`CATERPILLAR INC.
`
`
`v.
`
`Defendant/Counterclaim-Plaintiff.
`
`WIRTGEN AMERICA, INC.’S OPPOSITION TO
`CATERPILLAR INC.’S MOTION TO EXCLUDE
`
`
`
`Case 1:17-cv-00770-JDW Document 324 Filed 02/08/24 Page 1 of 17 PageID #: 30698
`
`
`
`WIRTGEN AMERICA, INC.
`
`
`Plaintiff/Counterclaim-Defendant,
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
`
`)
`)
`) C.A. No. 17-770-JDW
`)
`)
` JURY TRIAL DEMANDED
`)
`) EXHIBIT B CONTAINS
`
`) CONFIDENTIAL MATERIAL - FILED
`) UNDER SEAL
`
`
`
`
`
`
`
`
`
`
`

`

`Case 1:17-cv-00770-JDW Document 324 Filed 02/08/24 Page 2 of 17 PageID #: 30699
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`
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`
`
`I.
`
`II.
`
`TABLE OF CONTENTS
`
`INTRODUCTION ...............................................................................................................1
`
`BACKGROUND .................................................................................................................1
`
`A.
`
`B.
`
`C.
`
`Caterpillar’s Daubert motion. ..................................................................................1
`
`The Court’s ruling and the parties’ ensuing discussions. ........................................2
`
`Dr. Seth’s supplemental submission. .......................................................................4
`
`III.
`
`ARGUMENT .......................................................................................................................5
`
`A.
`
`Dr. Seth’s supplemental submission is consistent with—and directly
`responsive to—the Court’s Daubert ruling. .............................................................5
`
`1.
`
`2.
`
`3.
`
`Caterpillar does not and cannot justify the extraordinary sanction it
`seeks. ............................................................................................................5
`
`The opinions in the supplemental submission are not new..........................7
`
`Caterpillar’s arguments for exclusion mischaracterize the record
`and contradict Caterpillar’s counsel’s previous statements. ........................8
`
`B.
`
`Dr. Seth’s apportionment analysis is admissible. ....................................................8
`
`1.
`
`2.
`
`3.
`
`Dr. Seth’s analysis separates the value of the infringing features of
`Caterpillar’s machine from the value of non-infringing features
`(both patented and unpatented). ...................................................................8
`
`Caterpillar’s attacks on Dr. Seth’s assumptions go to weight, not
`admissibility. ................................................................................................9
`
`Caterpillar’s rehash of its spare-parts argument fails. ...............................11
`
`C.
`
`D.
`
`Dr. Seth’s description of the context of the hypothetical negotiation and
`analysis of the Georgia-Pacific factors is relevant and reliable and will aid
`the jury. ..................................................................................................................11
`
`The Court should reject Caterpillar’s vague (and belated) request to limit
`fact witness testimony relevant to damages. ..........................................................12
`
`IV.
