic Inc. v. Boston Scientific Corp.,
`558 Fed. Appx. 998 (Fed. Cir. 2014) .......................................................................................21
`
`v
`
`

`

`Case 1:17-cv-00770-JDW Document 246 Filed 10/19/23 Page 6 of 49 PageID #: 24924
`
`nCube Corp. v. Seachange Int’l, Inc.,
`436 F.3d 1317 (Fed. Cir. 2006)..........................................................................................21, 37
`
`Opticurrent, LLC v. Power Integrations, Inc.,
`2018 WL 6727826 (N.D. Cal. 201) .........................................................................................11
`
`Packet Intel. LLC v. NetScout Sys., Inc.,
`965 F.3d 1299 (Fed. Cir. 2020)................................................................................................36
`
`Philips Electronics North America Corp. v. Contec Corp.,
`411 F.Supp.2d 470 (D. Del. 2006) .....................................................................................26, 27
`
`Polara Eng'g Inc v. Campbell Co.,
`894 F.3d 1339 (Fed. Cir. 2018)..........................................................................................18, 38
`
`Power Integrations, Inc. v. Fairchild Semiconductor Int'l, Inc.,
`No. CA 04-1371-JJF, 2007 WL 7658923 (D. Del. Sept. 14, 2007) ........................................17
`
`Power Mosfet Techs., L.L.C. v. Siemens AG,
`378 F.3d 1396 (Fed. Cir. 2004)....................................................................................38, 39, 40
`
`Rite-Hite Corp. v. Kelley Co.,
`56 F.3d 1538 (Fed. Cir. 1995) (en banc)................................................................................4, 5
`
`Seymour v. Osborne,
`78 U.S. 516 (1870) ...................................................................................................................33
`
`SimpleAir, Inc. v. Sony Ericsson Mobile Comm’ns AB,
`820 F.3d 419 (Fed. Cir. 2016)..................................................................................................40
`
`Sinclair Refining Co. v. Jenkins Petroleum Process Co.,
`289 U.S. 689 (1933) ...................................................................................................................7
`
`Sloan Valve Co. v. Zurn Indus., Inc.,
`33 F. Supp. 3d 984 (N.D. Ill. 2014) .....................................................................................9, 10
`
`SRI Int’l, Inc. v. Cisco Sys., Inc.,
`14 F.4th 1323 (Fed. Cir. 2021) ................................................................................................36
`
`State Industries, Inc. v. More-Flo Industries, Inc.,
`883 F.2d 1573 (Fed. Cir. 1989)..................................................................................................8
`
`Syneron Medical Ltd. v. Invasix, Inc.,
`2018 WL 4696971 (C.D. Cal. 2018)......................................................................................5, 6
`
`Texas Instruments Inc. v. Cypress Semiconductor Corp.,
`90 F.3d 1558 (Fed. Cir. 1996)..................................................................................................21
`
`vi
`
`

`

`Case 1:17-cv-00770-JDW Document 246 Filed 10/19/23 Page 7 of 49 PageID #: 24925
`
`Trans-World Mfg. Corp. v. Al Nyman & Sons, Inc.,
`750 F.2d 1552 (Fed. Cir. 1984)..............................................................................................7, 8
`
`Union Carbide Chemicals & Plastics Tech. Corp. v. Shell Oil Co.,
`425 F.3d 1366 (Fed. Cir. 2005)................................................................................................11
`
`Union Carbide Corp. v. Graver Tank & Mfg. Co.,
`282 F.2d 653 (Fed. Cir. 1960)....................................................................................................8
`
`Vitronics Corp. v. Conceptronic, Inc.,
`90 F.3d 1576 (Fed. Cir. 1996)..................................................................................................24
`
`WBIP, LLC v. Kohler Co.,
`829 F.3d 1317 (Fed. Cir. 2016)................................................................................................38
`
`WCM Indus., Inc. v. IPS Corp.,
`721 F. App’x 959 (Fed. Cir. 2018) ..........................................................................................36
`
`Webasto Thermo & Comfort North America, Inc. v. Bestop, Inc.,
`2019 WL 3334565 (E.D. Mich. Jul. 25, 2019) ....................................................................8, 11
`
`Zimmer Surgical, Inc. v. Stryker Corp.,
`365 F. Supp. 3d 466 (D. Del. 2019) .....................................................................................9, 36
`
`Other Authorities
`
`Fed. R. Civ. P. 30(e) ........................................................................................................................7
`
`Lemley, Mark A., Copying in Patent Law, 87 N.C. LAW REV. 1428 (2009) ................................16
`
`Merriam-Webster Dictionary, available at https://www.merriam-
`webster.com/dictionary/when ..................................................................................................30
`
`Merriam-Webster.com Dictionary, Merriam-Webster, https://www.merriam-
`webster.com/dictionary/wheel .................................................................................................28
`
`vii
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`

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`Case 1:17-cv-00770-JDW Document 246 Filed 10/19/23 Page 8 of 49 PageID #: 24926
`
`I.
