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`Pallavi Seth, Ph.D. Vol II
`Wirtgen America Inc. v. Caterpillar Inc.
`Highly Confidential - Subject to the Protective Order
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` ******
` IN THE UNITED STATES DISTRICT COURT
` FOR THE DISTRICT OF DELAWARE
` - - -
`----------------------------x
`WIRTGEN AMERICA, INC., : CASE NO.
` :
` V. :
` :
`CATERPILLAR INC. : 1:17-cv-00770-JDW
`----------------------------x
`
` HIGHLY CONFIDENTIAL
` SUBJECT TO PROTECTIVE ORDER
` VOLUME II
` - - -
` February 11, 2024
` - - -
` Continued Videotaped Deposition of
` PALLAVI SETH, Ph.D.
` Wilmington, DE 19801
` February 11, 2024
`
`Reported by: Denise D. Bach, CCR, RPR
`
`______________________________________________________
` DIGITAL EVIDENCE GROUP
` 1730 M Street, NW, Suite 812
` Washington, D.C. 20036
` (202) 232-0646
`
`www.DigitalEvidenceGroup.comDigital Evidence Gorup C'rt 2024
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`202-232-0646
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` Continued Videotaped Deposition of
`PALLAVI SETH, Ph.D., held at the law offices
`of Wilson Sonsini Goodrich & Rosati, P.C.,
`#800, 222 Delaware Avenue, Wilmington, DE
`19801, beginning at 3:16 p.m., on the above
`date, before Denise D. Bach, a Registered
`Professional Reporter, Certified Court
`Reporter, License No. XI0003990, and Notary
`Public, NY, NJ, PA and DE.
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`APPEARANCES:
` STERNE KESSLER GOLDSTEIN & FOX, PLLC
` BY: DEIRDRE M. WELLS, ESQUIRE
` 1101 K Street, NW
` Washington, DC 20005
` 202.371.2600
` dwells@sternekessler.com
` --Representing the Plaintiff(s)
`
` WILSON SONSINI GOODRICH & ROSATI, P.C.
` BY: MATTHEW MACDONALD, ESQUIRE
` #100, 953 East 3rd Street
` Los Angeles, CA 90013
` 323.210.2900
` matthew.macdonald@wsgr.com
` and
` WILSON SONSINI GOODRICH & ROSATI, P.C.
` BY: MICHELLE DANG, ESQUIRE
` 40th Floor
` 1301 Avenue of the Americas
` New York, NY 10019-6022
` 212.999.5800
` mdang@wsgr.com
` --Representing the Defendant(s)
`
`ALSO PRESENT:
` CASSIE LEIGH BLACK, ESQUIRE
` WILSON SONSINI
` (APPEARING VIA ZOOM)
` BRETT L. REED, COMPETITION ECONOMICS
` - - -
` LARRY MOSKOWITZ, VIDEOGRAPHER
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` I N D E X
`WITNESS PAGE
` PALLAVI SETH, Ph.D.
` Mr. Macdonald 338
`
` E X H I B I T S
`MARKED DESCRIPTION PAGE
` Seth Expert Report of Dr. 337
` Exhibit 225 Pallavi Seth on Behalf of
` Wirtgen America, Inc., May
` 19, 2023
` Seth Supplemental Expert Report 337
` Exhibit 226 of Dr. Pallavi Seth on
` Behalf of Wirtgen America,
` Inc., January 29, 2024
` Seth Reply Expert Report of 337
` Exhibit 227 Pallavi Seth, Ph.D., on
` Behalf of Wirtgen America,
` Inc., July 7, 2023
` Seth Supplemental Expert Report 340
` Exhibit 228 of Dr. Pallavi Seth on
` behalf of Wirtgen America,
` Inc., February 6, 2024
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` E X H I B I T S
`MARKED DESCRIPTION PAGE
` Seth Dr. Seth's Understatement 438
` Exhibit 229 of Caterpillar Patents Due
` to Her Wirtgen GmbH CPC
` Limitation
`
`(Previously Marked Exhibits)
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` Trial Exhibit 3336
` Trial Exhibit 3337
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`Highly Confidential - Subject to the Protective Order
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` (Seth Exhibit No. 225, Expert
`Report of Dr. Pallavi Seth on Behalf of
`Wirtgen America, Inc., May 19, 2023; Seth
`Exhibit No. 226, Supplemental Expert Report of
`Dr. Pallavi Seth on Behalf of Wirtgen America,
`Inc., January 29, 2024; Seth Exhibit No. 227,
`Reply Expert Report of Pallavi Seth, Ph.D., on
`Behalf of Wirtgen America, Inc., July 7, 2023,
`were marked for identification.)
