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`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF TEXAS
`DALLAS DIVISION
`
`
`FRACTUS, S.A.
`
`Plaintiff,
`
`v.
`
`ZTE CORPORATION,
`ZTE (USA), INC., and
`ZTE (TX), INC.,
`
`
`
`
`Defendants.
`
`
` CIVIL ACTION NO.
` 3:18-CV-2838-K
`
`§
`§
`§
`
`§
` §
`§
`§
`§
`§
`§
`
`MEMORANDUM OPINION AND ORDER
`
`Before the Court are multiple motions filed by the parties related to the striking
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`
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`of expert reports and testimony. These motions are Plaintiff Fractus' Motion to Strike
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`Portions of the Expert Reports of Chris Bartone and Vince Thomas (Doc. No. 184);
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`Defendant, ZTE (USA), Inc. ("ZTE")’'s Motion to Strike Plaintiff Fractus' Expert
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`Reports of Dr. Stuart Long (Doc. No. 200), which was filed under seal as Doc. No. 200
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`and also filed unsealed in redacted form as Doc. No. 186; and Defendant ZTE (USA),
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`Inc.'s Motion to Strike the Reports and Testimony of Robert Mills Pursuant to Daubert
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`[Under Seal] (Doc. No. 194), which was filed under seal as Doc. No. 194 and filed in
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`redacted unsealed form as Doc. No. 188. After consideration of the pleadings, the
`
`arguments of the parties, the evidence of record, and the applicable law, the Court
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`GRANTS in part and DENIES in part Plaintiff Fractus' Motion to Strike Portions of
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`the Expert Reports of Chris Bartone and Vince Thomas (Doc. No. 184) and DENIES
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`Defendant ZTE's Motion to Strike Plaintiff Fractus' Expert Reports of Dr. Stuart Long
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`(Doc. Nos. 200 and 186) and Defendant ZTE's Motion to Strike the Reports and
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`Testimony of Robert Mills Pursuant to Daubert [Under Seal] (Doc. Nos. 194 and 188).
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`A. Plaintiff Fractus' Motion to Strike Portions of The Expert Reports of
`Chris Bartone and Vince Thomas (Doc. No. 184).
`
`The Plaintiff, Fractus, S.A. ("Fractus") has moved the Court to strike portions of
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`the reports of two of ZTE's experts. The reports at issue are the rebuttal report of Chris
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`Bartone, ZTE's non-infringement expert, and the report of Vince Thomas, ZTE's
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`damages expert.
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`Fractus asserts that two portions of Mr. Bartone's report should be stricken.
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`According to Fractus, the first portion of this report that should be stricken raises an
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`infringement defense that was not previously disclosed and the second portion of this
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`report relates to a non-infringing alternative that was also not previously disclosed.
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`Fractus asserts that since ZTE had not previously disclosed the theory of non-
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`infringement and the non-infringing alternative, ZTE should not be allowed to
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`introduce either of these into this litigation at this point.
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`Regarding the report of Mr. Thomas, ZTE's damages expert, Fractus argues that
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`a portion of this report should be stricken because this portion relies on the previously
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`undisclosed non infringing alternative that is included in Mr. Bartone's report.
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`Regarding the non-infringing alternative issue, Fractus served on ZTE an
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`interrogatory that specifically requested ZTE to identify any asserted non-infringing
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`alternatives. This was Fractus' Interrogatory No. 5 which read as follows:
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`For each asserted claim identify any products you contend are
`acceptable non-infringing alternatives to the patented products,
`identifying with specificity which claim elements asserted in Fractus'
`infringement contentions you contend are absent from such non-
`infringing alternatives, and stating why those elements are missing and
`why the alternatives are acceptable to consumers.
`
`Appendix in Support of Fractus' Motion to Strike at 9 (Doc. No. 184-2). ZTE
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`failed to substantively respond to this interrogatory. In ZTE's response to this
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`interrogatory, ZTE stated, "Defendant objects to this interrogatory to the extent that
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`it seeks privileged information. Defendant further objects to this interrogatory as
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`premature, given the stage of the case. Investigation continues." Id. Even though ZTE
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`amended its interrogatory responses twice, it never amended or updated the response
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`to this interrogatory.
