Case 2:14-cv-00111-AJS Document 353 Filed 04/28/15 Page 1 of 17
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE WESTERN DISTRICT OF PENNSYLVANIA
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`DRONE TECHNOLOGIES, INC.,
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` Plaintiff,
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`v.
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`PARROT S.A. and PARROT, INC.
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` Defendants.
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`§
`§
`§
`§
`§
`§
`§
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`§
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`Civil Action No. 2:14-cv-00111
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`Judge Arthur J. Schwab
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`JURY TRIAL DEMANDED
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`ELECTRONICALLY FILED
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`MEMORANDUM OF LAW IN SUPPORT OF
`DEFENDANTS PARROT S.A. AND PARROT, INC.’S
`MOTION FOR JUDGMENT AS A MATTER OF LAW
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`Case 2:14-cv-00111-AJS Document 353 Filed 04/28/15 Page 2 of 17
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`I.
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`INTRODUCTION
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`Pursuant to Federal Rule of Civil Procedure 50(a), Defendants Parrot S.A. and Parrot, Inc.
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`(collectively, “Defendants” or “Parrot”) submit this Memorandum in support of Parrot’s
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`accompanying Motion for Judgment as a Matter of Law, which asks the Court to enter judgment
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`as a matter of law in favor of Parrot for the grounds set forth herein. A Proposed Order
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`accompanies this Memorandum.
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`II.
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`LEGAL STANDARDS
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`Judgment as a matter of law “is appropriate only where a party has been fully heard on an
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`issue during a jury trial and the court finds that a reasonable jury would not have a legally
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`sufficient evidentiary basis to find for the party on that issue.” Agrizap, Inc. v. Woodstream
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`Corp., 520 F.3d 1337, 1342 (Fed. Cir. 2008) (citing Fed. R. Civ. P. 50(a)). “A motion for
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`judgment as a matter of law under Federal Rule 50(a) should be granted only if, viewing the
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`evidence in the light most favorable to the nonmoving party, there is no question of material fact
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`for the jury and any verdict other than the one directed would be erroneous under the governing
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`law.” Beck v. City of Pittsburgh, 89 F.3d 966, 971 (3d Cir. 1996) (quoting Macleary v. Hines,
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`817 F.2d 1081, 1083 (3d Cir. 1987)).
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`“In ruling on a Rule 50(a) motion, the Court must refrain from weighing the evidence,
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`determining the credibility of witnesses, or substituting [its] own version of the facts for that of
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`the jury.” Carnegie Mellon Univ. v. Marvell Tech. Group, Ltd., 986 F. Supp. 2d 574, 602 (W.D.
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`Pa. 2013) (quoting Eshelman v. Agere Sys., 554 F.3d 426, 433 (3d Cir. 2009) (internal quotation
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`marks omitted)). Judgment as a matter of law “should be granted where the record is critically
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`deficient of the minimum quantum of evidence necessary to support a verdict in favor of the non-
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`moving party. To that end, a scintilla of evidence is not enough to survive a Rule 50 motion at
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`trial. The question is not whether there is literally no evidence supporting the unsuccessful party,
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`Case 2:14-cv-00111-AJS Document 353 Filed 04/28/15 Page 3 of 17
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`but whether there is evidence upon which a reasonable jury could properly find a verdict in favor
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`of the non-moving party. In other words, a directed verdict is mandated where the facts and the
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`law will reasonably support only one conclusion.” Carnegie Mellon, 986 F. Supp. 2d at 602-03
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`(internal quotation marks and citations omitted).
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`III. THERE IS INSUFFICIENT EVIDENCE THAT DRONE TECHNOLOGIES, INC.
`(DTI) OWNS THE PATENTS-IN-SUIT OR THAT DTI IS A LEGAL
`CORPORATE ENTITY
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`The only evidence of ownership of the patents-in-suit that Plaintiff presented at trial was
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`evidence that the patents-in-suit identify Ms. Yu-Tuan (“Diane”) Lee as the sole inventor (P1;
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`P2), and that Lee assigned the patents-in-suit to DTI for $1.00 (P3). This evidence is insufficient
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`to show that DTI is the rightful owner of the patents-in-suit. As discussed in detail in Doc. No.