` THE VIDEOGRAPHER: Stand by.
` Good afternoon. We are now on
`the record. Today is February 11, 2024, and
`the time is 3:16 p.m. This is the continued
`deposition of Pallavi Seth, Ph.D. All counsel
`appearances will be noted on the stenographic
`record.
` MR. MACDONALD: Matt Macdonald,
`Wilson Sonsini Goodrich & Rosati. With me is
`my colleague, Michelle Dang, and expert
`witness, Brett Reed. We've also got on the
`phone or by video, we might have some client
`representatives.
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` I've discussed with counsel for
`Wirtgen and we have their consent for those
`clients to listen in, subject to counsel's
`right to ask for a continuance in case any
`highly confidential information comes up.
` MS. WELLS: Deirdre Wells from
`Sterne Kessler Goldstein & Fox on behalf of
`Wirtgen as well as the witness.
` PALLAVI SETH, Ph.D., having been
`first duly sworn or affirmed, was examined and
`testified as follows:
` - - -
` EXAMINATION
` - - -
`BY MR. MACDONALD:
` Q. All right. Dr. Seth, good
`afternoon. Your counsel has provided us with
`some redacted copies of your report that
`reflect changes to your report that were made
`in response to the court's recent order.
` I've had the court reporter hand
`you what has been marked Exhibits 225, 226 and
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`Wirtgen America Inc. v. Caterpillar Inc.
`Highly Confidential - Subject to the Protective Order
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`339
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`227, which are copies of those redacted
`reports.
` Do you have those in front of
`you?
` A. I do have them in front of me.
` Q. Okay. And is 225 an accurate
`copy of your redacted opening report?
` A. Yes. It does not have the
`exhibits, but it does have the -- it is the
`report.
` Q. And 226, is that an accurate
`redacted copy of your first supplemental
`report dated January 29th, 2024?
` A. That is correct.
` Q. And for the purpose of this
`deposition, can I call this your first
`supplemental report?
` A. Yes.
` Q. And --
` A. And, again, I believe it doesn't
`have the exhibits, but the report is right
`here.
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`Highly Confidential - Subject to the Protective Order
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`340
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` Q. And then Exhibit 227, is that an
`accurate copy of your redacted reply report
`submitted July 27, 2023?
` A. Yes, that's correct.
` Q. All right. Dr. Seth, you also
`submitted a second supplemental report in this
`case on February 6th, is that correct?
` A. Yes.
` Q. All right. I'm going to hand you
`a copy of that, which I'll have the court
`reporter mark Exhibit 228, please.
` (Seth Exhibit No. 228,
`Supplemental Expert Report of Dr. Pallavi Seth
`on behalf of Wirtgen America, Inc., February
`6, 2024, was marked for identification.)
`BY MR. MACDONALD:
` Q. All right. You had your
`deposition taken in this case.
` Do you recall that?
` A. Yes, I do.
` Q. Okay. And since your deposition,
`you have submitted both the first and the
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`second supplemental reports?
` A. That is correct.
` Q. Beyond the work that's set forth
`in those reports, have you done any other work
`or analysis in support of your opinions since
`your deposition in this case?
` A. All my opinions are in the
`reports.
` Q. You do not intend at trial to
`disclose any opinions that are not contained
`in your reports, correct?