`
`CONCLUSION ..................................................................................................................13
`
`
`
`
`
`
`i
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`

`

`Case 1:17-cv-00770-JDW Document 324 Filed 02/08/24 Page 3 of 17 PageID #: 30700
`
`
`
`Cases
`
`TABLE OF AUTHORITIES
`
`
`
`Page(s)
`
`ActiveVideo Networks, Inc. v. Verizon Commc’ns, Inc.,
`694 F.3d 1312 (Fed. Cir. 2012)................................................................................................10
`
`Commonwealth Sci. & Indus. Research Org. v. Cisco Sys., Inc.,
`809 F.3d 1295, 1301 (Fed. Cir. 2015)........................................................................................8
`
`Deere & Co. v. Int’l Harvester Co.,
`710 F.2d 1551 (Fed. Cir. 1983)................................................................................................11
`
`Dow Chem. Co. v. Mee Indus.,
`341 F.3d 1370 (Fed. Cir. 2003)................................................................................................13
`
`Evolved Wireless, LLC v. Apple Inc.,
`2019 WL 1178517 (D. Del. Mar. 13, 2019) ..............................................................................9
`
`Georgia-Pacific Corp. v. U.S. Plywood Corp.,
`318 F. Supp 1116 (S.D.N.Y. 1970) ...................................................................................11, 12
`
`Insight Equity v. Transitions Optical, Inc.,
`2016 WL 7031281 (D. Del. Nov. 30, 2016) ..............................................................................6
`
`Intel Corp. v. Future Link Sys., LLC,
`2017 WL 2482881 (D. Del. June 1, 2017) .............................................................................8, 9
`
`Konstantopoulos v. Westvaco Corp.,
`112 F.3d 710 (3d Cir. 1997).......................................................................................................5
`
`Meyers v. Pennypack Woods Home Ownership Ass’n,
`559 F.2d 894 (3d Cir. 1977)...................................................................................................6, 7
`
`NexStep, Inc. v. Comcast Cable Commc’ns, LLC,
`2021 WL 5356293 (D. Del. Nov. 17, 2021) ..............................................................................7
`
`Summit 6, LLC v. Samsung Elecs. Co., Ltd.,
`802 F.3d 1283 (Fed. Cir. 2015)..................................................................................................9
`
`ZF Meritor, LLC v. Eaton Corp.,
`696 F.3d 254 (3d Cir. 2012)...................................................................................................5, 6
`
`ii
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`

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`Case 1:17-cv-00770-JDW Document 324 Filed 02/08/24 Page 4 of 17 PageID #: 30701
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`
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`I.
`
`INTRODUCTION
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`Caterpillar’s motion to exclude is long on incendiary rhetoric and short on substance.
`
`Dr. Seth’s supplemental damages report does not contain new opinions. Caterpillar seems to
`
`concede this point. Despite opening its brief by accusing Wirtgen of “flagrant[ly] disregard[ing]”
`
`the Court’s order and submitting a “new report” with “new opinions,” Caterpillar later concedes
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`that Wirtgen did no such thing. See Mot. 12 (acknowledging that Wirtgen “elected to proceed to
`
`trial on the existing” opinion “[e]ven after the Daubert hearing”).
`
`Caterpillar concedes this because it has to. Dr. Seth’s supplemental report applies exactly
`
`the same apportionment methodology set forth in her opening report. See Mot. 4 (admitting as
`
`much). She just applies it to the entirety of the accused profits instead of merely a portion of the
`
`accused profits (the joint surplus), thereby fixing the flaw identified by the Court in its Daubert
`
`ruling. Caterpillar did not object to Dr. Seth’s apportionment methodology in its initial Daubert
`
`motion; on the contrary, at the Daubert hearing, Caterpillar’s counsel agreed that Caterpillar had
`
`no quarrel with it. Caterpillar thus has waived its objections to this aspect of Dr. Seth’s analysis.
`
`And, even if addressed on the merits, Caterpillar’s new arguments fail. They mischaracterize
`
`Dr. Seth’s analysis (completely ignoring the portions of her apportionment methodology that
`
`account for unpatented features) and the governing law. At best, Caterpillar’s complaints go to
`
`weight, not admissibility. Caterpillar’s motion should be denied.
`
`II.
`
`BACKGROUND
`
`Caterpillar’s Daubert motion.
`
`A.
`As the Court accurately summarized in its February 5 Order, Dr. Seth’s opening expert
`
`report arrived at a reasonable-royalty damages estimate by (i) calculating Caterpillar’s maximum
`
`willingness to pay and Wirtgen’s minimum willingness to accept in a hypothetical negotiation
`
`and (ii) apportioning the difference between those two values (or “joint surplus value”) using a
`
`1
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`

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`Case 1:17-cv-00770-JDW Document 324 Filed 02/08/24 Page 5 of 17 PageID #: 30702
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`
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`forward-patent citation analysis and the Rubenstein bargaining model. D.I. 308 at 4. Dr. Seth
`
`determined that Caterpillar’s maximum willingness to pay would have equaled its anticipated
`
`profits on the machines (and parts associated with the machines) that are accused of practicing
`
`Wirtgen’s asserted patents, and that Wirtgen’s minimum willingness to accept would have
`
`equaled its anticipated profits on the machines (and parts associated with the machines) that
`
`Wirtgen would lose if Caterpillar were to enter the market. Id. at 4–5.