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`173, which is incorporated herein by reference, Lee was not the sole inventor of the patents-in-
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`suit and, therefore, DTI never legally acquired the rights in the patents-in-suit.
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`Even if the patents-in-suit (P1; P2) and the assignment (P3) are viewed in the light most
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`favorable to Plaintiff, however, there remains another reason why a jury could not reasonably
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`find for Plaintiff: there is no evidence in the record that DTI is a legal corporation under
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`Taiwanese law. Plaintiff presented no evidence of incorporation, registration, tax records,
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`accounting records, annual reports, or other corporate documents that show that DTI is an actual
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`and legally existing company. Ding’s uncorroborated testimony, which also does not establish
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`that DTI is a legally valid entity, is insufficient as a matter of law. (See, e.g., Trial Tr. Day 1,
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`154:2-21, Apr. 27, 2015.) Because there is insufficient evidence for a reasonable jury to
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`conclude that DTI owns the patents-in-suit or that DTI is a legal corporate entity, judgment as a
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`matter of law should be entered on this ground.
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`Case 2:14-cv-00111-AJS Document 353 Filed 04/28/15 Page 4 of 17
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`IV.
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`PARROT PRODUCTS NOT INDENTIFIED IN THE COMPLAINT ARE NOT
`SUBJECT TO DAMAGES
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`Parrot products not identified in the Complaint include Parrot’s Minidrones (of which
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`there are two, the “Jumping Sumo” and “Rolling Spider,” collectively referred to as
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`“Minidrones”) and Bebop drone. Plaintiff only identified two accused products in its Complaint:
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`the AR.Drone and the AR.Drone 2.0. (Doc. No. 1, ¶ 14.) The Complaint did not identify
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`Parrot’s Minidrones or Bebop drone as accused products. Plaintiff’s initial disclosures under
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`LPR 3.1 did not accuse Parrot’s Minidrones or Bebop drone as indirectly infringing any claim of
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`any patent-in-suit either. The record shows that Plaintiff never provided any basis for an
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`allegation against these devices under Fed. R. Civ. P. 11. Because the Complaint only demands
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`judgment with respect to Parrot’s AR.Drone and AR.Drone 2.0, and because the Complaint does
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`not demand any judgment against any other Parrot product, Parrot’s Minidrones and Bebop
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`drones are not subject to the default judgment as a matter of law. See Fed. R. Civ. P. 54(c).
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`Because Parrot’s Minidrones and Bebop drones should never have been included in the damages
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`trial, there is insufficient evidence upon which a reasonable jury could properly award damages
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`with respect to these products. Therefore, judgment as a matter of law is appropriate.
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`V.
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`PLAINTIFF’S REASONABLE ROYALTY ANALYSIS IS FLAWED
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`For reasons further specified below, Parrot respectfully submits that Plaintiff has failed to
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`provide a legally sufficient evidentiary basis for the jury to find for Plaintiff on the issue of a
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`reasonable royalty.
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`A. Plaintiff did not provide sufficient evidence to establish the royalty base.
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`Plaintiff’s claim for damages is based solely on a reasonable royalty. Under long-settled
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`law, the amount of a reasonable royalty depends on two fundamental factors: 1) the royalty base,
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`which depends on the number of infringing acts; and, 2) the royalty rate to be assessed on that
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`base. See VirnetX, Inc. v. Cisco Sys., 767 F.3d 1308, 1326 (Fed. Cir. 2014); Lucent Techs., Inc. v.
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`Gateway, Inc., 580 F.3d 1301, 1339 (Fed. Cir. 2009). Plaintiff bears the burden of proof on both
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`issues. Lucent, 580 F.3d at 1324.
