Oracle's attempt to challenge the Leonard and Cox reports was truly pathetic, as evidenced by Judge Alsup's comments in the order and in contrast to the challenges Google has made against various Oracle experts which Google has largely won [Oracle Serwin Report Excluded (Google Wins One and Has a Second Deferred; Oracle Mitchell Report Limited (Google Gets Significant Win on Mitchell Report and Orders, Orders, Orders and Oracle ordered to have the Cockburn report redone (Damages Report - Try Again, Oracle)]. It is refreshing to see that name-calling, taking quotations out of context, and failing to consider the actual law doesn't work.
Consider these gems from Judge Alsup's order:
IN THE UNITED STATES DISTRICT COURT
ORACLE AMERICA, INC.,
FOR THE NORTHERN DISTRICT OF CALIFORNIA
No. C 10-03561 WHA
ORDER GRANTING IN PART
AND DENYING IN PART
MOTION TO EXCLUDE
PORTIONS OF THE EXPERT
REPORTS OF GREGORY
K. LEONARD AND ALAN J. COX
In this patent and copyright infringement action involving Java and Android, plaintiff
moves to strike portions of the reports by defendant’s damages experts. For the following
reasons, with one exception explained below, the motion is DENIED.
The factual background of this action has been set forth in previous orders (see Dkt.
Nos. 137, 230, 433). The damages aspect of this action has been controversial. The parties and
their retained damages experts have advanced extremely divergent outcomes. Oracle’s expert,
Professor Iain Cockburn, opined in his first report that a hypothetical license for the alleged
infringement would have been “at least $1.4 billion” and “could be as much as $6.1 billion” (Dkt.
No. 230 at 4). Responding, Google’s experts estimated much lower damages: $27.8 million
and $6.44 million for the alleged patent and copyright infringement, respectively (Dearborn Exh.
1 [Leonard Report] at 72; Dearborn Exh. 2 [Cox Report] at 64). The complexity of calculating
potential patent and copyright damages, and starkly conflicting expert testimony, led to the
appointment under Rule 706 of an independent expert to testify as to damages (Dkt. No. 374).
Plaintiff Oracle has now moved to strike portions of Google’s expert reports on
patent-infringement damages by Dr. Gregory K. Leonard and copyright-infringement damages by
Dr. Alan J. Cox. This order follows full briefing.
“A witness qualified as an expert by knowledge, skill, experience, training, or education”
may provide opinion testimony “if (1) the testimony is based upon sufficient facts or data, (2) the
testimony is the product of reliable principles and methods, and (3) the witness has applied the
principles and methods reliably to the facts of the case.” FRE 702. District courts thus “are
charged with a ‘gatekeeping role,’ the objective of which is to ensure that expert testimony
admitted into evidence is both reliable and relevant.” Sundance, Inc. v. DeMonte Fabricating
Ltd., 550 F.3d 1356, 1360 (Fed. Cir. 2008).
Here, Oracle seeks to strike significant portions of both of Google’s damages reports.
Oracle contends that the reports contained unqualified technical opinions, were based on
unreliable “spoon-fed” facts, and were inconsistent with established damages principles. Each of
Oracle’s arguments will be addressed in turn.
1. UNQUALIFIED TECHNICAL OPINIONS.
Oracle argues that Drs. Leonard and Cox, both economists with no technical expertise,
offered unqualified opinions regarding technical matters. Specifically, Oracle seeks to strike
sections of the reports that stated that Google had “good” and “multiple acceptable and effective
non-infringing alternatives” to the patents and copyrights in suit at the time of the hypothetical
negotiation (Br. 4). This objection is overruled. Both experts relied on Google’s noninfringement
experts, interviews with Google’s employees, and documentary evidence for the
technical points. Expert reliance on foundational facts supplied by Google’s engineers can be
proper so long as they testify to the foundational facts with firsthand knowledge. See Therasense,
Inc. v. Becton, Dickinson & Co., No. C 04-02123 WHA, 2008 WL 2323856 at *2 (N.D. Cal. May
22, 2008) (Alsup, J.) (“The traditional and correct way to proceed is for a foundational witness to
testify first-hand at trial to the foundational fact . . . and to be cross-examined. Then the expert
can offer his or her opinion on the assumption that the foundational fact is accepted by the jury.”).
Google acknowledged in its opposition brief that it will “offer the underlying factual testimony
from the percipient witnesses first, before its [damages] experts may testify based on those facts”
Oracle’s supposed examples of inappropriate technical opinions are not persuasive
(Br. 4–5). For instance, Oracle objects to the statement, “Google could have used a programming
language other than Java” in Dr. Leonard’s report as an inappropriate technical opinion (Br. 4).
But Dr. Leonard cites interviews with three different Google engineers and non-infringement
expert reports for that proposition (Leonard Report 13 n. 25). This order will not address each of
Oracle’s examples individually. Having reviewed the record, this order finds that in each
example, the damages experts did rely on sources of information reasonably relied upon as long
as the foundational facts are properly laid at trial. Of course, the expert should make clear that he
assumes this point and is not himself qualified to make expert findings on the technical point.