`
`THE COURT SHOULD DENY CATERPILLAR’S MOTIONS TO EXCLUDE
`WIRTGEN’S EXPERT TESTIMONY UNDER DAUBERT.
`
`A.
`
`Daubert #1: Dr. Seth’s Opinions Regarding Damages are Not Deficient
`
`Dr. Seth’s damages analysis is consistent with controlling legal standards and tethered to
`
`the facts of this case. There are two common types of damages in a patent case: lost profits
`
`(typically proved by the Panduit factors) and reasonable royalty (typically proved by the
`
`Georgia-Pacific factors). Dr. Seth opined on a reasonable royalty under a Georgia-Pacific
`
`analysis. Caterpillar acknowledges this and rightly notes that this analysis asks what a willing
`
`licensee and licensor would have agreed to in a hypothetical negotiation just before the
`
`infringement began. See Mot. at 3. But Caterpillar disagrees with the facts underlying Dr. Seth’s
`
`hypothetical negotiation and argues that Dr. Seth should have applied a Panduit analysis as part
`
`of her Georgia-Pacific analysis. Caterpillar’s argument is contrary to established law.
`
`A hypothetical negotiation is grounded in the parties’ beliefs, including the value they
`
`placed on the patents. Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F.Supp. 1116, 1120
`
`(S.D.NY. 1970). As Dr. Seth explains, Wirtgen greatly valued its patents and the advantage they
`
`provided in the market. See, e.g., Ex. L Seth Rep. ¶¶ 132, 136, 171-172, 245; Ex. N Seth Reply
`
`¶¶ 16, 28, 86; Ex. A (letter from Wirtgen to Caterpillar unwilling to license the patents). Wirtgen
`
`had never licensed anyone—let alone a competitor. But Caterpillar was desperate to use
`
`Wirtgen’s technology. Caterpillar had
`
` because it
`
` Ex. B Clark Dep. at 72:11-73:6;
`
`see also Ex. C Just Dep. at 182:4-9
`
`Displeased with its market position, Caterpillar set a goal to
`
` See, e.g., Ex. D at ’0001-0002
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`1
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`Case 1:17-cv-00770-JDW Document 246 Filed 10/19/23 Page 9 of 49 PageID #: 24927
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`
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` Rather than
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`innovate, Caterpillar performed systematic, comprehensive teardowns of Wirtgen machines to
`
`reverse engineer their features, hired ex-Wirtgen employees to extract information, and asked
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`customer surveys about Wirtgen’s desirable features. See, e.g., Ex. F Engelmann Dep. at 120:18-
`
`121:5 (Caterpillar performed “a systematic comprehensive teardown” of Wirtgen machines); Ex.
`
`G at ’926
`
`
`
` Ex. E Sansone Dep. at 56:18-58:2; 61:2-11 (Caterpillar
`
`used customer surveys to put the features that customers liked into the accused machines).