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`In addition, Fractus, in a 30(b)(6) deposition notice, included the topic of:
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`Any products you contend are acceptable non-infringing alternatives
`to the patented products, including which claim elements you contend
`are absent from such non-infringing alternatives, why those elements
`are missing, why the alternatives are acceptable to consumers, and the
`cost of manufacturing the alternatives.
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`Id. at 15. ZTE failed to provide a witness for this topic. Id. Instead, ZTE asserted
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`"ZTE incorporates its General Objections. ZTE objects to this Topic as calling for the
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`expert testimony." Id.
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`Despite ZTE's failure to identify any alleged alternative non-infringing devices
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`or to provide a deposition witness for this topic, Mr. Bartone, in his rebuttal report,
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`offered an opinion on a non-infringing alternative. Fractus asserts that, since ZTE had
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`not previously informed Fractus that ZTE would assert this non infringing alternative,
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`it cannot now introduce this non infringing alternative at this late stage of this case.
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`ZTE responds that striking the portions of these expert reports is not warranted
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`because Fractus was not harmed by any asserted failure to disclose non-infringing
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`alternatives and if Fractus was harmed, this was due to Fractus' own failure to further
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`pursue discovery on the issue. In support of these conclusions, ZTE asserts that ZTE
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`made it clear to Fractus that it was ZTE's position that the subject of non-infringing
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`alternatives is an area that requires expert testimony; Fractus failed to complain about
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`this assertion; Fractus was aware of the issue when this Court reopened fact discovery
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`after this case was transferred to this Court; and the expert's testimony was rebuttal
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`testimony which addressed non-infringing alternatives in response to Fractus'
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`infringement expert's report.
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`When a party fails to disclose information in response to a discovery request or
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`fails to identify a witness, "the party is not allowed to use that information or witness
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`to supply evidence on a motion, at a hearing, or at a trial, unless the failure was
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`substantially justified or is harmless.” Fed. R. Civ. P. 37(c)(1).
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`The Court agrees with Fractus that the portions of ZTE's expert reports that
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`attempt to introduce evidence of non-infringing alternatives should be stricken because
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`ZTE's failure to identify non-infringing alternatives during fact discovery was neither
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`substantially justified nor harmless. It is clear from the record that Fractus served
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`proper discovery requests on ZTE. These requests asked ZTE to identify any devices
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`that it contended were acceptable non-infringing alternatives. In response, ZTE did not
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`assert that this was the subject of expert testimony. Instead, it asserted that this called
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`for privileged information and was premature considering the status of the case. It also
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`asserted that it was still investigating the issue. ZTE, however, completely failed to
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`supplement this response in any way during the time period in which fact discovery
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`was open. In regards to the deposition topic, ZTE asserted that this was the subject of
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`expert testimony. ZTE, in its briefing on this issue, focuses on the assertion that the
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`deposition topic was the subject of expert testimony. This argument fails to
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`acknowledge that this objection was not raised in relation to the interrogatory.
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`Even if ZTE has properly asserted the expert testimony objection to the
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`interrogatory, this does not relieve ZTE from the obligation to respond to the extent
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`that the information requested is not the subject of expert testimony.
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`Both the interrogatory and the deposition topic are contention discovery
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`requests. These are designed to discovery basic factual contentions of an opposing party
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`which provides the benefit of clarifying what factual issues must be addressed in a case.
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`In this specific discovery, Fractus asked ZTE to identify and provide information about
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`any devices which ZTE contends are acceptable non-infringing devices. The
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`identification of what ZTE contends are acceptable non-infringing devices would have
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`clarified the areas of factual dispute in this case. Instead, ZTE chose to ignore this
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`contention inquiry under the guise of protection of its expert testimony objection.