`
`Caterpillar moved to exclude Dr. Seth’s opinions on no fewer than five grounds. First,
`
`Caterpillar argued that Dr. Seth was not permitted to use Wirtgen’s anticipated lost profits as part
`
`of her reasonable-royalty calculation because she did not perform a Panduit analysis. D.I. 211 at
`
`4–6. Second, Caterpillar contended that Dr. Seth included the wrong parties in the hypothetical
`
`negotiation because Wirtgen GmbH—rather than Wirtgen America—owned the patents at the
`
`time of first infringement. Id. at 6–8. Third, Caterpillar criticized Dr. Seth for using Wirtgen
`
`America’s actual lost profits as a proxy for its anticipated lost profits. Id. at 9–10. Fourth,
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`Caterpillar argued that Dr. Seth failed to apportion Wirtgen’s minimum willingness to accept. Id.
`
`at 10–12. Fifth, Caterpillar disputed that spare and replacement parts were properly includable in
`
`Dr. Seth’s royalty base. Id. at 12–13. Caterpillar did not challenge Dr. Seth’s apportionment
`
`methodology as applied to the joint surplus value, and Caterpillar’s counsel in fact stated at the
`
`Daubert hearing that he did not “dispute the issue that there was an apportionment to determine
`
`the royalty rate.” Hr’g Tr. 31:12–22.
`
`The Court’s ruling and the parties’ ensuing discussions.
`
`B.
`Following the hearing, the Court orally granted Caterpillar’s motion. The Court held that
`
`“the apportionment requirement appl[ies] even to the -- what I would call the base, the
`
`calculation, the minimum willingness to accept, and I don’t think that [] Dr. Seth did that.” Id. at
`
`69:18–21. The Court stated, however, that Dr. Seth’s use of lost profits in her reasonable-royalty
`
`2
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`

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`Case 1:17-cv-00770-JDW Document 324 Filed 02/08/24 Page 6 of 17 PageID #: 30703
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`
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`analysis was not problematic standing alone, and it further noted that “I don’t see why she can’t
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`get up and walk through her analysis of the Georgia Pacific factors separately.” Id. at 70:24–
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`71:13, 71:22–23. Counsel for Wirtgen responded with the proffer that “she would testify as to
`
`sort of the background . . . of the parties, the industry, et cetera,” and provide “her opinions on
`
`each of the Georgia Pacific factors, but where we would stop is in terms of offering opinion[s] as
`
`to what the -- what her opinion on the royalty would be, which comes to the minim[um
`
`willingness] to accept, maximum to pay in that part of the analysis.” Id. at 73:13–22.
`
`Counsel for Caterpillar, for his part, noted that “it would benefit all parties to have access
`
`to the Court’s detailed written order on this issue,” after which time the parties could “work out a
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`process where Wirtgen America could provide a written proffer or revised, redacted, whatever
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`we want to call it report so that the parties can see exactly and have notice as to what it is.” Id. at
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`76:25–77:7. The Court then stated that the proffer “wouldn’t be anything beyond what’s in the
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`report, but to the extent there’s stuff that can be pulled out of the report and offered as proper
`
`expert testimony, I guess that’s not improper.” Id. at 78:9–13. Counsel for Caterpillar responded
`
`that “the Court has in the past in these types of situations asked for updated reports in light of the
`
`Court’s guidance so that then our expert then can provide the rebuttal to whatever is going to be
`
`submitted so that then both sides know what’s going to happen at trial.” Id. at 78:25–79:5.
`
`The following Friday evening, counsel for Caterpillar wrote to Wirtgen asking three
`
`questions “[p]ursuant to the Court’s guidance at [the] hearing”:
`
`1.
`2.
`
`3.
`
`Does Wirtgen America still intend to call Dr. Seth?
`Will she be opining on a damages number? If so, what is
`that number? What is the damages theory and related
`analysis?
`Please identify the portions of Dr. Seth’s existing report that
`support the above.