`
`Caterpillar’s investigation led it directly to the patented features. See, e.g., Ex. H at ’406-
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`407 (listing the accused “Ride Control System” and “Four Leg Levelling” as features customers
`
`would look for), ’404 (listing the accused “CAT Grade and Slope” as important); Ex. I (listing
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`the accused “ability to reverse machine with rotor engaged” as a “PM300 Raw Customer
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`Requirement”); Ex. GG Mashek Dep. at 196:6-10; 197:18-21 (customers wanted the accused
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`feature of travelling in reverse with the rotor on). Caterpillar’s actions also led it directly into an
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`ITC infringement proceeding. There, Caterpillar was found to infringe Wirtgen’s patents,
`
`including patents asserted in this case. See Certain Road Milling Machines and Components
`
`Thereof, Inv. No. 337-TA-1067, Final Initial Determination (Oct. 1, 2018). But Caterpillar was
`
`not deterred—the patented features were simply too valuable. See, e.g., D.I. 226-27 Engelmann
`
`Dep. at 291:6-20; 294:7-295:5; 297:20-298:11. Caterpillar continued to make and sell the very
`
`machines that were found to infringe (including machines at issue here). Id. Rather than stop
`
`selling the infringing machines, Caterpillar moved production to the U.S. to evade the ITC’s
`
`exclusion order. Id. These actions speak to the value it placed on Wirtgen’s patents.
`
`2
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`

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`Case 1:17-cv-00770-JDW Document 246 Filed 10/19/23 Page 10 of 49 PageID #: 24928
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`Caterpillar’s internal documents confirm this value. Caterpillar projected that not having
`
`the patented features would cost it at least $11 million in sales and 25% of industry market share
`
`each year. Ex. J. This is more than Caterpillar’s entire goal. Compare Ex. at ’0001
`
` with Ex. J (
`
`
`
`
`
` As of a year and a half
`
`after the hypothetical negotiation date Caterpillar still had no idea how to achieve the benefits of
`
`the asserted patents without using Wirtgen’s patents. Ex. J (conceding Caterpillar had “No
`
`Design Around” for the ’530 or ’641 patents); see also Ex. K at ’068 (“We cannot accomplish
`
`this feature without having the exact same plumbing arrangement that the [Wirtgen machine]
`
`has”). Without the use of Wirtgen’s patented technology, Caterpillar’s machines would not sell.
`
`Against this factual backdrop, Dr. Seth opined that Wirtgen would not have willingly
`
`given up its monopoly for anything less than the profits it would forego by doing so. Meanwhile,
`
`Caterpillar would have been willing to pay a large sum of money—a value up to the additional
`
`profit it expected to gain from selling machines that incorporate the patented technology.
`
`Caterpillar’s attacks on Dr. Seth generally fall into three categories: (1) faulting Dr. Seth’s
`
`consideration of the profits Wirtgen would forego by licensing its patents (referred to by
`
`Caterpillar as the “wrong starting point”); (2) faulting Dr. Seth’s consideration of Wirtgen
`
`America during the negotiation (allegedly the “wrong party”); and (3) faulting Dr. Seth’s
`
`apportionment. As discussed below, each attack fails.
`
`1.
`
`Wirtgen’s Foregone Profits Are Properly Considered in Determining the
`Royalty Amount Wirtgen Would Be Willing to Accept in the
`Hypothetical Negotiation
`
`Caterpillar argues (at 1-4, 8-9) that Dr. Seth should not have included Wirtgen’s foregone
`
`profits as a data point in determining the minimum amount Wirtgen would accept in the
`
`hypothetical negotiation. There is no legal, nor factual, basis for this criticism. Because Wirtgen
`
`3
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`Case 1:17-cv-00770-JDW Document 246 Filed 10/19/23 Page 11 of 49 PageID #: 24929
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`never licensed a single patent and attributed its market share to monopolizing its patented
`
`innovations, Dr. Seth set the floor of what Wirtgen would agree to as a willing licensor as the
`
`profits it would give up by licensing its patents. D.I. 213-1 Seth Rep.at ¶¶ 16–17, 203, 226–27.
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`Likewise, she set the ceiling of what Caterpillar would be willing to pay as the additional profits
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`Caterpillar would earn from selling products that use Wirtgen’s patented technology. Id.