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`While specific details as to how any acceptable non-infringing devices may be the
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`subject of expert testimony depending on the circumstances, the simple identification
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`of acceptable non-infringing devices is not. This merely ask for the identification of the
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`devices that ZTE contends are non-infringing alternatives. This is very much akin to
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`the parties' requirement to serve infringement and invalidity contentions in a patent
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`infringement suit. The parties must exchange their contentions on these issues to make
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`clear what the issues in the case are. Whether or not these contentions must later be
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`proven by fact or expert evidence has no bearing on what the actual contentions are
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`and a party's obligation to assert those contentions.
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`In this situation, ZTE failed to assert the acceptable non-infringing alternative
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`contentions until it served its non-infringement expert's rebuttal report. This failure
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`was not substantially justified.
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`The failure to respond was also not harmless. The Court has analyzed all of
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`ZTE's arguments as to how Fractus was not harmed by the failure to respond to the
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`interrogatory or to provide a witness on the subject and how, if ZTE was harmed, this
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`was due to ZTE's own failure to pursue responses through, for example, a motion to
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`compel. The Court is not persuaded by any of these arguments. Introduction of a new
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`contention that there was an acceptable non-infringing alternative, at this late stage of
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`the litigation, is not harmless to Fractus. All discovery has been completed in this case,
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`and Fractus would be deprived of conducting discovery on the contention and of
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`developing its theories regarding the non-infringing alternative. In addition, it was
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`ZTE's obligation to fully respond to fact discovery to the extent that the responses did
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`not require expert testimony. ZTE did not do this. ZTE cannot now attempt to shift
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`the responsibility and burden onto Fractus, which is what all of ZTE's arguments
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`against striking these portions of the expert reports attempt to do.
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`For this reason, the Court GRANTS the relief requested and STRIKES the
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`portion of the report of Chris Bartone that opine on the subject of acceptable non-
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`infringing alternatives, which are identified as paragraphs 142-153 of the Expert
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`Rebuttal Report of Dr. Chris G. Bartone, P.E. In addition, the Court STRIKES all
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`portions of ZTE's damages expert report of Vince Thomas that rely on the stricken
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`testimony of Mr. Bartone, which are identified as paragraphs 36 and 91 of the Rebuttal
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`Expert Report of Vincent A. Thomas, CPA, CVA, CFF, ABV. The Court ORDERS that
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`neither expert shall opine on the stricken subject matter at trial of this case.
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`Fractus also asserts that the Court should strike another portion of the ZTE's
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`non-infringement expert's report because that portion includes what Fractus asserts is
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`a previously undisclosed theory of non-infringement.
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`This asserted new non-infringement theory involves ZTE's expert's opinion
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`regarding claim limitations which require multiband antennas to have different
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`portions that operate at different frequencies. In the rebuttal to Fractus' non-
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`infringement expert report, ZTE’s expert offers his opinion that the lowest of these
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`frequencies would be associated with the largest portion of the antenna. Fractus asserts
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`that this is a new theory of infringement because, although ZTE had already asserted
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`that the accused devices did not meet the limitations requiring multiple portions of the
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`antennas to operate at multiple frequencies, ZTE did not assert that there was a
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`relationship between a frequency and the size of the portion of an antenna that radiated
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`at that frequency, compared to the other frequencies of the antenna and the size of the
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`portion of the antenna that radiated at the other frequencies.
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`Fractus asserts that because ZTE did not explain this in response to a contention
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`interrogatory, this alleged new infringement theory should be stricken from the expert's
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`report. In particular, Fractus points to its Interrogatory No. 1, which read as follows:
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`Identify each limitation of each asserted claim in Plaintiffs' Patent
`Rule 3-1 infringement contentions that you contend is not met by the
`Accused Products and explain why you contend the limitations is not
`met, including identifying documents that support or substantiate
`your contention that the limitation is not met.