`
`3
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`

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`Case 1:17-cv-00770-JDW Document 324 Filed 02/08/24 Page 7 of 17 PageID #: 30704
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`
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`Ex. A. The Court then issued its written opinion, D.I. 308, along with an order directing that,
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`“[t]o the extent that Wirtgen believes that there are parts of Dr. Seth’s opinion that she can still
`
`offer,” Wirtgen should “disclose to Caterpillar which parts of Dr. Seth’s expert report it intends
`
`to offer at trial.” D.I. 309 at 1.
`
`Dr. Seth’s supplemental submission.
`
`C.
`Wirtgen supplied the required disclosure on February 6 in the form of highlighted
`
`versions of Dr. Seth’s expert reports showing the portions of the reports that Wirtgen does not
`
`intend to offer at trial. As required by the Court’s Order, Wirtgen removed the portions of Dr.
`
`Seth’s analysis that rely on an un-apportioned minimum willingness to accept and therefore
`
`applied Dr. Seth’s apportionment calculation (which Caterpillar did not challenge in its Daubert
`
`motion) to the entirety of the profits attributable to the accused machines. Wirtgen also served a
`
`supplemental report consisting of five paragraphs of text and five tables showing the details of
`
`these mathematical calculations. As the supplemental report explains, this was “a purely
`
`mathematical exercise; [her] analysis is otherwise unchanged.” Supp. Rpt. (Feb. 6, 2024) ¶ 4.
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`Importantly, the apportionment analysis reflected in Dr. Seth’s originally-served report—
`
`which, again, was not disputed in Caterpillar’s original Daubert motion and has now been
`
`applied to the entire accused profit figure, rather than just the joint-surplus figure—has three
`
`distinct components. First, Dr. Seth uses as her starting point profits, not revenues. That accounts
`
`for the value of the materials, labor, already-licensed patents or other intellectual property, and
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`other inputs that are used in the production of the accused machines. See Opening Rpt. ¶ 205;
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`Reply Rpt. ¶ 77. Second, to account for the value contributed by any Caterpillar-patented
`
`technology in the accused machines, Dr. Seth performs a patent forward-citation analysis. See
`
`Opening Rpt. ¶¶ 209–211. Third, to apportion out the value that any other non-patent inputs
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`(besides those accounted for by incremental costs) contribute to the accused machines, Dr. Seth
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`4
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`

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`Case 1:17-cv-00770-JDW Document 324 Filed 02/08/24 Page 8 of 17 PageID #: 30705
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`
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`employs the Rubenstein bargaining model, “a well-established economic model of the bargaining
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`process.” See id. at ¶¶ 212–221. That model takes into account “the structure of the market, the
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`competitive position of the two parties, and each party’s best alternative options to reaching an
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`agreement.” Id. at ¶ 213.
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`As shown in Dr. Seth’s supplemental report, the resulting royalty rate (and dollar value
`
`amount through 2023) of applying the patent forward citation analysis and the Rubenstein
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`bargaining model apportionment calculations to the entirety of the accused profits depends on
`
`the extent to which the accused machines employ the technology claimed by Caterpillar’s own
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`patents. Supp. Rpt. (Feb. 6, 2024) ¶ 4. If Caterpillar practices its own patents at the same rate in
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`the accused products that Wirtgen does in its own products, the calculation comes to just over
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`$10 million (corresponding to a royalty figure of 4.61%). Id. At the other end of the spectrum, if
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`the accused products do not practice Caterpillar’s patents at all, the calculation comes to just
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`under $70 million (corresponding to a royalty figure of 31.87%). Id.
`
`III. ARGUMENT
`
`A.
`
`Dr. Seth’s supplemental submission is consistent with—and directly
`responsive to—the Court’s Daubert ruling.
`
`1.
`
`Caterpillar does not and cannot justify the extraordinary sanction it
`seeks.