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`All of the claims of the patents-in-suit require two sub-systems: 1) a remote controller;
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`and, 2) a remotely controlled vehicle. (P1; P2.) In its Complaint, Plaintiff accuses Parrot of
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`indirect infringement of the patents-in-suit by selling the AR.Drone and AR.Drone 2.0 products
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`in the U.S., and by making available the FreeFlight software for remotely controlling them from
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`a smartphone, tablet, or computer. (Doc. No. 1, ¶¶ 32, 33, 37, 38.) The Complaint alleges that
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`“Users” of the AR.Drone directly infringe the patents-in-suit “when they download the Parrot
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`FreeFlight app onto a smartphone or tablet and control a Parrot Drone using the smartphone or
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`tablet, in accordance with the instructions provided by Defendants on the product packaging and
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`user manuals for the Parrot Drones.” (Doc. No. 1, ¶¶ 31, 36.)
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`In view of the Complaint, there is no dispute that to prove an act of direct infringement
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`under the patents-in-suit, Plaintiff must prove: 1) that a remote controller has been paired with a
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`Parrot drone; 2) that the remote controller has a magnetic sensor (’071 Patent) and/or an
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`accelerometer (’748 Patent); 3) that the magnetic sensor or accelerometer can be accessed by the
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`FreeFlight application to control a Parrot drone; 4) that the FreeFlight application has been
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`activated to use one or both of a magnetic sensor or accelerometer. All must be proven, and
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`proven on a system-by-system basis, to determine the number of directly infringing systems.
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`However, Plaintiff has not provided any evidence showing the number or extent of acts
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`of direct infringement. Specifically, there is insufficient evidence: 1) identifying any “User” of
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`the “Parrot Drones” or the number of Users of the Parrot Drones; 2) identifying the identity,
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`manufacturer, and capability of any particular smartphone or tablet known to be used by a User
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`with a Parrot Drone, including whether any such device has an accelerometer and/or magnetic
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`sensor that can be used by the FreeFlight application as required by the claims of the patents-in-
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`suit; 3) determining the extent to which any User of a Parrot Drone actually uses a smartphone or
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`tablet to “control” a Parrot Drone as required by the claims of the patents-in-suit. Nor was any
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`of this information provided by Plaintiff’s expert Mr. Ned Barnes. Indeed, Barnes used the
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`number of Parrot drones sold in the U.S. as the royalty base instead of the number of allegedly
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`infringing systems. Moreover, neither Plaintiff nor Barnes made a proper showing of a “causal
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`connection” between the sale of a Parrot drone and an act of direct infringement, as required by
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`law. See Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., 711 F.3d 1348, 1375
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`(Fed. Cir. 2013) (quoting Chiuminatta Concrete Concepts, Inc. v. Cardinal Indus., Inc., 1 F.
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`App’x 879, 883-84 (Fed. Cir. 2001) (“In cases in which there is a question whether every sale
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`leads to an instance of direct infringement, a patentee must . . . establish the connection between
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`sales and direct infringement.”)). Because neither Plaintiff nor Barnes has provided sufficient
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`evidence of such information, it is impossible for a reasonable jury to properly determine the
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`number of acts of direct infringement by a “User.” As such, a reasonable jury cannot properly
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`determine the royalty base component of the reasonable royalty. Thus, judgment as a matter of
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`law is appropriate.
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`B. Plaintiff, including Plaintiff’s expert, did not provide sufficient evidence with
`respect to “infringing functionalities,” the entire market value rule, and the
`“price comparison” analysis.
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`1. “Infringing Functionalities”
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`Neither Plaintiff’s Complaint nor Plaintiff’s infringement contentions identify any
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`“infringing functionalities.” Barnes introduced the term “infringing functionalities” in his expert
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`report and related testimony. At trial, Barnes testified that the Parrot drones have two
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`“infringing functionalities”1: “accelerometer mode” and “absolute control mode.” Trial Tr. Day
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`No. 1, 208:8-11. The entire basis for Barnes’s understanding of how accelerometers and
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`magnetometers work (and, therefore, the basis for his understanding of the two modes he calls
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`“infringing functionalities”) amounts to his having accessed the website, HowStuffWorks.com in
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`January 2015 (Doc. No. 187 at 7, n.17)—even though the patents-in-suit have an effective filing
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`date of March 23, 2007 (P1; P2). Plaintiff did not provide any evidence whatsoever sufficient to
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`identify with reasonable particularity what the “infringing features” are, or what they include.