`
`In response to the interrogatory, ZTE identified the claim limitations that it
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`asserts are not present in the accused devices. This included the assertion that the
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`accused devices did not meet the multilevel structure requirement of the asserted
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`claims. Appendix in Support of Defendant ZTE (USA)'s Opposition to Plaintiff Fractus'
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`Motion to Strike Portions of The Expert Reports of Chris Bartone and Vince Thomas
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`at 6 (Doc. No. 212). ZTE also asserted that further detailed explanation of how the
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`accused devices do not meet these limitations is the subject of expert discovery, which
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`would be disclosed according to deadlines for disclosing expert discovery. Id. In essence,
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`ZTE argues that it complied with the factual contention portion of this interrogatory
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`by identifying which claim elements were in contention in this case and it was not
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`further obligated in the response to this interrogatory to provide a non-infringement
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`analysis as to why the limitations were not met because this was the subject of expert
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`testimony.
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`The Court agrees with ZTE on this issue. Factual contentions as to what
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`elements are not present in an accused device are the proper subject of fact discovery,
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`but application the claim limitations to the accused devices to show how those elements
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`are not met in the accused devices is often the subject of expert testimony. When that
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`application of the claim limitations to the accused device is in a realm that requires
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`expert testimony, this information should be disclosed in the context and timelines
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`relevant to expert discovery, not fact discovery. That is the case here. ZTE provided
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`the factual contention and followed up with the expert evidence that it asserts proves
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`those factual contentions.
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`For these reasons, the Court DENIES, the motion to strike the portions of the
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`expert report of Mr. Bartome that relate to what Fractus asserts is a previously
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`undisclosed theory of non-infringement.
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`B. Defendant's Motion to Strike Plaintiff Fractus' Expert Reports of Dr.
`Stuart Long (Doc. Nos. 200 and 186).
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`In this motion, ZTE requests that the Court strike the expert reports of Dr.
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`Stuart Long, Fractus' infringement expert because, according to ZTE, the reports are
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`unreliable and not grounded in sufficient facts and data. Fractus asserts that both Dr.
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`Long's initial report and rebuttal report should be stricken in full of for failing to comply
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`with Fed. R. Civ. P. 26; that certain sections of Dr. Long's initial report be stricken
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`under Fed. R. Evid. 702 and 403; and that certain sections of Dr. Long's rebuttal report
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`be stricken under Fed. R. Evid. 702 and 403.
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`Under Fed. R. Civ. P. 26, a party must disclose "a complete statement of all
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`opinions" an expert "witness will express and the basis and reason" for those opinions.
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`Fed. R. Civ. P. 26 (a)(2)(B). In addition, the party must disclose any "facts or data
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`considered" by the expert witness in forming those opinions. Id.
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`Under Fed. R. Evid. 702, an expert may offer opinion testimony if (a) the
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`expert's … knowledge will help the trier of fact …; (b) the testimony is based on
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`sufficient facts or data; (c) the testimony is the product of reliable principles and
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`methods; and (d) the expert has reliably applied the principles and methods to the facts
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`of the case." Fed. R. Evid. 702. Under Fed. R. Evid. 702, expert evidence must not only
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`be relevant, but is also must be reliable. Daubert v. Merrell Dow Pharms. Inc., 509 U.S.
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`579, 589 (1993). An expert opinion based on insufficient information is unreliable.
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`Seaman v. Seacor Marine LLC, 326 Fed. App'x 721, 724 (5th Cir. 2009); Knight v. Kirby
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`Inland Marine, Inc. 482 F.3d 347, 354–55 (5th Cir. 2007).
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`Under Fed. R. Evid. 403, a court may exclude relevant evidence if its probative
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`value is substantially outweighed by a danger of … “unfair prejudice, confusing the
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`issues," or "confusing the jury." Fed. R. Evid. 403.
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`Regarding ZTE's Fed. R. Civ. P. 26 argument, ZTE asserts that neither of Dr.
