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Webasto Thermo & Comfort North America, Inc. v. Bestop, Inc.

United States District Court, E.D. Michigan, Southern Division

July 25, 2019

WEBASTO THERMO & COMFORT NORTH AMERICA, INC. and WEBASTO-EDSCHA CABRIO USA, INC., Plaintiffs/Counter-Defendants,
v.
BESTOP, INC., Defendant/Counter-Plaintiff.

          R. Steven Whalen, United States Magistrate Judge

          OPINION AND ORDER DENYING DEFENDANT'S MOTION TO EXCLUDE THE EXPERT TESTIMONY OF MICHAEL K. MILANI (ECF NO. 158)

          PAUL D. BORMAN, UNITED STATES DISTRICT JUDGE

         This action involves Plaintiffs Webasto Thermo & Comfort North America, Inc. and Webasto-Edscha Cabrio USA, Inc.'s (collectively “Webasto”) claim that Defendant Bestop, Inc. (“BesTop”) infringes Webasto's U.S. Patent No. 9, 346, 342 (“the '342 Patent”), entitled “Vehicle Roof and Roof Opening Mechanism.” Webasto claims that BesTop's Accused Product, the Sunrider for Hardtop (“the Sunrider”), infringes Webasto's ‘342 patent as embodied in Webasto's Black Forest ThrowBack top (“ThrowBack”). BesTop responds that the Sunrider does not infringe and that the claims of the '342 Patent were disclosed in prior art and are therefore unpatentable. The Court has issued claim construction and summary judgment rulings and the parties have filed Daubert[1] and in limine motions. Now before the Court is BesTop's Motion to Exclude the Expert Testimony of Michael K. Milani. (ECF No. 158.) The matter has been fully briefed and the Court held a hearing on May 23, 2019. For the reasons that follow, Bestop's motion is DENIED.

         I. BACKGROUND

         The background facts of this litigation are set forth in multiple prior Orders of this Court and the reader's knowledge of those facts is presumed. Particular facts, as specifically relevant to the issues in this motion, will be discussed where appropriate.

         II. LEGAL STANDARD

         “Admissibility of expert testimony is governed by Federal Rule of Evidence 702 and informed by the seminal case applying Rule 702, Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993).” In re Southeastern Milk Antitrust Litigation, 739 F.3d 262, 267 (6th Cir. 2014). Fed.R.Evid. 702 provides:

A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:
(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and methods; and
(d) the expert has reliably applied the principles and methods to the facts of the case.

Fed. R. Evid. 702.

         “[T]he rules of evidence - especially Rule 702 - do assign to the trial judge the task of ensuring that an expert's testimony both rests on a reliable foundation and is relevant to the task at hand.” Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 597 (1993). The trial court's “gatekeeping” task with respect to expert testimony applies not just to scientific evidence, as was at issue in Daubert, but to all types of specialized knowledge presented through an expert witness. Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 148-49 (1999). “”[T]he relevant reliability concern may focus upon personal knowledge or experience . . . [as] there are many different kinds of experts, and many different kinds of expertise.” Id. at 150. The Court must analyze separately the proposed expert's qualification, reliability and helpfulness.

         The Federal Circuit “appl[ies] regional circuit law to evidentiary issues.” VirnetX, Inc. v. Cisco Sys., Inc.., 767 F.3d 1308, 1324 (Fed. Cir. 2014). “Whether proffered evidence should be admitted in a trial is a procedural issue not unique to patent law, and therefore we review the district court's decision whether to admit expert testimony under the law of the regional circuit, here the Fifth Circuit.” Micro Chem., Inc. v. Lextron, 317 F.3d 1387, 1390-91 (Fed Cir. 2003). The Sixth Circuit has noted that absolute certainty is not required of an expert but that sheer speculation, regardless of the qualifications of the speculator, lacks sufficient reliability:

Rule 702, we recognize, does not require anything approaching absolute certainty. See Daubert, 509 U.S. at 590, 113 S.Ct. 2786. And where one person sees speculation, we acknowledge, another may see knowledge, which is why the district court enjoys broad discretion over where to draw the line.

Tamraz v. Lincoln Elec. Co., 620 F.3d 665, 671-72 (6th Cir. 2010).