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`This is improper. See Enzo Biochem, Inc. v. Applera Corp., No. 2014-1321, 2015 U.S. App.
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`LEXIS 4064, at *10 (Fed. Cir. Mar. 16, 2015). Further, Barnes admitted that he does not have a
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`technical background and that he failed to consult anyone technical (such as a skilled artisan) to
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`aid his understanding of the “infringing functionalities” and the associated modes. (Trial Tr. Day
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`No. 2, 126:8, 127:23-24, Apr. 28, 2015.)
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`Plaintiff has never identified the “infringing feature” for the ’071 patent for the AR.Drone,
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`Minidrones, and Bebop. Another reason a reasonable jury could not award damages based on
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`this theory of “infringing functionalities,” is that the Plaintiff failed to provide any evidence that
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`“infringing functionalities” actually exist, much less what these “infringing functionalities”
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`might actually be, or how they are allegedly present in each of the Parrot drones for which
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`Plaintiff asked the jury to award damages. To begin with, it is undisputed that a Parrot drone
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`alone is not an infringing system of the patents-in-suit. As such, Plaintiff’s characterization of
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`Parrot drones as having “infringing functionalities” when a Parrot drone is not an infringing
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`system is erroneous as a matter of law. As explained above in Section V.A., supra, there is
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`1 Barnes uses “infringing functionalities” and “infringing features” interchangeably. See,
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`e.g., Trial Tr. Day No. 1,
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`insufficient evidence of facts or data to support the purported number of acts of direct
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`infringement. This means that there is also insufficient evidence for a reasonable jury to
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`properly determine the royalty base component of the reasonable royalty based solely on sales of
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`Parrot drones having purported “infringing functionalities,” instead of considering infringing
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`systems as a whole, which would require the jury to know the number of acts of direct
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`infringement.
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`On this record, there is insufficient evidence for a reasonable jury to conclude that
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`damages should be awarded based on the theory that Parrot products have “infringing
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`functionalities.” Thus, judgment as a matter of law is appropriate.
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`2. Entire Market Value Rule (EMVR)
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`Plaintiff seeks a reasonable royalty assessed as a dollar amount for each sale of a Parrot
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`drone. Plaintiff concedes, however, that the “infringing functionalities” (whatever they may be)
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`exist within a component of a drone, and that Parrot’s drones include other, non-infringing
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`features. The uncontroverted evidence shows the component including the “infringing
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`functionalities” was planned to be sold separately by Parrot in the form of a module known as
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`the RC7000. The RC7000 would have sold for a fraction of the price of a Parrot drone. (P119,
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`at P119-016.)
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`Where, as Plaintiff seeks here, a “reasonable royalty” assessed on a per unit basis, such
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`royalty ordinarily must be based on the “smallest salable patent-practicing unit.” LaserDynamics,
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`Inc. v. Quanta Computer, Inc., 694 F.3d 51, 67 (Fed. Cir. 2012) (quoting Cornell Univ. v.
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`Hewlett-Packard Co., 609 F. Supp. 2d 279, 283, 287-88 (N.D.N.Y. 2009)). There is one limited
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`exception to this rule, known as the “entire market value” rule. Under that rule, where an
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`accused device includes patented and unpatented features, a royalty may be based on the “entire
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`market value” of the device, but “only where the patented feature creates the basis for customer
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`Case 2:14-cv-00111-AJS Document 353 Filed 04/28/15 Page 9 of 17
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`demand or substantially creates the value of the component parts.” VirnetX, 767 F.3d at 1326
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`(emphasis in original). Courts have repeatedly applied that rule to require that a royalty be based
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`only on the infringing component of a multi-component product. E.g., LaserDynamics, 694 F.3d
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`at 68-69 (royalty must be based on optical disk rather than laptop including disk); Uniloc USA,
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`Inc. v. Microsoft Corp., 632 F.3d 1292, 1318-21 (Fed. Cir. 2011) (software registration system of
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`Microsoft Office and Windows). Moreover, Plaintiff bears the burden of establishing that the
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`EMVR applies and that the infringing feature is what drove customer demand to buy the entire
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`product. See Lucent, 580 F.3d at 1338.