` A. That is correct.
` Q. Now, your original report offered
`a reasonable royalty calculation that is
`different from the one that is contained in
`your second supplemental report, true?
` A. I received the court order on
`February 5th, I believe, and I provided a
`supplemental report, a second supplemental
`report in response to that.
` Q. Well, and that provides a
`reasonable royalty calculation that is
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`different than the one that you provided in
`your original report, true?
` A. It applies the concepts of --
`concepts that I had included in my original
`report, including the bar -- Rubinstein
`bargaining model, the patent citation
`analysis, to the accused profits that were
`also in the original report.
` Q. But it's different, right?
` A. I think you might have to explain
`different to me.
` Q. Well, all right. Let me ask you
`a different question. It comes out that
`the -- your first report comes out with a very
`different number than the second report, true?
`Or the second supplemental report, right?
` A. The numbers have changed between
`the opening report and the second supplemental
`report.
` Q. Great.
` And at trial you intend to offer
`as your damages opinion the reasonable royalty
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`calculations that are laid out in your second
`supplemental report, correct?
` A. That is correct.
` Q. And you stand by the calculations
`that are set forth in your second supplemental
`report, correct?
` A. Are the calculations in the
`second supplemental report reliable?
`Accurate? I don't -- I'm not sure what you
`mean by stand by.
` Q. You believe that your second
`supplemental report lays out a reliable
`formula for calculating the reasonable royalty
`in this case, true?
` A. That is correct.
` Q. All right. I want to get -- I'd
`like to get us on the same page about how the
`reasonable royalty calculation set forth in
`your second supplemental report works.
` Now, my understanding is it has
`three components. At the first step, you
`estimate Caterpillar's accused profits, is
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`that correct?
` A. I do, in my report, I do
`calculate the -- calculate Caterpillar's
`accused profits.
` Q. And then the second step of your
`reasonable royalty analysis is to apportion
`the accused profits according to what you call
`a forward patent citation analysis, is that
`correct?
` A. Yes, I do apply a forward patent
`citation analysis to the accused profits.
` Q. And the methodology that you
`employed to calculate the forward -- or,
`excuse me, strike that question.
` The methodology that you apply in
`your forward patent citation analysis is set
`forth in appendix B of your original report,
`is that correct?
` A. It is discussed both in the
`report itself in various places, but also
`discussed in appendix B of the record.
` Q. The third step of your reasonable
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`royalty calculation is to apply a bargaining
`split from the Rubinstein bargaining model,
`correct?
` A. The -- that -- I applied the
`Rubinstein bargaining model to bargain over
`the apportioned, the patent citation-based
`apportioned accused profits.
` Q. All right. Are there any steps
`that I've missed in those three steps that you
`apply to calculate the reasonable royalty in
`this case?
` A. Each steps have several further
`calculations in them, but, at a high level,
`you're correct.
` Q. There's no fourth step, right?
` A. No.
` Q. Okay. All right. So, if you can
`turn to Exhibit 228 -- well, actually, let me
`ask a different question.
` So, you've set forth in your
`second supplemental report four different
`damages scenarios. Is that fair?
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` A. Sorry, could you repeat that
`question?
` Q. Yeah, sure.
` In your second supplemental
`report, you set forth four different
`reasonable royalty scenarios. Is that fair?
` A. Depending on the rate at which
`Caterpillar practices its patents, which I
`don't know, I have provided four different
`numbers for reasonable royalties, similar to
`what I had done in my opening report as well.
` Q. And the low scenario -- excuse
`me, strike that.
` In the low scenario, the
`reasonable royalty is just over $10 million,
`correct?
` A. Of the four scenarios I've
`presented, the lower one is approximately
`$10 million.
` Q. And the high scenario that you
`presented was about $69 and a half million,
`correct?
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` A. That is correct.
` Q. So, just to clarify, your opinion
`in this case is that if Caterpillar practices
`its own patents at the same rate in the
`accused products that Wirtgen does in its
`practicing products, then the reasonable
`royalty for all asserted patents is
`$10,051,967 through 2023, correct?