2. RELIANCE ON INTERVIEWS WITH GOOGLE EMPLOYEES.
In a parallel way, Oracle argues that Drs. Leonard and Cox inappropriately based their
calculations on “spoon-fed” facts given by Google employees (Br. 6). As discussed above, expert
reliance on interviews with Google’s engineers can be proper so long as they can testify to the
foundational facts with firsthand knowledge. See Therasense, Inc., 2008 WL 2323856 at *2. If
Oracle is worried about bias, then it should make its arguments on cross-examination.
Oracle also argues that the timing of these interviews is unfair because most were
conducted the “week prior to service of the Reports and after the conclusion of fact depositions”
(Br. 6). A recent order, however, addressed this concern by allowing additional depositions of
three of the “spoon-feeders,” the three to be selected by Oracle (Dkt. No. 617). All but one of the
seven interviewees referenced in the damages reports had already been deposed or offered for
Oracle also argues that Drs. Leonard and Cox have inappropriately relied on interviews at
odds with documents produced in discovery (Br. 8–9). This argument overstates the record
evidence favoring Oracle. While Oracle can point to discovery documents that support its
contentions, Google can similarly rely on its own witnesses to rebut those contentions. Who is to
say at this stage which is more accurate? Documents produced in discovery are not judicial
admissions. They are only data points. Company witnesses can try to explain away and even
contradict those data points. Subject to the rules of evidence, Oracle will have its chance during
trial to make the contrary case with Google’s own documents. See Hangarter v. Provident Life &
Acc. Ins. Co., 373 F.3d 998, 1017 n.14 (9th Cir. 2004) (holding that the factual basis of an expert
opinion goes to the credibility of the testimony, not the admissibility, and that it is up to the
opposing party to examine the factual basis for the opinion in cross-examination).
3. OPINIONS NOT SUPPORTED BY ANY EVIDENCE.
Oracle argues that Drs. Leonard and Cox cite no evidence for some key propositions
(Br. 9–10). This argument is plainly wrong. The allegedly unsupported sentences in the expert
reports were actually part of broader discussions with citations. For example, Oracle objects to
the phrase, “demand for a smartphone is a complex function of all of its attributes, and a
smartphone with slower application speed can still be highly demanded by consumers” (Br. 10) as
being unsupported. This passage has been taken out of context; instead, the entire sentence
included the introductory phrase “As discussed above . . .” (Leonard Report 25). And above that
sentence, on the same page in the report, Dr. Leonard cited a record document, a market research
study, and a deposition of an Oracle engineer for the proposition that there are many different
attributes that drive consumer demand (Leonard Report 25). Oracle has made no attempt to
debunk these citations.
Oracle takes issue with another phrase, “[smartphone manufacturers] would have accepted
small reductions in performance or somewhat more demanding handset specification in order that
they could still be able to offer Android smartphones” (Br. 10). Contrary to Oracle’s assertion
that this was ipse dixit, this phrase actually had a citation to an interview with Andy Rubin,
founder of Android and the head of Google’s Android division (Leonard Report at 30). Likewise,
the other examples in Oracle’s brief either have supporting citations attached to it or are part of a
broader discussion where support can be inferred from surrounding text.
4. OPINIONS ON FRAGMENTATION AND STAGNATION.
Oracle argues that Google’s damages experts were unqualified to opine on stagnation and
fragmentation in the Java community and relied on unreliable sources in doing so (Br. 11). This
order disagrees. The term “stagnation” was used in a business sense to describe dissatisfaction
among carriers, device manufacturers, and developers for the Java platform (see Leonard
Report 31–33; Cox Report 44–45). Similarly, “fragmentation” was used in a business sense to
describe how Java’s “write once, run anywhere” marketing concept was being eroded by a
proliferation of incompatible devices and platforms (see Leonard Report 34–37; Cox
Report 45–48). Notably, Oracle’s own damages expert, Professor Cockburn, has opined on this
same fragmentation issue without having a background in computer science (Dkt. No. 230 at 9).
Oracle also argues that Google’s damages experts failed to rely on facts or data
customarily relied upon in their opinions on fragmentation and stagnation. Oracle does not meet
its burden to support this argument because it makes no attempt to debunk the citations. In their
reports, Google’s experts cited depositions with former and current Oracle employees, including
Hasan Rizvi (Senior Vice President of Java), Jeet Kaul (former Vice President of the Java Clients
Software Group at Sun Microsystems), and Vineet Gupta (Senior Director, Chief Technology
Strategy Officer at Sun Microsystems, and subsequently an employee of Oracle). Google’s
damages experts also relied on interviews with John Rizzo (a third-party witness who has
experience with Java licenses), postings on internet blogs by James Gosling (former Chief
Technology Officer at Sun), and other online sources. These are sources of information the
damage experts can reasonably rely upon as long as the foundational facts are properly laid at
trial. Oracle has not meet its burden to show that these sources are unreliable.