`
`Caterpillar admits that the demonstrated profitability and success of Wirtgen’s patented
`
`technology is properly considered under Georgia-Pacific factor 8. Mot. at 6 (“Under appropriate
`
`circumstances, lost profits can be considered in a reasonable royalty analysis (e.g., Georgia-
`
`Pacific Factor 8).”). Indeed, the Federal Circuit has upheld damages awards based on the same
`
`analysis Caterpillar challenges here: using the profit a patentee foregoes by licensing its patents
`
`to determine the reasonable royalty floor in a hypothetical negotiation. See, e.g., Rite-Hite Corp.
`
`v. Kelley Co., 56 F.3d 1538, 1554–55 (Fed. Cir. 1995) (en banc) (basing royalty on a function of
`
`patentee’s lost profit); Asetek Danmark A/S v. CMI USA Inc., 852 F.3d 1352 (Fed. Cir. 2017)
`
`(same); Golight, Inc. v. Wal-Mart Stores, Inc., 355 F.3d 1327, 1338 (Fed. Cir. 2004) (same).
`
`Asetek explained that “a patent owner participating in a hypothetical negotiation would
`
`consider the profits on sales it might lose as a result of granting a license.” 852 F.3d at 1362.
`
`This is common sense: “a patent owner would be ‘unlikely’ to be ‘interested in’ accepting a
`
`royalty rate lower than its profit margin on the patented products.” Asetek, 852 F.3d at 1362–63
`
`(cleaned up). Similarly, in Rite-Hite, the en banc Federal Circuit noted, “[t]he language of the
`
`statute requires ‘damages adequate to compensate,’ which does not include a royalty that a
`
`patentee who does not wish to license its patent would find unreasonable.” 56 F.3d at 1555
`
`(upholding a damages award that set the floor of the royalty as a function of foregone profits).
`
`Courts have repeatedly denied challenges like Caterpillar’s. See, e.g., Plexxikon Inc. v.
`
`Novartis Pharm.s Corp., 2021 WL 97544 (N.D. Cal. 2021) (denying challenge that expert
`
`4
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`

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`Case 1:17-cv-00770-JDW Document 246 Filed 10/19/23 Page 12 of 49 PageID #: 24930
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`“improperly relied on an incomplete lost profits analysis by setting a ‘floor’ for the [reasonable
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`royalty] license based on lost sales of [the product that competes against the accused product.]”);
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`Cave Consulting Group, LLC v. Optuminsight, Inc., 2016 WL 4658979 (N.D. Cal. 2016) (same).
`
`Cave Consulting is particularly instructive because the analysis challenged there bears striking
`
`similarity to Dr. Seth’s. Like here, Plaintiff’s damages expert applied a “‘floor’ for the
`
`hypothetical negotiation [that] was calculated from the incremental profit [Plaintiff] would have
`
`made if [the infringing product] had not been on the market.” Cave Consulting, 2016 WL
`
`4658979 at *11. And—like here—the expert applied a “ceiling for the hypothetical negotiation”
`
`that corresponded to the defendant’s profits from the infringing product. Id. Like Caterpillar, the
`
`defendant in Cave Consulting argued “that [the expert] improperly used [Plaintiff’s] lost profits
`
`for the 2011-2014 damages period to set the ‘floor’ for the hypothetical negotiation bargaining
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`range.” Id. at *14. The court disagreed, stating that under prior cases (including Rite-Hite):
`
`“in conducting a hypothetical reasonable royalty analysis, [Plaintiff’s damages
`expert] was entitled to consider the profits that [Plaintiff] could have earned from
`selling its product to customers that actually purchased [the infringing products]
`instead. That is precisely what [Plaintiff’s expert] did. . . . [Defendant’s] argument
`that this methodology was improper is unpersuasive.”
`
`Id. at *15. That is precisely what Dr. Seth did here.
`
`Caterpillar places heavy and erroneous reliance on Syneron Medical Ltd. v. Invasix, Inc.,
`
`2018 WL 4696971 (C.D. Cal. 2018). See Mot. at 5, 6, 9. In Syneron, the expert simply labeled
`
`the Plaintiff’s lost profits as the reasonable royalty. 2018 WL 4696971 at *4. Importantly, the
`
`expert there did not perform the remainder of the reasonable royalty analysis. See id. The court
`
`observed that Georgia-Pacific “does not authorize the direct setting of the reasonable royalty in
`
`the amount of the licensor’s lost profits, as [Plaintiff’s damages expert] d[id] in his report.”
