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Minebea Co., Ltd. v. Papst

June 21, 2005


The opinion of the court was delivered by: Paul L. Friedman United States District Judge


Rule 702 of the Federal Rules of Evidence effectively codifies the Supreme Court's decisions in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and Kumho Tire Co. V. Carmichael, 526 U.S. 137 (1999). In Daubert, the Court charged trial judges with the responsibility of acting as "gatekeepers" to shield unreliable or irrelevant expert testimony and evidence from the jury. In Kumho the Court made clear that the gatekeeper function applies to all expert testimony, not just scientifically-based testimony. Rule 702 therefore provides that if the Court finds that scientific, technical or other specialized knowledge "will assist the trier of fact to understand the evidence or to determine a fact in issue," and if the Court finds that the witness is qualified as an expert "by knowledge, skill, experience, training, or education," then the Court may permit the witness to testify -- so long as the witness' testimony is based on "sufficient facts or data," the testimony "is the product of reliable principles and methods," and the witness has "applied the principles and methodology reliably to the facts of the case. FED. R. CIV. P. 702.

As the D.C. Circuit has explained, the twin requirements for the admissibility of expert testimony are evidentiary reliability and relevance. See Ambrosini v. LaBarraque, 101 F.3d 129, 133 (D.C. Cir. 1996); see also McReynolds v. Sodexho, 349 F. Supp. 2d 30, 34-35 (D.D.C. 2004); Groobert v. Georgetown College, 219 F. Supp. 2d 1, 6 (D.D.C. 2002). With respect to realiability, the Court's focus must be on the methodology or reasoning employed by application of the factors in Rule 702 and the non-exhaustive lists of factors set forth in Daubert and Kumho. See Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. at 595 (the "focus, of course, must be solely on principles and methodology, not on the conclusions they generate"); Ambrosini v. LaBarraque, 101 F.3d at 140 ("the admissibility inquiry focuses not on conclusions but on approaches"). With respect to relevance, the Court must determine whether the proffered testimony is sufficiently tied to the facts of the case and that it will aid the jury in resolving a factual dispute. Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. at 592-93.

In this case, plaintiffs have proffered nine experts and defendants have proffered five. Their areas of expertise vary widely. Some are experts on the technology at issue; others on patent law and licensing; others on damages; others on Japanese culture and negotiations; and still others on legal ethics. The Court has considered the expert reports and supplemental reports of each expert; a written summary of the methodology, opinions and conclusions of each; and briefs (sometimes in the form of objections or motions in limine and oppositions thereto) with respect to why the proponent believes the testimony should be admitted and why the opponent believes it should be excluded. Over the course of three days, the Court heard live testimony from each of the fourteen experts. The Court's rulings follow:

A. Legal Ethics Experts

Minebea has proffered the testimony of Steven Lubet, a Professor of Law and Director of the Program on Advocacy and Professionalism at the Northwestern University School of Law in Chicago. Professor Lubet, in a lengthy written report, has offered opinions concerning the activities of certain attorneys for Papst including Jerold Schnayer and Richard Smith and has concluded that both lawyers violated Rule 4.2 of the Rules of Professional Conduct by dealing directly with a represented party, namely Minebea, and improperly circumventing that party's lawyers. Professor Lubet pointed to at least seven incidents where Mr. Schnayer or Mr. Smith violated rule 4.2.*fn1

Although Papst believes Professor Lubet's testimony is irrelevant and should be excluded, in the event the Court admits it Papst proposes to rebut Professor Lubet with the testimony of Geoffrey Hazard, Trustee Professor of Law at the University of Pennsylvania School of Law in Philadelphia. Professor Hazard prepared an expert report and testified that in his opinion there were no violations of Rule 4.2 by Mr. Schnayer or Mr. Smith. Alternatively, if there were violations, they were technical or minor in nature and, in the context of this civil litigation, they are not material because they had no adverse effect on the relationship between Papst and Minebea.

There is no question about the knowledge, skill, and experience of Professor Lubet or Professor Hazard. They are pre-eminent in their field and are recognized experts in legal ethics. The Court also has no question about their methodology or reasoning. The Court agrees with Papst, however, that the testimony of neither is relevant to the issues to be tried before the jury in this case. Professor Lubet's testimony seeks to raise collateral ethics issues that are peripheral and irrelevant to the issues to be decided. The jury trial before this Court is not the appropriate venue in which to raise Minebea's ethical concerns about the conduct of Mr. Schnayer or Mr. Smith. The Court, therefore, grants Papst's motion in limine to exclude the testimony of Professor Lubet. Without Professor Lubet's testimony, there is no need for the rebuttal testimony of Professor Hazard and the Court therefore will exclude his testimony as well.

B. Japanese Culture and Negotiation Experts

Papst has proffered Thomas C. Dodd, the President of IP Options, Inc., an intellectual property consulting company who has extensive experience in negotiating patent licenses with Japanese businesses. He is proffered as an expert on Japanese business practices and negotiations between Japanese parties and Westerners. In his opinion, Minebea's legal expertise and support are greater than that typically found in a Japanese company. Based upon his opinions and observations on these matters and on negotiating patent licenses more generally, and on the documents he reviewed, Mr. Dodd proposes to testify that Minebea did not in fact rely on Papst because Minebea's actions are consistent with a Japanese company conducting an arm's-length patent negotiation with a Western company.