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`Long's reports contain all of the relevant facts and data that Dr. Long used to generate
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`his opinions. Because of this, according to ZTE, they do not meet the disclosure
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`requirements of Fed. R. Civ. P. 26 and should be stricken. The basis for ZTE's assertion
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`is Dr. Long's deposition testimony. During his deposition, Dr. Long was asked if his
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`reports included all of the relevant facts or data that he considered in forming his
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`opinions. Appendix in Support of ZTE (USA), Inc.'s Motion to Strike Plaintiff Fractus'
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`Expert Reports of Dr. Stuart Long at 29 (Doc. No. 202). Dr. Long's response to this
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`question was "…. most likely no." Id. However, he clarified that he did not believe that
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`he left anything important out of the report and the things left out of the report that
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`he was referring to were ancillary or in some ways nor germane to the particulars of his
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`opinion. Id. ZTE then goes on to provide a long list of things that it asserts are incorrect
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`or missing from the report. These are based on the fact that Dr. Long testified that he
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`did not personally run many of the tests referenced in his reports and that he did not
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`create the photographs, diagrams, and images in the reports. According to ZTE, this
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`fails to comply with Fed. R. Civ. P. 26 because the reports do not have the facts and
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`data relied on by Dr. Long in forming his opinions.
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`ZTE also argues that portions of the report should be stricken because they are
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`unreliable under Fed. R. Evid. 702 and Daubert. ZTE's basis for this assertion is
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`essentially the same as the basis in support of its argument under Fed. R. Civ. P. 26,
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`which is that Dr. Long did not perform the tests himself, did not know or did not
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`disclose certain test variables, did not know or disclose who created the photographs,
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`figures, and graphs in his report, and did not connect the alleged commercial success
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`of the accused devices to the claimed invention of the asserted patents. According to
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`ZTE, this renders the expert evidence unreliable.
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`Likewise, ZTE also uses the same basis to assert that the danger of prejudice and
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`misleading the jury associated with Dr. Long's testimony outweighs the probative value.
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`Because of this certain, ZTE argues that portions of his report should be stricken under
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`Fed. R. Evid. 403.
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`The Court has fully analyzed each of ZTE's asserted reasons as to why the reports
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`or portions of the reports should be stricken under Fed. R. Civ. P. 26; Fed. R. Evid.
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`702; and Fed. R. Evid. 403. The Court disagrees with ZTE as to all of its arguments.
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`Regarding ZTE's Fed R. Civ. P. 26 argument, while Dr. Long testified at
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`deposition that he did not personally perform the tests referenced in the report, he did
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`assert that the tests were done under his direction and that he included in his report
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`all the information that he believes is germane to the opinions that he offered. The
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`requirement under Fed. R. Civ. P. 26 is for the report to include all data and facts that
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`he considered in forming the opinions. Dr. Long stated that he did this by including
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`all of the facts and data that he believes are relevant to forming his opinions.
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`Regarding ZTE's arguments based on Fed. R. Evid. 702 and Fed. R. Evid. 403,
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`these arguments go to the weight that should be placed on Dr. Long's testimony and
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`not to the reliability of the evidence.
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`For these reasons, the Court DENIES in full ZTE’s Motion to Strike Plaintiff
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`Fractus' Expert Reports of Dr. Stuart Long (Doc. Nos. 200 and 186).
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`C. Defendant ZTE (USA), Inc.'s Motion to Strike The Reports and
`Testimony of Robert Mills Pursuant to Daubert [Under Seal] (Doc.
`Nos. 194 and 188).
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`
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`ZTE has also moved the Court to strike the entire expert report and the entire
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`supplement expert report of Robert Mills. Mr. Mills is Fractus' damages expert. ZTE
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`specifically challenges Mr. Mills' determination of the starting royalty rate and effective
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`royalty rate used to determine what Fractus' damages would be if the accused devices
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`were found to infringe the claims of the patents in suit. ZTE also challenges Mr. Mills'
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`alternative damages calculation as being unreliable because the alternative damages
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`calculations are based upon industry estimated sales of accused devices instead of actual
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`sales data.
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`ZTE challenges the starting royalty rate and effective royalty rate under Fed. R.
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`Evid. 702 and Daubert. Mr. Mills used past licensing agreements between Fractus and
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`other parties to determine the starting and effective royalty rates at issue. According to
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`ZTE, Mr. Mills failed to take into consideration certain facts related to those previous
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`licenses and his failure to do so resulted in skewing the starting and effective royalty
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`rates so that Mr. Mills' ultimate royalty rate is not reliable evidence of the reasonable
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`royalty rate that Fractus must prove at trial.