`
`One point bears emphasis at the outset: Caterpillar is trying to preclude Wirtgen from
`
`offering any affirmative damages case. That is “an ‘extreme’ sanction,” and it therefore requires
`
`an extreme justification. ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254, 297 (3d Cir. 2012)
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`(quoting Konstantopoulos v. Westvaco Corp., 112 F.3d 710, 719 (3d Cir. 1997)). No such
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`justification is present here. Indeed, Caterpillar does not even address the governing legal
`
`framework.
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`5
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`

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`Case 1:17-cv-00770-JDW Document 324 Filed 02/08/24 Page 9 of 17 PageID #: 30706
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`
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`In ZF Meritor, the Third Circuit addressed a similar factual scenario to the one at issue
`
`here and concluded that a district court abused its discretion in refusing to permit the plaintiffs to
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`submit an alternative damages calculation after the court had held the initial calculations
`
`improper. Id. at 300. Such a request, the court held, should be analyzed under the Pennypack
`
`framework, which requires consideration of (i) potential prejudice to the party against whom the
`
`evidence would be offered; (ii) the ability of that party to cure the prejudice; (iii) the extent to
`
`which permitting the evidence would disrupt the proceedings; (iv) any bad faith on the part of the
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`party offering the evidence; and (v) the importance of the evidence. Id. at 298 (quoting Meyers v.
`
`Pennypack Woods Home Ownership Ass’n, 559 F.2d 894, 904–05 (3d Cir. 1977)). And the court
`
`concluded that these factors weighed against exclusion: the new proffered calculations were
`
`based on data found in the damages expert’s original report and used the same methodologies,
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`meaning there was little prejudice to the opposing party; there was no evidence of bad faith; and
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`(perhaps most significantly) the evidence was “critical[ly]” important. Id. at 298–99.
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`The same result is appropriate here, for almost exactly the same reasons. Dr. Seth’s
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`apportionment methodology (to which Caterpillar previously conceded it had no objection) has
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`not changed, so there is no prejudice. Caterpillar’s own expert, Mr. Reed, included his
`
`responsive positions to Dr. Seth’s patent forward citation analysis and Rubenstein bargaining
`
`model in his own expert report. Caterpillar took a deposition of Dr. Seth after her patent forward
`
`citation analysis and Rubenstein bargaining model had been disclosed and had the opportunity to
`
`ask her questions about either methodology. There is also no evidence that Wirtgen has acted in
`
`bad faith; on the contrary, the adjustments Dr. Seth made to her calculation directly respond to
`
`the Court’s central concern that the entirety of the accused profits—not just the joint surplus—
`
`must be apportioned under Federal Circuit law. And it is difficult to overstate the importance of a
`
`damages theory to Wirtgen’s case. See id.; Insight Equity v. Transitions Optical, Inc., 2016 WL
`
`6
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`

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`Case 1:17-cv-00770-JDW Document 324 Filed 02/08/24 Page 10 of 17 PageID #: 30707
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`
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`7031281, at *1–2 (D. Del. Nov. 30, 2016) (permitting plaintiff to submit a revised damages
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`theory after initial theory was excluded because of the critical nature of a damages theory to a
`
`plaintiff’s case).
`
`Caterpillar does not even nod to the Pennypack factors, much less try to justify the
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`extreme sanction it asks the Court to impose on Wirtgen. Caterpillar’s motion should be denied
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`for that reason alone.
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`The opinions in the supplemental submission are not new.
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`2.
`Even setting aside Caterpillar’s failure to engage with the applicable legal standard, its
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`untimeliness argument fails because the premise is wrong. Dr. Seth’s opinion is not new. Contra
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`Mot. 5. As explained above, Dr. Seth’s apportionment methodology has not changed, nor has the
`
`data to which Dr. Seth has applied it. As Caterpillar acknowledges (at 4), Dr. Seth has simply
`
`applied the previously disclosed apportionment calculations to the full amount of the profit
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`figure instead of just one component of it—“a purely mathematical exercise.” Supp. Rpt. (Feb. 6,
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`2024) ¶ 4. That, in turn, immediately distinguishes the sole case Caterpillar cites, in which the
`
`expert “cobbled together a new theory” shortly before trial. NexStep, Inc. v. Comcast Cable
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`Commc’ns, LLC, 2021 WL 5356293, at *2 (D. Del. Nov. 17, 2021). This is not a new theory. It
`
`employs the same data and the same methodology as set forth in Dr. Seth’s initial report. Cf. D.I.