To counter Mr. Dodd, Minebea proposes the testimony of Rochelle Kopp, a Managing Principal at Japan Intercultural Consulting, who is a professional business consultant specializing in Japanese culture. She is offered as an expert witness to testify with respect to internal decision-making and interpersonal relations within Japanese companies and the manner in which Japanese executives interact with and negotiate with others in business settings. Based on her knowledge of Japanese business practices and culture and her understanding of the facts of this case. Ms. Kopp is of the opinion that Minebea relied on Papst and that such reliance was reasonable. To avoid impinging on ultimate questions for the jury, however, Minebea proposes to limit Ms. Kopp's testimony to the explanation of the elements of Japanese culture and business practices that would have influenced Minebea's actions and that are evidenced in the testimony of the witnesses and the documents that have been produced in this case. In addition to Ms. Kopp, Minebea offers the testimony of Edward Fiorito (discussed infra)*fn2 on negotiating patent license agreements between Japanese and non-Japanese parties.

The Court concludes that, while Mr. Dodd has extensive experience in negotiating with Japanese companies and Ms. Kopp is eminently qualified in the area of Japanese culture, their testimony will not assist the jury in understanding the evidence any better than would the testimony of lay witnesses who actively participated in the negotiations at issue. Indeed, because the testimony of both rely on so many materials and experiences not directly related to this case, their testimony likely would tend to confuse rather than edify. Finally, the proffered testimony comes so close to an ultimate issue in the case -- namely, reliance -- that the Court will exclude it. For similar reasons, Mr. Fiorito'stestimony on license negotiations between Japanese and Western parties is likewise excluded.

C. Damages Experts

Minebea offers fourexperts on the issue of damages: Edward Fiorito, Thomas Gardner, Jerry Hausman, and James Malackowski. Papst offers twoexperts on the issue of damages: Bruce Dubinsky and Chera Sayers.

1. Edward Fiorito

Edward Fiorito is a patent lawyer with extensive experience in patent disputes and patent licensing. Minebea has offered to provide Mr. Fiorito's testimony on the calculation of a reasonable royalty. His testimony is based on his experience and by applying the fifteen factors set forth in Georgia-Pacific Corp. v. United States Plywood, 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970).

Despite the fact that Mr. Fiorito is an experienced patent and licensing attorney, the Court will not allow him to testify as to the calculation of a reasonable royalty because it is unclear what facts or data he has relied upon and his methodology is unreliable. Mr. Fiorito's application of the Georgia Pacific factors in order to arrive at the royalty rate of $1 per motor has at least the following flaws in data and methodology: Mr. Fiorito's analysis does not offer any mathematical computations leading to his $1 royalty; he does not compare lump sum license payments to running royalty rates; he does not take into account whether market conditions over the 1990, 1993 and 1995 time periods would (or could) affect the royalty that HDD*fn3 manufacturers would be willing to pay to Papst; and he did not do a detailed per patent analysis for each license agreement he considered. As the Court inquired during the Daubert hearing: Where did the $1 figure come from? And why did $3, for example, just "feel too high" to Mr. Fiorito under Georgia Pacific? The Court finds Mr. Fiorito's proposed testimony to be too speculative to satisfy the reliability threshold of Rule 702 since such testimony would invite conjecture and confusion rather than assist the jury in determining a reasonable royalty rate.

2. Thomas Gardner

Thomas Gardner is a HDD industry consultant familiar with all aspects of the HDD industry including, without limitation, engineering, marketing, and operations. Minebea offers Mr. Gardner to provide testimony on the HDD market, submarkets, products and technologies; the HDD spindle motor market, submarkets and products; Minebea's and Nidec's market share of the worldwide HDD spindle motor market; the significance of the U.S. HDD market; the business implications of Papst's royalty demands on Minebea's customers; supply and demand in the market approach "but for" scenario; and Minebea's production capabilities under "but for" scenarios. Mr. Gardner's methodology includes forecasting techniques whereby he reviewed various market data sources in order to calculate the HDD and HDD spindle motor market. Mr. Gardner has made determinations regarding the U.S. spindle motor market and Minebea's potential share in such market if Papst acknowledged Minebea's patent rights. The Court is not persuaded by Papst's objections to Mr. Gardner's methodology and conclusions. Mr. Gardner's testimony is appropriate for the jury's consideration under Rule 702. Mr. Gardner is a qualified damages expert, he employed reliable methodology, and he used the data properly in order to arrive at reliable conclusions.

3. Jerry Hausman

Jerry Hausman is a Professor of Economics at the Massachusetts Institute of Technology. In addition, he has extensive experience in the computer industry and has consulted for numerous computer hardware and software companies. Minebea offers Professor Hausman to provide testimony on (1) Papst's market ...

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