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`Neither Plaintiff nor its expert, Barnes, has provided sufficient evidence that the patents-
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`in-suit or the “infringing functionalities” are the basis for customer demand. For example,
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`Barnes did not conduct any market studies or consumer surveys to address this question. See
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`LaserDynamics, 694 F.3d at 69. Barnes should have based his royalty on the smallest salable
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`unit, the RC7000, but he did not do so.
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`Barnes’s “apportionment” analysis also does not satisfy the entire market value rule. In
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`his analysis, Barnes attributes up to 45% of the value of a drone to the “infringing
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`functionalities” based on an erroneous conclusion that Parrot suffered a decline in revenue from
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`AR.Drone products of approximately 45% during the relevant period.2 (Doc. No. 187, ¶ 66.) He
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`used this “portion” of the drone sale price as an adjusted base for his royalty. As in
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`LaserDynamics, however, Barnes’s apportionment analysis is flawed. LaserDynamics, 694 F.3d
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`at 69. Barnes’s 45% figure generates an adjusted royalty base that is almost three times the value
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`of the smallest salable unit including the “infringing functionalities.” (Doc. No. 187, ¶ 67.) The
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`Federal Circuit has held, moreover, that reducing the royalty rate is not a basis to allow a
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`2 This erroneous conclusion is further discussed Section V.C., infra.
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`patentee to base a royalty on the entire market value of the product; it does not excuse the
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`patentee from showing that the patented feature is the basis for customer demand. Uniloc, 632
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`F.3d at 1319-20.
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`In view of the above, Plaintiff has not provided sufficient evidence that the patents-in-suit
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`or the “infringing functionalities” are the basis for customer demand, which violates the entire
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`market value rule. Barnes’s improper “apportionment” analysis does not cure this deficiency.
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`Because Plaintiff has failed to provide sufficient evidence to show that the entire market value
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`has been satisfied, a reasonable jury cannot properly determine the royalty base component of
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`the reasonable royalty, which must be based on the “smallest salable patent-practicing unit.”
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`Thus, judgment as a matter of law is appropriate on this ground.
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`3. “Price Comparison” Analysis
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`Barnes also testified that he conducted a “price comparison” analysis of different drone
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`products, in which he concluded that “the infringing functionalities” . . . accounted for “a 41 to
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`44 percent price premium for the AR.Drone.” (Trial Tr. Day No. 2, 141:6-7 As explained in
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`Section V.B.1., Plaintiff and Barnes have not provided sufficient evidence with respect to the
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`“infringing functionalities.” As such, insofar as Barnes’s “price comparison” analysis is based
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`on the “infringing functionalities,” there is insufficient evidence to support the “price
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`comparison” analysis for this reason alone.
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`For the “price comparison” analysis, Barnes “identified 10 competing drone products
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`with comparable camera functionality.” (Doc. No. 187, ¶ 33.) Plaintiff’s identification of these
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`10 drones as the competing drones is arbitrary. Barnes failed to consider consumer drone
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`products that were actually on the market when Parrot released the AR.Drone 2.0, even though
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`these were clearly identified by Parrot. (See P66, at P66-016.) Barnes also ignored squarely
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`relevant competing drone products, including those with comparable camera functionalities and
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`those with much higher selling prices. Barnes’s “price comparison” analysis also failed to
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`account for the many significant differences between the accused products and the allegedly
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`comparable products besides camera functionality. For example, none of the comparable
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`products have two cameras (like the AR.Drone) and at least three of them do not record HD
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`video (like the AR.Drone). (D13.) Moreover, none of the allegedly comparable products allow
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`Wi-Fi connectivity, none offer multiple hulls, none offer video sharing, and only one offers real-
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`time video capability. (Doc. No. 187, Ex. 5; D13.) Barnes did not adjust his “price comparison”
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`analysis to account for any of these differences. For at least these reasons, the “price
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`comparison” analysis is based on insufficient evidence, and a reasonable jury cannot properly
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`determine the royalty base component of the reasonable royalty based on the incomplete “price
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`comparison” analysis.