` A. Yes. In paragraph 4 of the
`second supplemental report, I note that.
` Q. And what was the rate that you
`calculated that Wirtgen practices its own
`patents for the purposes of your forward
`citation analysis?
` A. Sorry, could you ask that
`question again, please?
` Q. Yeah, sure.
` What was the rate that you
`calculated that Wirtgen practices its own
`patents in its practicing products for
`purposes of calculating the forward citation
`analysis?
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` A. Well, we would have to go back
`and look at my opening report and the exhibits
`to the opening report, particularly
`Exhibits 14 and 15.
` Q. Do you recall what the rate was?
` A. I don't want to speak off memory.
`I would prefer to have the exhibits in front
`of me.
` Q. All right. So, you would agree,
`wouldn't you, that if Caterpillar practices
`its own patents that are in the accused
`products at a rate higher than Wirtgen does in
`the practicing products, then the reasonable
`royalty would be less than 10 million -- or
`than that $10 million figure, right?
` A. I don't know at what rate
`Caterpillar practices, but hypothetically if
`they do, mathematically I believe the number
`would be lower than 10 million.
` Q. And, similarly, if it turned out
`that Caterpillar practices its own patents at
`the same rate as Wirtgen, but your analysis
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`Pallavi Seth, Ph.D. Vol II
`Wirtgen America Inc. v. Caterpillar Inc.
`Highly Confidential - Subject to the Protective Order
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`missed some relevant patents with forward
`citations, then the reasonable royalty would
`also be less than that $10 million figure,
`correct?
` A. That's hypothetical. I don't
`know. I'd have to see what was missed and how
`it would play a role in the analysis.
` Q. Well, your analysis, as I
`understand your forward patent citation
`analysis, you count up Wirtgen's forward
`patent citations, right, and you compare that
`to Caterpillar's forward patent citations on
`the patents that it practices and you take a
`ratio, right?
` A. Well, I don't know what
`Caterpillar -- what patents Caterpillar
`practices. That's why I have to come up with
`an inferred calculation for Caterpillar.
` Q. All right. I understand.
` But the method, let's talk about
`the method that you're employing, the method
`looks at how many forward citations Wirtgen's
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`www.DigitalEvidenceGroup.comDigital Evidence Gorup C'rt 2024
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`202-232-0646
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`Wirtgen America Inc. v. Caterpillar Inc.
`Highly Confidential - Subject to the Protective Order
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`patents have and you compare it to the number
`of forward citations that Caterpillar's
`practice patents have, right?
` A. I think that's where the
`correction is. I don't know what patents
`Caterpillar practices.
` Q. I understand that. I'm asking
`about the methodology you employed.
` A. So, the methodology would be not
`what Caterpillar practices, but rather what I
`infer Caterpillar to practice based on the
`patents that Wirtgen says it practices based
`on its public patent marking websites.
` Q. But if you had information about
`what patents Caterpillar practiced, the right
`way to do the analysis is to compare the
`number of patents that Wirtgen practices and
`their forward citations to the patents --
`actually, let me strike that.
` The right way to do the
`calculation is you look at the six or seven
`patents that are in this case and their
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`www.DigitalEvidenceGroup.comDigital Evidence Gorup C'rt 2024
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`202-232-0646
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`Pallavi Seth, Ph.D. Vol II
`Wirtgen America Inc. v. Caterpillar Inc.
`Highly Confidential - Subject to the Protective Order
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`forward citations and you compare that to the
`forward citations for the patents that
`Caterpillar's machine practices, right?
` A. I don't have that information.
`If Caterpillar had produced the information
`about what its cold milling machines or its
`accused products practice, I could have done
`that calculation.
` Q. Right.
` So, if you had that information,
`the method that I just described in my
`previous question is the right way to do the
`calculation, correct?