`
`Syneron, 2018 WL 4696971 at *4 (emphasis added). In Syneron, there was no consideration of a
`
`reasonable royalty floor, ceiling, or negotiation—the expert instead merely “proferre[d] a
`
`5
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`

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`Case 1:17-cv-00770-JDW Document 246 Filed 10/19/23 Page 13 of 49 PageID #: 24931
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`reasonable royalty damages calculation that [wa]s mathematically indistinguishable from that of
`
`a lost profit calculation.” Id. at *5. Syneron bears no resemblance to Dr. Seth’s analysis. Dr. Seth
`
`performed a complete analysis, considering all available information and all applicable Georgia-
`
`Pacific factors. She used Wirtgen’s foregone profits as a data point to inform the negotiation (the
`
`amount Wirtgen would have been willing to accept), as permitted (under Georgia-Pacific factor
`
`8). She did not simply label lost profits as the reasonable royalty, as in Syneron.
`
`Caterpillar also argues (at 1, 3-6) that to consider Wirtgen’s foregone profits, Dr. Seth
`
`should have performed a Panduit analysis. Not so. As the court noted in Plexxikon, “the Federal
`
`Circuit has approved of consideration of a patent owner’s lost profits in a hypothetical
`
`negotiation framework, even without considering the Panduit test.” 2021 WL 97544 at *5. The
`
`defendant in Asetek, also made the argument Caterpillar makes here; that use of profit margin as
`
`part of a reasonable royalty requires proving the Panduit factors. Asetek, 852 F.3d at 1362
`
`(citations omitted). The Federal Circuit disagreed. Id. at 1362. Caterpillar ignores this precedent.
`
`Instead, Caterpillar cites Axcess Intern., Inc. v. Savi Technologies, Inc., 2013 WL
`
`6839112 (N.D. Tex. 2013). But in Axcess, the damages expert estimated the plaintiff’s “target
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`incremental profit margin and multiplie[d] it by the revenues realized from the accused
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`[products] to determine a reasonable royalty.” 2013 WL 6839112 at *8. As with Syneron, the
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`expert did not perform the full Georgia-Pacific analysis. The district court thus required an
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`analysis of “but for” causation in Axcess because the calculation was “in essence a lost profits
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`analysis”—not a Georgia-Pacific analysis. Id. at 8–9. Dr. Seth did not blindly label Wirtgen’s
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`lost profits as her reasonable royalty rate. She performed a complete George-Pacific analysis.
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`Caterpillar also asserts (at 4) that “Wirtgen America claims the same royalty floor
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`regardless of the number of infringed patents, the infringed claims at issue, or the feasibility of
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`design-arounds.” That is false. While the framework for Dr. Seth’s analysis is consistent as
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`patents are added or subtracted (i.e., setting Wirtgen’s walkaway point as its foregone profit), the
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`dollar value of the walkaway point changes based on the patents found to be infringed.
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`Depending upon the patents found to infringe, Dr. Seth’s states that Wirtgen’s walkaway point
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`ranges from $4,044,913 to $53.2 million. See Ex. L Seth Rep. at ¶¶ 85-86. Dr. Seth provides the
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`patent-by-patent breakdown of Wirtgen’s walkaway point in row [1] of Table 7 (medium-sized
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`machines) and row [1] of Table 8 (large machines). Id. She clearly shows how she calculated
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`these numbers (see Ex. L Seth Rep. Exhibit 6) and how they factored into her analysis (see Ex. L
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`Seth Rep. Exhibit 5). Caterpillar ignores this information and instead misleadingly cites to two
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`excerpts from Dr. Seth’s deposition were she misspoke and corrected her testimony in her errata
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`sheet. See Ex. L at Errata; see also Fed. R. Civ. P. 30(e). Caterpillar does not cite her errata.