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`309 at 1 (permitting Wirtgen to “disclose to Caterpillar which parts of Dr. Seth’s expert report it
`
`intends to offer at trial”). Indeed, Caterpillar concedes this point later in its brief, criticizing
`
`Wirtgen (at 12) for “proceed[ing] to trial on the existing, flawed expert opinion” “[e]ven after the
`
`Daubert hearing.” This opinion therefore is not untimely.
`
`7
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`

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`Case 1:17-cv-00770-JDW Document 324 Filed 02/08/24 Page 11 of 17 PageID #: 30708
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`
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`3.
`
`Caterpillar’s arguments for exclusion mischaracterize the record and
`contradict Caterpillar’s counsel’s previous statements.
`
`Throughout its motion, Caterpillar suggests (e.g., at 1, 3, 5) that Wirtgen’s service of
`
`supplemental calculations somehow contradicts Wirtgen’s representations after the Court’s oral
`
`ruling at the Daubert hearing. These accusations are wrong. Following the Court’s oral ruling,
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`Wirtgen’s counsel sought clarification from the Court as to whether “all of Dr. Seth’s opinions”
`
`were excluded. Hr’g Tr. 70:13-23. After some back and forth, Caterpillar’s counsel proposed
`
`that “it would benefit all the parties to have access to the Court’s detailed written order on this
`
`issue. And then subsequent to the receipt of the written order, we could work out a process
`
`where Wirtgen America could provide a written proffer or revised, redacted, whatever we want
`
`to call it report so that the parties can have notice as to what it is.” Id., 76:25 - 77:7. The Court
`
`declined to rule at that time as to whether other portions of Dr. Seth’s testimony would be
`
`permissible. Id. 78:3-8. Caterpillar’s assertion that it believed Wirtgen America would offer no
`
`damages figures at all is also the request it sent the very next day asking for Dr. Seth’s “damages
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`number” and the supporting analysis in her report. See Ex. A. Caterpillar can hardly profess
`
`surprise that Wirtgen provided exactly that.
`
`B.
`
`Dr. Seth’s apportionment analysis is admissible.
`
`1.
`
`Dr. Seth’s analysis separates the value of the infringing features of
`Caterpillar’s machine from the value of non-infringing features (both
`patented and unpatented).
`
`“The Federal Circuit has made clear that there is no single, exacting way to conduct an
`
`apportionment analysis, since ‘damages models are fact-dependent.’” Intel Corp. v. Future Link
`
`Sys., LLC, 2017 WL 2482881, at *5 (D. Del. June 1, 2017) (quoting Commonwealth Sci. &
`
`Indus. Research Org. v. Cisco Sys., Inc., 809 F.3d 1295, 1301 (Fed. Cir. 2015)). The
`
`apportionment method Dr. Seth applied here is reliable—Caterpillar previously conceded as
`
`8
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`

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`Case 1:17-cv-00770-JDW Document 324 Filed 02/08/24 Page 12 of 17 PageID #: 30709
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`
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`much, see Hr’g Tr. 31:18–20—and Caterpillar’s critiques of it at best go to weight, not
`
`admissibility.
`
`As an initial matter, Caterpillar focuses solely on Dr. Seth’s forward-citation analysis and
`
`ignores altogether two of the three steps of Dr. Seth’s apportionment analysis: her use of profits
`
`instead of revenues (which apportions out value associated with the incremental costs of the
`
`accused machines) and her use of the Rubenstein bargaining model (which apportions out other
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`non-patented features that contribute value). See supra Section II.C. Dr. Seth does not “assume[]
`
`that the unpatented features have zero value,” contra Mot. 7; those features are accounted for by
`
`the components of the apportionment methodology that Caterpillar ignores.