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`C.
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`Plaintiff did not provide sufficient evidence that the removal, replacement, or
`restoration of the FreeFlight application from the Apple App Store in 2013
`had a quantifiable effect on the reasonable royalty.
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`With respect to Plaintiff’s reasonable royalty damages claim, Barnes used an
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`apportionment analysis to adjust his initial royalty base in an attempt to “isolate the portion of
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`the value of accused AR.Drone products that is attributable to the infringing functionalities.”
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`(Doc. No. 187, ¶ 67.) A significant part of this apportionment analysis was based on a decline in
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`Parrot sales following the removal of the FreeFlight application from the Apple App Store. (Doc.
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`No. 187, ¶¶ 66-67.)
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`However, Plaintiff did not provide sufficient evidence from which a reasonable jury
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`could determine that the removal of FreeFlight from the Apple App Store in 2013 had a
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`quantifiable effect on the royalty base component of the reasonable royalty. For example, the
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`evidence showed that Parrot’s drone sales almost tripled from April 2012 to April 2013, which
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`was the month after FreeFlight was removed. (Doc. No. 187, Ex. 4.) The evidence also showed
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`that Parrot’s drone sales dropped significantly from August 2012 to August 2013, which was
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`more than one month after FreeFlight was restored. (Id.)
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`Plaintiff chose an arbitrary period of time (April-August) as a basis of comparison. This
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`period is different from the actual period when the allegedly infringing features were designed
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`out. Because Plaintiff did not provide sufficient evidence for a reasonable jury to conclude that
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`the removal, replacement, or restoration of the FreeFlight application from the Apple App Store
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`in 2013 had any quantifiable effect on the royalty base component of the reasonable royalty,
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`judgment as a matter of law is appropriate.
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`D.
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`Plaintiff’s reasonable royalty analysis includes non-infrining sales and was
`based upon an incorrect hypothetical negotiation date.
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`Damages accrue beginning on the date of first infringement. See Applied Med. Res. Corp.
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`v. U.S. Surgical Corp., 435 F.3d 1356, 1364 (Fed. Cir. 2006). In this case, the date of first
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`infringement is the date Parrot first had knowledge of the patents-in-suit because Plaintiff’s
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`Complaint accuses Parrot only of “indirect” infringement. Indirect infringement includes either
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`inducement of infringement under 35 U.S.C. § 271(b) or contributory infringement under 35
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`U.S.C. § 271(c). Both require proof of knowledge of the patents alleged to be infringed.
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`Commil USA, LLC v. Cisco Sys., 720 F.3d 1361, 1367 (Fed. Cir. 2013); Lucent, 580 F.3d at 1320.
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`Plaintiff’s Complaint alleges that Parrot’s first knowledge of the patents-in-suit occurred
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`no later than January 4, 2013, when “Diane” Lee identified that patents-in-suit to Parrot in an
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`email. (Doc. No. 1, ¶ 20.) The evidence in the record supports this allegation with respect to
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`January 4, 2013. (P-21 at 4-5.) Moreover, there is no evidence in the record of an earlier date,
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`and Plaintiff has not identified any such evidence.
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`Plaintiff nonetheless calculated damages beginning on January 31, 2012, the issue date of
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`the ’748 patent-in-suit. Also, Barnes used January 31, 2012 as the date of first infringement to
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`establish a “hypothetical negotiation” date for the purpose of determining a reasonable royalty
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`under Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970).
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`However, there is no factual support in the record for the use of January 31, 2012 as the
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`hypothetical negotiation date or to calculate damages. Plaintiff has not shown any “causal
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`connection” between Parrot’s alleged
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`indirect
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`infringement and any act of direct
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`infringement.Because Plaintiff has not provided sufficient evidence for a reasonable jury to
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`determine a reasonable royalty based on the hypothetical negotiation date of January 31, 2012,
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`judgment as a matter of law is appropriate.