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`Next, Caterpillar argues (at 4, 9-10) that Dr. Seth should have relied solely on expected
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`profits rather than actual profits. According to Caterpillar, using actual profits fails to view the
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`hypothetical negotiation at the relevant time. But “[e]vidence of the infringer’s actual profits
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`generally is admissible as probative of his anticipated profits.” Trans-World Mfg. Corp. v. Al
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`Nyman & Sons, Inc., 750 F.2d 1552, 1568 (Fed. Cir. 1984); see also Sinclair Refining Co. v.
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`Jenkins Petroleum Process Co., 289 U.S. 689, 698 (1933) (in determining patent damages,
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`courts are not free to ignore the “book of wisdom.”). Courts have long recognized that experts
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`may consider actual lost profits in assessing a reasonable royalty. Cave Consulting, 2016 WL
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`4658979 at *14; see also Fromson v. Western Litho Plate and Supply Co., 853 F.2d 1568, 1575
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`(Fed. Cir. 1988) (reasonable royalty involves “flexibility because it speaks of negotiations as of
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`the time infringement began, yet permits and often requires a court to look to events and facts
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`that occurred thereafter and that could not have been known to or predicted by the hypothesized
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`negotiators”), overruled on other grounds by Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH
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`v. Dana Corp., 383 F.3d 1337 (Fed. Cir. 2004); Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d
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`1301, 1333-34 (Fed. Cir. 2009); Webasto Thermo & Comfort North America, Inc. v. Bestop, Inc.,
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`2019 WL 3334565, at *10 (E.D. Mich. Jul. 25, 2019) (“There is nothing inherently inappropriate
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`about utilization of a post-infringement profit number”). Actual profits are particularly reliable
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`here, where there is no evidence that expected profits would differ meaningfully.
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`Finally, Caterpillar incorrectly argues (at 12-13) that it was improper for Dr. Seth to
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`consider Wirtgen’s foregone profits on replacement and spare parts. But “[b]oth the hypothetical
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`licensor’s expectant loss of collateral sales and the hypothetical licensee’s expectation of profits
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`on its collateral are relevant elements to be considered in determining a reasonable royalty.”
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`Georgia-Pacific, 318 F.Supp at 1132. As the Federal Circuit has held: “It seems a logical and
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`commonsense view that [Defendant], if it had been negotiating with [Plaintiff] for a license,
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`would have taken into consideration all advantages which might accrue to it in determining a
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`royalty which it would be willing to pay. A license to sell the [infringing product] would have
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`enabled [Defendant] to expand its business, increase its sales of non-infringing materials and
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`thereby increase its profits.” Union Carbide Corp. v. Graver Tank & Mfg. Co., 282 F.2d 653,
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`671-672 (Fed. Cir. 1960); see also Trans-World, 750 F.2d at 1568; State Industries, Inc. v. More-
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`Flo Industries, Inc., 883 F.2d 1573, 1580 (Fed. Cir. 1989).
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`Here, the evidence is clear that both Wirtgen and Caterpillar placed great weight on profit
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`from spare and replacement parts. In fact, one of Caterpillar’s “key objectives” for the accused
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`products was
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` Ex. M at slide 53. Similarly, Wirtgen expected to make the same
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`revenue on the sale of the initial machine as it makes on the machine’s necessary spare and
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`replacement parts. See Ex. L Seth Rep. at ¶ 256. Given their expectation regarding the value of
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`spare and replacement parts sales at the time of the hypothetical negotiation, both parties would
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`Case 1:17-cv-00770-JDW Document 246 Filed 10/19/23 Page 16 of 49 PageID #: 24934
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`have considered Wirtgen’s foregone profits and Caterpillar’s additional profits made from spare
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`and replacement part sales when determining the appropriate licensing fee.
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`The fact pattern here resembles that of Deere & Co. v. Int’l Harvester Co., 710 F.2d 1551
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`(Fed. Cir. 1983). In Deere, the patent covered a corn head attachment to a combine. Id. at 1553.
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`The district court noted that “corn heads made possible the harvesting of corn with a combine
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`and th