`
`Caterpillar’s attacks on Dr. Seth’s forward-citation analysis fare no better. These
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`arguments should be deemed waived because Caterpillar failed to challenge the forward-citation
`
`analysis in its initial Daubert motion. But the arguments fail on the merits in any event. As
`
`Caterpillar acknowledges (at 9), forward-citation analysis is an economically accepted tool for
`
`apportionment value among patents. And, contrary to Caterpillar’s implication (at 9), its use is
`
`not limited to an “aide in valuing comparable license[s].” Multiple courts have rejected Daubert
`
`challenges to forward-citation analysis outside of that context. See, e.g., Intel, 2017 WL
`
`2482881, at *4–5 (approving forward-citation methodology that did not involve patent licenses);
`
`see also Evolved Wireless, LLC v. Apple Inc., 2019 WL 1178517, at *3–4 (D. Del. Mar. 13,
`
`2019) (similar).
`
`2.
`
`Caterpillar’s attacks on Dr. Seth’s assumptions go to weight, not
`admissibility.
`
`Caterpillar also attacks (at 9–10) various purportedly “unreasonable assumptions”
`
`underlying Dr. Seth’s analysis. That is an argument about weight, not admissibility. See Summit
`
`6, LLC v. Samsung Elecs. Co., Ltd., 802 F.3d 1283, 1299 (Fed. Cir. 2015) (to the extent a
`
`9
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`

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`Case 1:17-cv-00770-JDW Document 324 Filed 02/08/24 Page 13 of 17 PageID #: 30710
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`
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`damages expert’s “credibility, data, or factual assumptions have flaws, these flaws go to the
`
`weight of the evidence, not to its admissibility”); ActiveVideo Networks, Inc. v. Verizon
`
`Commc’ns, Inc., 694 F.3d 1312, 1333 (Fed. Cir. 2012) (disagreements with conclusions and their
`
`underlying factual assumptions and considerations “go to the weight to be afforded the testimony
`
`and not its admissibility”). If Caterpillar believes Dr. Seth’s assumptions are faulty, it may cross-
`
`examine her on them.
`
`In any event, Caterpillar’s criticisms of Dr. Seth’s assumptions fail on their own terms.
`
`For example, Caterpillar contends (at 9) that the forward-citation analysis “arbitrarily assumes
`
`the relevant patents are those associated with certain ‘cooperative patent classification’ classes.”
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`In fact, Dr. Seth uses the primary CPC classes Wirtgen practices. Opening Rpt. ¶¶ 276, 278–279.
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`This is not an “arbitrary” assumption. And Dr. Seth must necessarily rely on the CPC classes of
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`Wirtgen’s patents rather than Caterpillar’s because Caterpillar has opted not to mark its machines
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`or otherwise indicate which, if any, of its patents its machines practice. Caterpillar also
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`complains (at 9) that Dr. Seth “provides no basis for ignoring Caterpillar patents on engines,
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`picks, or other components.” That premise is simply wrong. Some of the patents she includes
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`relate to engines, as Caterpillar’s expert Mr. Reed has conceded. See Ex. B (Reed Rebuttal Rpt.)
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`at 72. More fundamentally, neither Caterpillar nor its damages expert have ever identified a
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`single Caterpillar patent the accused machines practice. Surely, if Dr. Seth’s assumption about
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`the categories of patents Caterpillar’s machines practice were so unreasonable, Caterpillar could
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`have adduced some evidence to undermine it (evidence that is peculiarly in Caterpillar’s control,
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`no less).1
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`1 Tellingly, Caterpillar’s citations for these purportedly “unreasonable assumptions” are
`to Dr. Seth’s opening report, further underscoring that (i) the opinions Caterpillar is complaining
`about are not new and (ii) Caterpillar could have and should have made these arguments in its
`initial Daubert motion if it believed there was a basis to do so.
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`10
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`Caterpillar’s rehash of its spare-parts argument fails.
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`3.