` A. If Caterpillar had produced the
`information, I would have to revisit and make
`sure I understand what's there. But I would
`apply -- I would have, you know, used the
`patent citation -- forward patent citation
`analysis for the asserted patents and
`evaluated against Caterpillar's practiced
`patents in the asserted -- in the accused
`machines.
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`www.DigitalEvidenceGroup.comDigital Evidence Gorup C'rt 2024
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`202-232-0646
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`Pallavi Seth, Ph.D. Vol II
`Wirtgen America Inc. v. Caterpillar Inc.
`Highly Confidential - Subject to the Protective Order
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` Q. You calculated that -- strike
`that.
` All right. Are you aware that
`Wirtgen America last night dropped its claims
`about the '474 patent?
` A. I'm not sure I can answer that
`question.
` Q. Okay. Well, why don't you look
`at -- why don't you look at Table 9 of
`Exhibit 228, your second supplemental report.
` A. Second supplemental report.
`Okay.
` Q. Okay. This table is your
`calculation of the reasonable royalty under
`the low scenario, correct?
` A. Sorry, could you tell me which
`table you're looking at?
` Q. Table 9, extended Table 9.
` A. Okay.
` Q. You have that in front of you?
` A. I do.
` Q. That's the calculation of the low
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`www.DigitalEvidenceGroup.comDigital Evidence Gorup C'rt 2024
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`202-232-0646
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`Pallavi Seth, Ph.D. Vol II
`Wirtgen America Inc. v. Caterpillar Inc.
`Highly Confidential - Subject to the Protective Order
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`scenario damages number, correct?
` A. This is a scenario where
`Caterpillar practices at the same rate as
`Wirtgen. And the reasonable royalties are
`10 million, approximately 10 million.
` Q. Right. And you've broken out the
`damages by patent, right?
` A. Yes. It shows what the damages
`are -- the -- well, this is apportioned
`accused profits, yes, by patent.
` Q. Okay. And one of the patents
`that you list damages for is the '474 patent,
`correct?
` A. That is correct.
` Q. And I'll represent to you that
`last night Caterpillar -- actually, I'm going
`to ask this question hypothetically.
` If it was the case that Wirtgen
`dropped its claims as to the '474 patent,
`would that affect your damages calculation at
`all?
` A. It would not, because it belongs
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`www.DigitalEvidenceGroup.comDigital Evidence Gorup C'rt 2024
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`202-232-0646
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`Pallavi Seth, Ph.D. Vol II
`Wirtgen America Inc. v. Caterpillar Inc.
`Highly Confidential - Subject to the Protective Order
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`to the same sensor switching family, like the
`patent that's already there, which is the '788
`patent. So, it's already captured in the
`family citation analysis.
` Q. So, it makes no difference at all
`to your calculation of the reasonable royalty
`that -- if Wirtgen doesn't have a claim as to
`the '474 patent, correct?
` A. That is correct, because it
`belongs to the same sensor switching family as
`the '788 patent.
` Q. Hypothetically, if the jury were
`to find that -- and let's assume that this is
`the applicable scenario of the one that's set
`forth on Table 9 -- if the jury were to find
`that the '309 patent is not infringed, but
`that the others are, the right way for the
`jury to calculate damages is to subtract the
`879 or so thousand for the '309 from your
`total damages calculation, right?
` A. Yes. They could just add up all
`the other number -- all the other patent
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`www.DigitalEvidenceGroup.comDigital Evidence Gorup C'rt 2024
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`202-232-0646
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`Pallavi Seth, Ph.D. Vol II
`Wirtgen America Inc. v. Caterpillar Inc.
`Highly Confidential - Subject to the Protective Order
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`numbers, leaving out -- you don't want to
`double count the '788 and '474, but you could
`add up the other -- other numbers in column C.
` Q. Okay. And, similarly, if the
`jury were to find that only the '641 patent
`was infringed and this is the applicable
`scenario, then the damages would be 2.2 or so
`million, right?
` A. Yes.