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`E.
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`Plaintiff’s reasonable royalty analysis erroneously relied on an agreement
`between Parrot and its subsidiary, which lacked sufficient comparability to
`the hypothetical license at issue, and ignored the most relevant license
`agreement, the Barse License.
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`The parties agree that a reasonable royalty will be determined in this case by a
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`“hypothetical negotiation” under Georgia-Pacific. One of the Georgia-Pacific factors analyzes
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`patent license agreements that are “comparable” to the patents-in-suit. Georgia-Pacific, 318 F.
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`Supp. at 1120. Licenses that are not sufficiently comparable cannot be relied upon for purposes
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`of the hypothetical negotiation. Uniloc, 632 F.3d at 1316 (quoting Lucent, 580 F.3d at 1325)
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`(“[T]he licenses relied on by the patentee in proving damages must be sufficiently comparable to
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`the hypothetical license at issue in suit.”); Ravo v. Covidien LP, No. 11-1637, 2014 U.S. Dist.
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`LEXIS 151342, at *19 (W.D. Pa. Oct. 24, 2014) (“[L]icenses relied upon to support a reasonable
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`royalty analysis must be proven to be sufficiently comparable to the hypothetical license at issue
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`with respect to technology, economic terms, and time period.”).
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`Barnes exclusively relied on a 2009 license agreement between Parrot S.A. and one of its
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`wholly-owned subsidiaries (not a party to this action) responsible for manufacturing and selling
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`Parrot-branded consumer products (hereinafter, “the Parrot Agreement”). (Trial Tr. Day 2,
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`Case 2:14-cv-00111-AJS Document 353 Filed 04/28/15 Page 14 of 17
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`
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`188:22-25.) The Parrot Agreement grants to the wholly-owned subsidiary a non-transferable and
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`non-exclusive license with respect to substantially all of Parrot’s patents and technology for use
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`in all of Parrot’s Parrot-branded products in exchange for a variable royalty in an amount of a
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`confidential percentage of the net selling price of the applicable Parrot-branded product. (P24.)
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`As a matter of law, the manufacturing agreement with Parrot S.A.’s wholly-owned
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`subsidiary is not sufficiently comparable to a hypothetical license between two unrelated parties.
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`See Warsaw Orthopedic, Inc. v. NuVasive, Inc., 2015 U.S. App. LEXIS 3133, 26-27 (Fed. Cir.
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`Mar. 2, 2015) (“[R]oyalties paid by related parties have little probative value as to the patent’s
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`value.”); see also Medtronic Sofamor Danek USA, Inc. v. Globus Med., Inc., 637 F. Supp. 2d 290,
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`309 (E.D. Pa. 2009) (“[S]ince MPRO and Deggendorf are corporate entities related to Warsaw,
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`the royalty rates provided under the license agreements do not prove a royalty rate established by
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`an arms-length transaction. There is no evidence that Warsaw licensed the patents to unrelated
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`parties (although it retained the right to do so), so there is no established royalty rate for the
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`patents in suit. This factor has no effect on the royalty rate.”).
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`Nor is the subject matter of the Parrot Agreement comparable. In addition to having been
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`executed more than three years prior to the January 2013 hypothetical negotiation date, the
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`internal Parrot Agreement is directed to an entire portfolio of patents (including at least 34
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`French Patents) and other intellectual property (trade secrets, know-how, software) required to
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`manufacture Parrot’s products. (P24.) The agreement applies to the entire range of Parrot’s
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`offerings of electronic consumer products, including products that are not drones. There is
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`simply no rational way to compare a portfolio license directed to multiple products to the
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`hypothetical license here, which is limited to a pair of related patents and directed to a two
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`features that may or may not be found singly or together in a component of a single product.
