Case 2:23-cv-00059-JRG-RSP Document 284 Filed 01/23/25 Page 1 of 8 PageID #:
`13590
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`MARSHALL DIVISION
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`TOUCHSTREAM TECHNOLOGIES, INC.,
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`Plaintiff,
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`v.
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`CHARTER COMMUNICATIONS, INC. et
`al.,
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`Defendants.
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`TOUCHSTREAM TECHNOLOGIES, INC.,
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`Plaintiff,
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`v.
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`COMCAST CABLE COMMUNICATIONS,
`LLC, D/B/A XFINITY, et al.,
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`Defendants.
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`Lead Case No. 2:23-cv-00059-JRG
`Member Case No. 2:23-cv-00062-JRG
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`TOUCHSTREAM’S RESPONSE TO CHARTER’S
`OBJECTION TO ORDER DENYING DEFENDANTS’
`MOTION TO EXCLUDE AND STRIKE DR. RUSSELL W. MANGUM III’S OPINIONS
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`Case 2:23-cv-00059-JRG-RSP Document 284 Filed 01/23/25 Page 2 of 8 PageID #:
`13591
`FILED UNDER SEAL PURSUANT TO PROTECTIVE ORDER
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`Touchstream respectfully submits this response to the Charter Defendants’ Objection (Dkt.
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`257) to Magistrate Judge Payne’s Order Denying Defendants’ Motion to Exclude and Strike Dr.
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`Russell W. Mangum III’s Opinions (Dkt. 245).1 Although Charter may disagree with Judge Payne’s
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`Order, Charter falls far short of showing the Order is “clearly erroneous” and “contrary to law.”
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`Fed. R. Civ. P. 72(a). As explained below, Judge Payne thoroughly analyzed and rejected both of
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`the arguments that Charter raises in its Objection: (1) Dr. Mangum’s opinions regarding a
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`reasonable royalty in this method case, and (2) his apportionment of a comparable agreement (the
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`Quadriga Agreement) to the patents asserted in this case. See Dkt. 239 at 3-6. For the reasons
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`discussed below, the Court should deny Charter’s Objection.
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`First, Charter continues to argue that Dr. Mangum’s royalty rate of $0.48 per set-top box
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`per month—which is based on a comparable agreement Touchstream entered with Quadriga—is
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`improper in this method patents case and that the royalty base must be limited to a numerical input
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`of actual use. See Dkt. 239 at 3 (arguing Dr. Mangum should have used “Charter’s actual usage
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`data”). Charter is incorrect: Dr. Mangum’s $0.48 per month royalty rate does consider expectations
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`of use. Under the terms of the Quadriga Agreement, Touchstream was paid this monthly royalty
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`for every hotel room in which its technology was available—regardless of whether a guest ever
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`used the patented functionality. Dkt. 126 at 3; Dkt. 126-2 ¶ 104. Relying on the Quadriga
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`Agreement, Dr. Mangum opines that a reasonable royalty in this case would likewise be $0.48 per
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`month for each Charter set-top box that has the ability to practice the infringing methods. Dkt.
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`126-2 at ¶¶ 161-65. Dr. Mangum’s opinions are consistent with the Federal Circuit’s guidance that
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`the hypothetical negotiation ought to reflect what parties do in real-world licensing negotiations
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`1 This Order denied Charter’s motion “for the reasons provided in Dkt. 239.” See Dkt. 245. Thus,
`Touchstream cites the analysis set forth in the Memorandum Order on Comcast’s Motion to Strike
`Dr. Mangum’s Opinions (Dkt. 239).
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`1
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`because “[t]he hypothetical negotiation tries, as best as possible, to recreate the ex ante licensing
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`negotiation scenario and to describe the resulting agreement.” Lucent Techs., Inc. v. Gateway, Inc.,
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`580 F.3d 1301, 1325 (Fed. Cir. 2009).2 After considering these arguments, Judge Payne concluded
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`that “Dr. Mangum adequately explains how the Quadriga Agreement is an appropriate proxy for
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`use,” and cited Touchstream’s argument that the royalty rate in the Quadriga Agreement reflected
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`expectations for the counterparty’s use of the technology (so that if the royalty base was more
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`narrowly defined, the royalty rate would increase).3
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`Second, the Court should reject Charter’s criticism that Judge Payne’s Order “does not even
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`mention, much less address, any Federal Circuit cases.” Dkt. 257 at 2; see also id. (“Ignoring
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`controlling precedent . . .”). A close review of Judge Payne’s Order confirms that it is fully
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`consistent with Federal Circuit precedent. The Federal Circuit has recognized that damages in
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`method cases should track “real-world licensing negotiations,” and rejected the “rigid
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`requirement”—advanced by Charter here—that such damages be limited to actual use. See Lucent,
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`580 F.3d at 1334. Judge Payne’s Order is also consistent with the Federal Circuit’s decision in
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`Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d 1075 (Fed. Cir. 1983), in which the court affirmed
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`a flat royalty where only method claims were infringed and rejected the defendant’s plea to set
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`aside the damages award because it “acquired the [snowmaking] machines for experimental
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`2 Charter makes much of Dr. Mangum’s statement that a damages model based on actual usage is
`“inappropriate,” Dkt. 257 at 1, but as Dr. Mangum clarified at his deposition, what he meant was
`that on the facts presented here, a flat rate that accounts for use is appropriate whereas a rate that
`uses each instance of use as a mathematical input is not. See Dkt. 126-4 at 68:9–69:25.