5. LITTLE OR NO UPWARD ADJUSTMENT FOR LOST BUSINESS OPPORTUNITY.
Oracle’s expert, Professor Cockburn, opined that the starting point for patent damages
should be upwardly adjusted because infringement would have prevented Sun from offering a
commercial version of the Java platform that would run within Android (Br. 12). That is, Sun
would not be able to develop a potential business opportunity to create an Android-compatible
Java platform. Oracle now seeks to exclude portions of Dr. Leonard’s report that criticized this
upward adjustment by arguing that Dr. Leonard’s opinion constitutes an inappropriate mitigation
defense (Br. 12–13). Google’s Dr. Leonard opined that there should be little or no upward
adjustment because this business opportunity was not lost and was not worth that much to begin
with (Leonard Report 82–83). Despite using the word “mitigate” in his report, Dr. Leonard’s
opinion was not based on the legal assumptions of a contract-style mitigation defense. Instead,
Dr. Leonard merely opined on the value of this allegedly lost business opportunity. This
objection is overruled.
6. MISUSE OF NON-INFRINGING ALTERNATIVES TO
REDUCE DISGORGEMENT DAMAGES.
Turning to the copyright side, Oracle argues that Google’s Dr. Cox inappropriately opined
that non-infringing alternatives would provide a basis for calculating wrongful profit (Br. 11–12).
Copyright law provides recovery for “any profits of the infringer that are attributable to the
infringement and are not taken into account in computing the actual damages.” 17 U.S.C. 504(b).
In his damages report, Dr. Cox opined: “The ready availability of obviously acceptable
non-infringing alternatives also provide [sic] basis that the ‘element of profit’ that is attributable
to the allegedly infringed API claim contained in the Android framework is very small or zero”
(Cox Report 38). Dr. Cox did not explain how the availability of non-infringing alternatives
supposedly decreased the wrongful profits attributable to infringement. In its opposition brief,
Google argues that the existence of non-infringing alternatives suggests that profits are
attributable to other, non-infringing features added by the alleged infringer (Opp. 14). This is not
There is no controlling authority on the issue of whether the existence of non-infringing
alternatives should be considered when calculating disgorgement damages under Section 504(b).
But our court of appeals’ interpretation of the purpose behind Section 504(b) sheds light on this
issue. Our court of appeals has held that Section 504(b) was enacted to explicitly provide for two
distinct monetary remedies — actual damages and recovery of wrongful profits — to serve
different purposes. Polar Bear Prods., Inc. v. Timex Corp., 384 F.3d 700, 708 (9th Cir. 2004).
Damages for lost license fees, derived from a hypothetical negotiation, fall under the rubric of
actual damages. Id. at 708–709. As Dr. Cox makes clear in his report, the existence of “multiple
acceptable and effective” non-infringing alternatives “at little or no additional cost” greatly
reduces the lost license fees (Cox Report 61). This order finds this aspect acceptable. Not
acceptable, however, is allowing the existence of non-infringing alternatives to reduce recovery
of wrongful profits. This is a distinct remedy for the purpose of disgorgement. Non-infringing
alternatives have nothing to do with this. The motion to strike portions of Dr. Cox’s report that
opined that non-infringing alternatives would provide a basis for calculating wrongful profit
7. CRITIQUE OF CONJOINT ANALYSIS.
Oracle argues that Dr. Leonard was unqualified to critique the conjoint analysis — a type
of consumer-preference marketing study — conducted by Dr. Shugan (Br. 13–14), and attacks
Dr. Leonard’s interpretation of the relevant academic literature in the field of survey-based
research. This order disagrees. Dr. Leonard’s opinions on conjoint analysis are proper expert
testimony. Dr. Leonard has published and conducted studies in the field of survey-based research
(Leonard Decl. ¶¶ 22–23). He extensively cited to academic literature in his criticisms of Dr.
Shugan’s conjoint study. If Oracle has problems with Dr. Leonard’s interpretation of the
literature, then it should save its critiques for trial.
For the foregoing reasons, plaintiff’s motion to exclude portions of Dr. Leonard’s and
Dr. Cox’s expert reports is GRANTED IN PART and DENIED IN PART. As to Dr. Cox’s opinions
that non-infringing alternatives were a basis for calculating wrongful profits, the motion is
GRANTED. Any opinion in the Expert Report of Dr. Alan M. Cox that stated, in substance, that
non-infringing alternatives should in any way affect the calculation of infringer’s profits under 17
U.S.C. 504(b) is STRICKEN. As to Oracle’s other contentions, the motion is DENIED.
IT IS SO ORDERED.
Dated: November 28, 2011.
UNITED STATES DISTRICT JUDGE