We all remember hearing the words “show your work” when doing any math problem as kids: algebra, calculus, statistics, you name it. This concept is also relevant to expert testimony and court proceedings as blanket statements with nothing to back it up, which are disfavored by courts. In MLC Intellectual Prop., LLC v. Micron Tech., the Federal Circuit upheld the exclusion of expert testimony due to the expert failing to provide evidence to support his mathematical assertion of the proper royalty rate and also his failure to apportion.2
MLC Intellectual Prop., LLC v. Micron Tech. involves a patent infringement action for a patent titled “Electrically Alterable Non-Volatile Memory with N-bits Per Cell.” The patent involved “methods of programming multi-level cells.”3
The goal of the patent is to fix problems in multiple-bit read-only-memories (ROMs) and dynamic random access memory (DRAM) “by disclosing a multi-bit semiconductor memory cell that has the non-volatile characteristics of ROM, as well as the electrically alterable characteristics of a multi-bit per cell DRAM.”4 The patent allows for “multi-level and triple-level cell flash memory.”5 This type of memory is typically used in USB drives and solid state drives “in consumer, commercial, and industrial applications.”6
MLC Intellectual Property, LLC was seeking an interlocutory review of a Northern District of California order excluding some of MLC’s damages expert opinions specifically regarding the calculation of royalties.7
The Federal Circuit held that the district court properly determined that the expert testimony concerning the 0.25% royalty rate was not based on “sufficient facts or data.”8 Specifically, the expert’s testimony was not sufficiently linked to any of the evidence presented.9
MLC’s expert failed to provide the mathematical analysis he used to come up with his royalty rate and the court frowned upon his unsupported positions.10 The court concluded that the expert’s royalty rate was not reliable and warranted the district court’s exclusion.11
Additionally, the Federal Circuit affirmed the district court’s order striking portions of the expert report under Federal Rule of Civil Procedure 37(c)(1). Under Rule 37(c)(1), if “a party fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless.”12
The district court found that MLC failed to disclose Rule 26(e) information because it did not disclose its beliefs surrounding an appropriate royalty rate, nor did it disclose the extrinsic evidence its expert witness relied on in support of his royalty rate calculations. On appeal, MLC argued that “it was not required to disclose the specific facts and documents because it ultimately disclosed them during expert discovery.”13 The Federal Circuit ultimately concluded that MLC failed to comply with Rule 37(c)(1) due to its series of omissions.14
The Federal Circuit further agreed that had MLC disclosed the information during the fact discovery phase, Micron could have sought its own fact discovery regarding the issue. Although MLC was not required to disclose its entire expert opinion during the fact discovery phase, “it was still required to [fully] disclose (1) its view that the . . . license agreements reflect a 0.25% royalty rate and (2) the extrinsic evidence [the expert] relied on to support that view in response to Micron’s reasonable requests for all facts, evidence, and testimony regarding any applicable royalty rates that MLC intended to rely on at trial” based on Micron’s interrogatories.15 MLC also had the chance to properly disclose the information through Micron’s requested 30(b)(6) deposition, to which its corporate designee testified that MLC did not know what the royalty rate was in the licensing agreements.16
This highlights the importance of properly producing information relevant to your position, especially damages in the fact discovery portion of a case, and a district court’s discretion to encourage early discovery.
This case also touched upon the issue of apportionment. The court also affirmed the district court’s grant of Micron’s Daubert motion to exclude the expert opinion for failure to apportion.17 The court followed the widely understood principle when an accused technology “does not make up the whole of the accused product, apportionment is required.”18 Additionally, “the ultimate combination of royalty base and royalty rate must reflect the value attributable to the infringing features of the product, and no more.”19 The court found that the accused technology did not make up the whole of the accused product and the expert’s damages theory did not apportion for the non-patented aspects of the accused products, warranting its exclusion.20
If not based on this case but on our childhood principle of showing your work in math class, attorneys and experts should be vigilant in showing how they came to their ultimate conclusions especially when damages are on the line, or face exclusions for failing to disclose.
Endnotes
1The opinions expressed are those of the author and do not necessarily reflect the views of Squire Patton Boggs or its clients.
2MLC Intellectual Prop., LLC v. Micron Tech., Inc., No. 2020-1413, 2021 U.S. App. LEXIS 25710 (Fed. Cir. Aug. 26, 2021).
3Id. at *2.
4Id. at *4-5.
5Id. at *7.
6Delkin Industrial, What is NAND Flash Storage, DELKIN BLOG, https://www.delkin.com/blog/what-is-nand-flash-storage/#:~:text=Triple-level%20cell%20%28TLC%29%20NAND%20flash%20stores%20three%20bits,flash%20memory%20is%20frequently%20used%20in%20commercial%20applications (last visited Mar. 2, 2022).
7MLC Intellectual Prop., LLC at *2.
8Id. at *19.
9Id. at *15.
10Id. at *22.
11Id. at *18-23.
12Id. at *24.
13Id.
14Id. at *28.
15Id. at *30.
16Id. at *27.
17Id. at *34.
18Id. at *34-35.
19Id. at *35.
20Id.