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`The Court disagrees with ZTE. ZTE does not challenge the math or methods
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`used by Mr. Mills to determine his opinion as to the reasonable royalty rate. Instead,
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`ZTE simply challenges the facts that Mr. Mills used as a starting point to determine
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`the reasonable royalty rate. This is not an issue of the reliability of the evidence. It is
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`an issue of the weight to be placed on the evidence.
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`Regarding ZTE's challenge to Mr. Mills' alternative damages calculations, ZTE
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`argues that these should be stricken under Fed. R. Evid. 702 as being unreliable and
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`under Fed. R. Evid. 403 because the probative value of the evidence outweighs the
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`potential of misleading the jury. ZTE does not challenge the math or methods used to
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`generate the alternative damages calculations. ZTE challenges the source of the
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`information Mr. Mills used to determine the volume of sales of accused devices. In
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`these alternative damages calculations, Mr. Mills used industry sales estimates
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`generated by a third party that is in the business of estimating the number of cell
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`phones sold by various manufacturers. ZTE asserts that the actual sales data provided
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`by ZTE is a much more reliable way to determine the number of accused devices that
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`were sold and that the calculations based on the estimates should be stricken from the
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`report.
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`The Court disagrees with ZTE that the use of industry sales estimates renders
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`this expert testimony unreliable or misleading. It is clear from Mr. Mills' testimony that
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`these are based on estimated sales data. A jury will be able to understand the
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`implications of using estimated sales data as opposed to actual sales data. In addition,
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`it is also clear that this is an alternative damages calculation. Mr. Mills also offers
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`damages calculation based on the sales information that Fractus was able to obtain
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`from ZTE. It is also clear from the course of this litigation that Fractus appears to assert
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`that ZTE's actual sales numbers are not truly reflective of actual sales of accused
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`devices. Considering all of this, ZTE's argument regarding the use of estimated sales
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`numbers to produce alternative damages calculations really goes to the weight to be
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`given to the evidence, not to the reliability of the evidence.
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`Since all of the arguments asserted by ZTE in support of striking Mr. Mills'
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`testimony go to the weight to be placed on the evidence and not the reliability of the
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`evidence, the Court DENIES in full Defendant ZTE (USA), Inc.'s Motion to Strike
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`the Reports and Testimony of Robert Mills Pursuant to Daubert [Under Seal] (Doc.
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`Nos. 194 and 188).
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`G. Conclusion
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`The Court GRANTS in part Plaintiff Fractus' Motion to Strike Portions of the
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`Expert Reports of Chris Bartone and Vince Thomas (Doc. No. 184). The Court
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`STRIKES the portion of the report of Chris Bartone that opines on the subject of
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`acceptable non infringing alternatives, which are paragraphs 142-153 of the Expert
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`Rebuttal Report of Dr. Chris G. Bartone, P.E. The Court STRIKES all portions of
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`ZTE's damages expert report of Vince Thomas that rely on the stricken testimony of
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`Mr. Bartone, which are paragraphs 36 and 91 of the Rebuttal Expert Report of Vincent
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`A. Thomas, CPA, CVA, CFF, ABV. The Court DENIES all other relief requested in
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`Plaintiff Fractus' Motion to Strike Portions of The Expert Reports of Chris Bartone and
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`Vince Thomas (Doc. No. 184).
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` Case 3:18-cv-02838-K Document 235 Filed 11/04/19 Page 16 of 16 PageID 20371 Case 3:18-cv-02838-K Document 235 Filed 11/04/19 Page 16 of 16 PageID 20371
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`The Court DENIES Defendant ZTE (USA), Inc.'s Motion to Strike the Reports
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`and Testimony of Robert Mills Pursuant to Daubert [Under Seal] (Doc. Nos. 194 and
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`188) and Defendant's Motion to Strike Plaintiff Fractus' Expert Reports of Dr. Stuart
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`Long (Doc. Nos. 200 and 186).
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`SO ORDERED.
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`Signed November 4th, 2019.
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`__________________________________
`ED KINKEADE
`UNITED STATES DISTRICT JUDGE
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