`3 Dr. Mangum explained why Touchstream and Charter would agree to a $0.48 running royalty
`rate, including because (i) Quadriga agreed to this royalty structure and rate in similar
`circumstances, and (ii) this aligns with Charter’s need for the technology and how Charter charges
`video customers. See Dkt. 126-2 ¶¶ 106-09, 114. He also explained that if he artificially changed
`the base, such as by applying the $0.48 rate only to customers who actually used the technology
`in a given month, he would need to increase the rate. See Dkt. 126-4, Mangum Tr. at 68:9-69.
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`2
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`purposes and did not use them much,” and that the royalty therefore “should have been based upon
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`actual use.” Id. at 1080. The Federal Circuit found the damages award “fully supported by the
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`record,” which included testimony that the plaintiff “would have refused to grant a license based
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`on actual use or other criteria relating to the situation of the particular licensee.” Id. at 1079-80.
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`Twenty-five years later, the Federal Circuit in Lucent reaffirmed Hanson’s reasoning in rejecting
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`a defendant’s argument that precedent “requires that [method patent infringement] damages be
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`limited to the proven number of instances of actual infringing use.” 580 F.3d at 1323-34 (“[W]e
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`have never laid down any rigid requirement that damages in all circumstances be limited to specific
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`instances of infringement proven with direct evidence.”). Lucent recognized that in some
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`circumstances “value is added simply by having the patented invention available for use . . . . Thus,
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`potential licensors and licensees routinely agree to royalty payments” regardless of how often
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`consumers use the invention. Id. Simply put, Judge Payne’s decision to reject Charter’s challenge
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`to Dr. Mangum’s opinions follows Federal Circuit precedent.
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`Third, the Court should reject Charter’s argument that the Federal Circuit’s decision in
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`Niazi Licensing Corp. v. St. Jude Medical S.C., Inc., 30 F.4th 1339 (Fed. Cir. 2022) represents a
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`sea change in how the Federal Circuit treats damages for method patents and somehow this panel
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`decision sub silentio overruled all prior precedent on this issue. It did not.4 But Charter
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`nevertheless attempts to create a false dichotomy between “pre-Niazi” and “post-Niazi” law, Dkt.
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`257 at 2, in an attempt ignore the decades of on-point Federal Circuit precedent that is consistent
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`4 See, e.g., Fed. Cir. R. 40(a)(4); Deckers Corp. v. U.S., 752 F.3d 949, 964 (Fed. Cir. 2014) (“We
`have also adopted the rule that a panel of this court—which normally sits in panels of three, and
`not en banc—is bound by the precedential decisions of prior panels unless and until overruled by
`an intervening Supreme Court or en banc decision.”); In re Morris, 127 F.3d 1048, 1054 (Fed. Cir.
`1997) (rejecting invitation to “overrule, sub silentio, decades old case law,” reasoning that “[h]ad
`either of the cases cited by appellants intended to make the dramatic shift in our jurisprudence
`suggested by appellants one can safely assume they would have done so explicitly”).
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`3
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`with Judge Payne’s decision. And, in any event, Niazi is factually dissimilar insofar as the Federal
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`Circuit affirmed the exclusion of a “conclusory” damages opinion in which the expert provided
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`“no explanation of how (or even whether) he apportioned to account for unpatented uses when
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`selecting the minimum royalty rate of 14.6%.” 30 F.4th at 1342, 1358. Similarly, Charter relies
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`heavily on Cardiac Pacemakers, Inc. v. St. Jude Medical, Inc., 576 F.3d 1348 (Fed. Cir. 2009), but
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`fails to acknowledge that a month after this decision the Federal Circuit favorably cited Hanson in
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`its Lucent decision. See Lucent, 580 F.3d at 1334.5
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`Fourth, Judge Payne carefully analyzed Charter’s argument that Dr. Mangum failed to
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`adjust the rate of the Quadriga Agreement to apportion to the patents at issue in this case. See Dkt.
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`239 at 5-6. Judge Payne rejected this argument and found that “Dr. Mangum adequately adjusts
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`the terms of the Quadriga Agreement,” including by “excluding certain payments Quadriga made
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`to Plaintiff to develop the technology at issue in the Quadriga Agreement.” Id. at 6. While
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`acknowledging that there may be “several credible disputes,” Judge Payne concluded that such
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`disputes “are best addressed with vigorous cross examination.” Id. This decision is well-supported
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`by the evidence: Dr. Mangum subtracted out several payments in the Quadriga Agreement,
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`including “development fees” and “integration” fees, and explained why the remaining $0.48 per
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`month rate is appropriate in this case once an appropriate royalty base was selected and adjusted
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`for consistency. Dkt. 126-2 ¶¶ 102-19, 161, 163; see also Dkt. No. 126 at 10–13.6
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`Fifth, Charter failed to address several arguments that Judge Payne relied on in denying
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`Charter’s motion, and those arguments are independently sufficient to uphold Judge Payne’s ruling
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`5 It is also notable that the Federal Circuit in Cardiac Pacemakers took up some issues en banc,
`but not the “actual usage” issue. See 576 F.3d at 1358-59.