` Q. All right. I want to talk a
`little bit about your forward patent citation
`analysis and the method that you used to
`calculate it.
` So, as I understand, the purpose
`of this step is to account for the incremental
`contribution of the asserted products to
`Caterpillar's accused products, correct?
` Excuse me, I misread that. Let
`me rephrase that question.
` This step is designed to account
`for the incremental contribution of the
`asserted patents to Caterpillar's accused
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`www.DigitalEvidenceGroup.comDigital Evidence Gorup C'rt 2024
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`202-232-0646
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`Wirtgen America Inc. v. Caterpillar Inc.
`Highly Confidential - Subject to the Protective Order
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`products, correct?
` A. As I note in paragraph 273 of my
`opening report, it says the goal is to
`calculate the proportion of the contribution
`associated with asserted patents to all other
`patents Caterpillar employs in the accused
`products.
` Q. So, if you can turn to
`paragraph 196 of your report.
` MS. WELLS: Sorry, which report
`are we --
` MR. MACDONALD: Her original
`report. Thank you, Counsel. Good
`clarification.
`BY MR. MACDONALD:
` Q. You say -- do you have 196 in
`front of you?
` A. I do.
` Q. Great.
` And it says, in the second
`sentence, it says, "To account for the
`incremental contribution of the asserted
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`www.DigitalEvidenceGroup.comDigital Evidence Gorup C'rt 2024
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`Wirtgen America Inc. v. Caterpillar Inc.
`Highly Confidential - Subject to the Protective Order
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`patents to Caterpillar's accused products, I
`apportioned the value created by the accused
`products based on forward patent citations."
` Correct?
` A. Yes. That's what paragraph 196
`says.
` Q. Okay. And to perform this step,
`you start with the accused profits, correct?
` A. Yes, I apply the patent -- the
`forward patent citation analysis to the
`accused profits.
` Q. And in laymen's terms, what
`you're doing is you're allocating those
`accused profits into two buckets, one that's
`associated with Wirtgen's patents that are
`asserted in this case, right? And one that is
`associated with any patents that Caterpillar's
`accused products practice, is that correct?
` A. No, it is not.
` Q. What's wrong with the way I
`phrased that?
` A. So, the accused profits contain
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`www.DigitalEvidenceGroup.comDigital Evidence Gorup C'rt 2024
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`202-232-0646
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`Pallavi Seth, Ph.D. Vol II
`Wirtgen America Inc. v. Caterpillar Inc.
`Highly Confidential - Subject to the Protective Order
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`both contribution from Wirtgen's asserted
`patents, contribution from Caterpillar's
`patents if it practices any in the asserted
`patents. It also captures other unpatented
`value or features contributed by Caterpillar.
` Q. Okay. How does the forward
`patent citation analysis account for
`unpatented value or features contributed by
`Caterpillar?
` A. So, the unpatented value
`contributed by Caterpillar is actually
`captured in several steps. So, one, just by
`looking at accused profits instead of
`accused rev -- like instead of accused
`revenues, the costs that have been subtracted
`include some of the unpatented aspects that
`Caterpillar brings to the table.
` Now, the accused profits that are
`being apportioned have a mix of both patent
`contributions by Wirtgen, potentially by
`Caterpillar, and the unpatented features.
`When you apply the patent forward citation
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`www.DigitalEvidenceGroup.comDigital Evidence Gorup C'rt 2024
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`202-232-0646
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`Pallavi Seth, Ph.D. Vol II
`Wirtgen America Inc. v. Caterpillar Inc.
`Highly Confidential - Subject to the Protective Order
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`analysis -- and there aren't clean lines
`within that accused profit where you say,
`here's where the patent contribution starts,
`unpatented contribution begins and so on.
` So, when you apply the patent
`forward citation analysis, you're giving a
`slice of the pie -- you're taking out a slice
`of the pie and you're giving away to
`Caterpillar value created both from patents
`and -- from its own patents, if it practices
`any, and unpatented features.
` What's left of the pie now
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