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`Case 2:14-cv-00111-AJS Document 353 Filed 04/28/15 Page 15 of 17
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`Barnes’s analysis as to how the patents under the Parrot Agreement compare with the
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`patents-in-suit under the hypothetical license at issue is incomplete. He states only that the
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`Parrot Agreement includes, a patent that is directed to “steering drone for iPhone,” and that the
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`agreement applies to Parrot products covered by “one or more” patents. (Doc. No. 187, ¶¶ 37,
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`39.) Further, Barnes makes no attempt to explain how many Parrot patents under the Parrot
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`Agreement would cover manufacture of Parrot’s drones, much less how any such patents would
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`cover Parrot’s drones in January 2013, the date of the hypothetical negotiation, or even January
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`2012, the date Barnes erroneously concluded was the date of the hypothetical negotiation. Nor
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`does he address the fact that Parrot never licensed any of its patents outside of Parrot.
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`Moreover, Barnes ignored the most relevant license—a collaboration agreement between
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`Parrot and Mr. Thomas Barse (“Barse/Parrot Agreement”) for the development of one of the
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`Parrot Minidrones, a jumping drone controlled by a smartphone, called the “Jumping Sumo.” As
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`part of the Barse/Parrot Agreement, Parrot received an exclusive worldwide license to a Japanese
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`patent directed to a jumping drone and exclusive rights to Barse’s jumping drone concept,
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`designs and models, and know-how. Although the Barse/Parrot Agreement applies only to some
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`of the Parrot products for which Plaintiff seeks damages and conveyed exclusive rights to an
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`overall drone concept, including know-how and the continued involvement of the inventor, the
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`Barse/Parrot Agreement is the closest basis for comparison to the hypothetical license at issue
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`than the Parrot Agreement at least because the Barse/Parrot Agreement involved a drone that
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`could be piloted using a smartphone, a similar area of application at issue in this case. Because
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`Plaintiff has not provided sufficient evidence for a reasonable jury to determine a reasonable
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`royalty based on licenses that are sufficiently comparable to the hypothetical license at issue,
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`judgment as a matter of law is appropriate.
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`Case 2:14-cv-00111-AJS Document 353 Filed 04/28/15 Page 16 of 17
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`VI.
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`THE ISSUE OF “FUTURE” ONGOING ROYALTIES HAS NOT BEEN PROVEN
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`Plaintiff seeks a reasonable royalty for “future sales” made after trial, specifically after
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`June 2015. Plaintiff has not provided sufficient proof, if any, of Parrot’s future sales. Parrot’s
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`future sales are a matter of speculation. Plaintiff did not provide any credible method to project
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`Parrot’s sales, nor did it provide a verifiable method to project sales. The evidence is undisputed
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`that the drone industry is new and rapidly changing, and facing numerous uncertainties. Parrot’s
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`ability to compete, and its use of the allegedly infringing features, is uncertain and speculative.
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`Accordingly, judgment as a matter of law is appropriate on this ground.
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`VII. CONCLUSION
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`For the multiple grounds set forth herein, Parrot respectfully requests that this Court enter
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`judgment as a matter of law in favor of Parrot.
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`Dated: April 28, 2015
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`Respectfully submitted,
`
`
`
`/s/ Eric G. Soller
`Eric G. Soller, Esquire
`PA I.D. #65560
`EGS@Pietragallo.com
`Firm I.D. #834
`One Oxford Centre, 38th Floor
`301 Grant Street
`Pittsburgh, PA 15219
`Phone: (412) 263-1836
`Fax: (412) 263-4242
`
`
`
`COUNSEL FOR DEFENDANTS
`PARROT S.A. AND PARROT, INC.
`
`
`
`James E. Hopenfeld (pro hac vice)
`Attorney-in-Charge
`CA Bar No. 190268
`Hopenfeld@oshaliang.com
`Tammy J. Terry (pro hac vice)
`Texas Bar No. 24045660
`Terry@oshaliang.com
`OSHA LIANG LLP
`909 Fannin Street, Suite 3500
`Houston, TX 77010-1034
`Phone: (713) 228-8600
`Fax: (713) 228-8778