`Finally, Caterpillar rehashes (at 10–11) its argument that Dr. Seth should not have
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`considered profits on replacement and spare parts as part of her analysis. That argument fails for
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`reasons Wirtgen has already explained: “Both the hypothetical licensor’s expectant loss of
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`collateral sales and the hypothetical licensee’s expectation of profits on its collateral [sales] are
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`relevant elements to be considered in determining a reasonable royalty.” D.I. 244 at 8 (quoting
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`Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp 1116, 1132 (S.D.N.Y. 1970)). And
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`the evidence in this case shows that revenues associated with spare and replacement parts for the
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`accused machines were critically important to the parties: 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, Opening Rpt. ¶ 256, and Caterpillar expected to make 25 percent of the
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`machine price annually from spare and replacement parts, Reply Rpt. ¶ 71. It was therefore
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`entirely proper for Dr. Seth to take parts profits into account, just as the parties at the
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`hypothetical negotiation would have. See Deere & Co. v. Int’l Harvester Co., 710 F.2d 1551,
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`1559 (Fed. Cir. 1983) (finding it “eminently reasonable” to “take into account the impact of
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`anticipated collateral sales of an admittedly noninfringing product line on the respective
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`bargaining positions of the parties engaged in the theorized licensing negotiations”).2
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`C.
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`Dr. Seth’s description of the context of the hypothetical negotiation and
`analysis of the Georgia-Pacific factors is relevant and reliable and will aid the
`jury.
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`2 Caterpillar includes in this section (at 10–11) an unrelated argument that Dr. Seth used
`the wrong royalty base because the accused machines are not the smallest saleable patent-
`practicing unit. This argument is waived; it appears nowhere in Caterpillar’s original Daubert
`motion. It is also meritless. The patents in this case cover road-milling machines, so the accused
`products are the smallest saleable patent-practicing unit. To be sure, that fact does not excuse
`Wirtgen from its obligation to apportion, but Dr. Seth did apportion, as explained in this brief.
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`11
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`Dr. Seth’s opening report sets forth an extensive discussion of the Georgia-Pacific
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`factors and their influence on the ultimate outcome of the hypothetical negotiation, the vast
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`majority of which has nothing to do with the minimum-willingness-to-accept calculation the
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`Court deemed inadmissible. See Opening Rpt. ¶¶ 143–200. That discussion, in turn, relies on Dr.
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`Seth’s explanation of relevant background information about the parties, the patents, and the
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`industry—most of which is likewise unrelated to the minimum willingness to accept. See id.
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`¶¶ 24–142.
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`Caterpillar seeks (at 11–12) to exclude all of this testimony, contending that experts
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`should not be permitted to serve as a “mouthpiece” for factual recitations. Caterpillar is right
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`about the legal principle, but wrong about its application here. Dr. Seth is not going to offer a
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`narrative of the facts; she is going to explain why the various facts relevant to the Georgia-
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`Pacific factors would influence the royalty rate up or down. That sort of testimony falls squarely
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`in the heartland of permissible damages expert opinion. The Court intimated as much at the
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`Daubert hearing: “I don’t see why she can’t get up and walk through her analysis of the Georgia
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`Pacific factors separately.” Hr’g Tr. 71:11–13. Caterpillar’s attempt to preclude this testimony
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`should be rejected.
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`D.
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`The Court should reject Caterpillar’s vague (and belated) request to limit
`fact witness testimony relevant to damages.
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`Caterpillar’s final ask is to exclude an ill-defined category of fact witness testimony
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`relevant to damages. As an initial matter, this request is in substance an out-of-time motion in
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`limine and should be rejected for that reason alone. If Caterpillar wanted to preclude Wirtgen
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`from adducing fact-witness testimony about the Georgia-Pacific factors, evidence of
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`Caterpillar’s profits on the accused machines, or “company-wide financial metrics,” Mot. 13–14,
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`it should have moved on those issues already.
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`12
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`In any event, Caterpillar’s arguments are legally incorrect, moot, or both. Caterpillar’s
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`contention that fact witnesses cannot provide testimony relevant to a reasonable royalty
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`contravenes black-letter law. Expert testimony is not an absolute prerequisite for reasonable-
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`royalty damages. Dow Chem. Co. v. Mee Indus., 341 F.3d 1370, 1382 (Fed. Cir. 2003). The fact
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`of infringement establishes the fa