Yesterday Judge Whyte issued an Order with tentative rulings on motion’s in limine and Daubert motions for the upcoming Realtek v. LSI trial where the jury will determine (1) a RAND rate, (2) damages based on the court’s prior ruling that LSI breached its RAND obligations by seeking an exclusion order at the ITC before offering Realtek a license on RAND terms and (3) whether Realtek failed to mitigate damages by not negotiating a license.  These tentative evidentiary rulings are based on the particular arguments and circumstances of the case, but provide some general insight into how Judge Whyte has shaped the RAND issues.

Parallel ITC Investigation.  Recall that, in a parallel ITC investigation (Inv. No. 337-TA-837), Administrative Law Judge Shaw determined that the LSI patents were not infringed and also rejected Realtek’s various RAND defenses.  The ITC has decided to review the determination in its entirety, which review is still pending.  Judge Whyte made several tentative evidentiary rulings regarding the ITC investigation.  First, he excludes the ITC’s non-infringement decision because it is not final and its relevance is outweighed by danger of undue prejudice and jury confusion.  Second, he excludes the ITC’s decision that LSI did not breach its RAND obligation.

Judge Robart’s RAND Rate.  Judge Whyte would not exclude Realtek’s economic expert from relying on a portion of Judge Robart’s RAND rate ruling in the Microsoft v. Motorola litigation, where the economic expert used a Realtek license as “the best benchmark” for a RAND rate and used Judge Robart’s finding to “futher support[]” his analysis.  Judge Whyte questioned the economic expert’s apportionment technique, where he divided Judge Robart’s rate for Motorola’s twenty-four WiFi 802.11 SEPs by 12 since only two WiFi 802.11 SEPs are at issue here, because that simple division assumes equal contributions by each patent, rather than their individual relative contributions.  But the court “nevertheless considers it a satisfactory way to reflect the RAND royalty rate that might pertain to two, versus twenty-four patents” and “a reasonable point of comparison as part of [a] more comprehensive analysis.”

No Duty To Mitigate Damages by Negotiating During Exclusion Order Threat.  Judge Whyte excluded evidence of whether LSI’s June 20, 2012 license offer to Realtek was RAND, where such evidence is intended to show whether Realtek failed to mitigate damages by not negotiating with LSI.  At the time that LSI made the offer, LSI also was seeking an exclusion order from the ITC (and is still seeking an exclusion order), and “Realtek was under no duty to negotiate in an unfair bargaining position under the threat of an exclusion order.”  Judge Whyte explained that “Realtek had no obligation to mitigate by negotiating a license with LSI after LSI breached its contract to Realtek and where Realtek was still under the threat of an exclusion order from the ITC.”  Further, even if LSI’s offer were RAND, “Realtek would not be unreasonable in declining to negotiate with LSI under the circumstances.”  Thus, Judge Whyte excluded all evidence of LSI’s June 20, 2012 offer to Realtek and responses thereto.

This particular ruling is one to be careful with to avoid over-reading its import, particularly where it is a tentative evidentiary ruling based on the particular arguments, issues and circumstances presented.  It is not likely that the court intends to encourage parties not to negotiate in any circumstances.  Rather, the finite issue presented here concerns whether evidence of refusal to negotiate may be used to show that a party seeking damages for litigation costs failed to mitigate those damages.  But the court is not endorsing the concept of not negotiating.  Rather, under the duty to mitigate case law quoted and applied by Judge Whyte, “[t]he fact that in retrospect a reasonable alternative course of action is shown to have been feasible is not proof of the fact that the course actually pursued … was unreasonable.”

Via Pool.  Judge Whyte excludes LSI’s expert from relying on the “Via Pool” as a benchmark for her analysis.  The expert determined that LSI’s 802.11 SEPs were three times more valuable than those in the Via patent pool based on a comparison of (1) the number of times any of LSI’s nineteen 802.11 SEPs were cited in later patents and (2) the number of times 377 patents she believed to be SEPs in the Via Pool were cited in later patents.  She then divided the resultant rate by the number of LSI’s 802.11 SEPs (nineteen of them) to determine a rate for the two specific LSI 802.11 SEPs at issue here.

Judge Whyte found that, although the “patent counting method may be an acceptable methodology to determine the relative value of patent portfolios”, the problem here is that most of the citations in later patents to LSI’s 802.11 SEPs were not to the two SEPs at issue here; rather, another LSI 802.11 SEP not at issue here accounted for 93% of the later patent citations.  The expert also had admitted that the method was good for portfolios, but not for singling out specific patents such as  the two patents at issue here.

Infringement.  Judge Whyte excluded LSI’s expert testimony about whether Realtek actually infringes the SEPs, which is an issue “before the ITC” but “not at issue before this court” in which “the RAND issue in this case is ‘[a] determination of a RAND royalty rate” for the two LSI 802.11 SEPs at issue.  Thus, there would be no testimony about infringement or whether Realtek owed a lump-sum royalty “based on past infringement“, though testimony for a lump-sum royalty could be based on other grounds.  The intent of the ruling here does not appear to be that no royalty is owed for past activities (perhaps an issue not decided one way or the other), but only that any such royalty cannot be premised on evidence of “past infringement” since “infringement” evidence is excluded.