`6 Charter insists that the Quadriga Agreement is inapt because it also includes device claims. Dkt.
`257 at 3 & 5. But Dr. Mangum points to evidence that Charter would pay a flat rate for a license
`to all of Touchstream’s patents, as Quadriga did. Dkt. 126 at 10-11; see also Dkt. 182 at 5 n.5.
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`4
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`and are now waived. Touchstream’s opposition brief pointed out that Charter “ignored several fact
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`disputes counseling against requiring any actual use, as a mathematical input.” Dkt. 126 at 10-11.
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`More specifically, Touchstream argued that Charter’s motion ignores that some of the asserted
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`claims in the asserted ’251 patent require steps performed by a Charter server system. Id. at 10.
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`Charter’s reply did not address that argument at all, such as by positing that data is available for
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`the Charter servers that performed these steps or explaining how that data would factor into the
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`estimate of actual use Charter claims is required. Dkt. 154 at 1-3.7 Touchstream’s opposition also
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`explained why Charter’s insistence that Dr. Mangum rely on Charter’s later, litigation-inspired
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`estimates of actual use contravenes Federal Circuit precedent. Dkt. 126 at 6-10. Charter did not
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`address this point meaningfully on reply, instead maintaining (misleadingly) that that Dr. Mangum
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`“ignored” Charter’s actual usage data. Dkt. 154 at 2-3. Judge Payne’s Order noted Touchstream’s
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`argument that Charter ignores these complications to the rigid approach Charter insists must be
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`followed on damages, and Charter’s objections fail to address how it can overcome its own
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`decision not to brief key issues below. Dkt. 239 at 3.
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`Sixth, Charter’s conclusory arguments regarding Dr. Mangum’s references to Touchstream
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`Technologies, Inc. v. Google LLC are premature because the Court’s ruling on Charter’s Motion in
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`Limine No. 2 requires the parties to “request and receive leave of Court before introducing
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`evidence, testimony, or argument regarding the Google case.” Dkt. 239 at 7-8. Touchstream will,
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`of course, comply with the Court’s rulings on this issue.8
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`7 Thus, Charter’s arguments about the percentage of set-top boxes performing the method
`according to its records is misplaced, as Charter appears to have no idea what percentage of its
`servers perform the method, or why controlling law would require eschewing a real-world flat-rate
`license like Quadriga in favor of some reconciliation of the percentage of set-top boxes and servers
`involved in performing the method.
`8 Touchstream maintains that evidence of the Google case is admissible. See Dkt. 247 at 3-5
`(Touchstream’s objection to the order on Motion in Limine No. 2).
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`5
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`Case 2:23-cv-00059-JRG-RSP Document 284 Filed 01/23/25 Page 7 of 8 PageID #:
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`Date: January 23, 2025
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`Respectfully submitted,
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`/s/ Ryan D. Dykal
`Lead Counsel
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`Ryan D. Dykal (pro hac vice)
`Jordan T. Bergsten (pro hac vice)
`Mark Schafer (pro hac vice)
`Philip A. Eckert (pro hac vice)
`Anita Liu (TX State Bar No. 24134054)
`BOIES SCHILLER FLEXNER LLP
`1401 New York Ave, NW
`Washington, D.C. 20005
`(t) 202-274-1109
`rdykal@bsfllp.com
`jbergsten@bsfllp.com
`mschafer@bsfllp.com
`peckert@bsfllp.com
`aliu@bsfllp.com
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`John M. Lyons (pro hac vice)
`Sabina Mariella (pro hac vice)
`Sophie Roytblat (pro hac vice)
`BOIES SCHILLER FLEXNER LLP
`55 Hudson Yards, 20th Floor
`New York, NY 10001
`jlyons@bsfllp.com
`smariella@bsfllp.com
`sroytblat@bsfllp.com
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`
`Melissa Smith (TX State Bar No. 24001351)
`GILLAM & SMITH LLP
`303 S. Washington Ave.
`Marshall, TX 75670
`(t) 903-934-8450
`melissa@gillamsmithlaw.com
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`Counsel for Plaintiff Touchstream Technologies,
`Inc.
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`6
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`FILED UNDER SEAL PURSUANT TO PROTECTIVE ORDER
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`CERTIFICATE OF SERVICE
`I, Ryan D. Dykal, declare under penalty of perjury that a true and correct copy of the
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`foregoing Response to Charter’s Objection to Order Denying Defendants’ Motion to Exclude and
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`Strike Dr. Russell W. Mangum III’s Opinions was filed on January 23, 2025 by means of the U.S.
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`District Court for the Eastern District of Texas’s Case Management/Electronic Case Filing
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`(CM/ECF), which will send notification of such filing by electronic mail to all ECF participants.
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`By: /s/ Ryan D. Dykal
` Ryan D. Dykal
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`7
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