         To determine the testimony's reliability, the court does not “determine whether [the opinion] is correct, but rather [determines] whether it rests upon a reliable foundation, as opposed to, say, unsupported speculation.” In re Scrap Metal Antitrust Litig., 527 F.3d 517, 529-30 (6th Cir. 2008). “As gatekeeper, the trial court only determines the admissibility of expert evidence; the jury determines its weight. The court's focus is ‘solely on principles and methodology, not on the conclusions that they generate.'” United States v. Stafford, 721 F.3d 380, 393-94 (6th Cir. 2013) (quoting Daubert, 509 U.S. at 595) (alterations in original). “[R]ejection of expert testimony is the exception, rather than the rule.” In re Scrap Metal, 527 F.3d at 530.

         III. ANALYSIS

         Mr. Michael K. Milani was retained by Webasto “to analyze certain accounting, financial, marketing, and other business data in order to identify the compensation that would be appropriate for Webasto to receive in the event that liability is found against BesTop.” (ECF No. 159-1, Sealed Updated December 7, 2018 Expert Report of Michael K. Milani, p. 2, PgID 3681) (“Milani Updated Report”). Mr. Milani has over 20 years of litigation experience offering opinions relating to economic damages in all types of Intellectual Property matters. (Id. 1, PgID 3680.) Mr. Milani has testified in matters pending in Federal Court, State Court, the Patent Trial and Appeals Board (“PTAB”) and Alternative Dispute Resolution (“ADR”) proceedings. (Id.) Mr. Milani also provides management advice related to IP transactions and valuation outside of litigation. (Id.) Mr. Milani has served as an adjunct professor and visiting lecturer at numerous universities and holds a Bachelor of Science in Finance from the University of Illinois and a Master's in Business Administration from Northwestern University. (Id.) BesTop does not challenge any aspect of Mr. Milani's qualifications to testify as an expert in this case.

         For purposes of his work for Webasto on this case, Mr. Milani has assumed that the ‘342 Patent is valid, enforceable, and infringed. To summarize, he opines that Webasto's damages in this case would be a combination of lost profit and reasonable royalty damages, and his opinion separately analyzes Webasto's damages under both theories. Specifically, Mr. Milani opines that Webasto would be entitled to lost profit damages for the period of time that it was selling its patented Black Forest ThrowBack (“ThrowBack”) in competition with BesTop's Accused Product the Sunrider for Hardtop (“Sunrider”). Mr. Milani calculates lost profits based on two different models, depending on how the trier of fact ultimately determines that the relevant market would have evolved but-for BesTop's infringement. The range of lost profit damages that Webasto is seeking, taking into account both theories, is $500, 009 to $1.7 million. Mr. Milani calculates a reasonable royalty of $63 per unit and the range of reasonable royalty damages for the relevant period is approximately $499, 000 to $555, 000. The total range of damages to which Webasto will claim it is entitled, including both lost profit and reasonable royalty damages, $1.0 million to $2.3 million. If Webasto is unable to prove lost profits, and the trier of fact were to conclude that Webasto is only entitled to reasonable royalty damages, then Webasto would claim a total of $936, 000 in reasonable royalty damages. (Milani Updated Report 4, PgID 3683.)

         A. Mr. Milani's Testimony on Lost Profits

         BesTop argues that Mr. Milani's testimony “does not meet the burden for lost profit proof.” (Def.'s Mot. 3, PgID 3657.) The parties agree that “[t]o recover lost profits a patentee must show that “but for” infringement it reasonably would have made the additional profits enjoyed by the infringer.” Micro Chemical, Inc. v. Lextron, Inc., 318 F.3d 1119, 1122 (Fed. Cir. 2003) (citing King Instruments Corp. v. Perego, 65 F.3d 941, 952 (Fed. Cir. 1995)). The Federal Circuit “has not restricted patentees to any one particular method of proving “but for” causation [and] [a] patentee may resort to any method showing, with reasonable probability, entitlement to lost profits “but for” the infringement.” Id. “Once the patentee establishes the reasonableness of this inference, the burden shifts to the infringer to show that the inference is unreasonable for some or all of the lost profits.” Id.

         The parties also agree that a four-factor test, first set forth by the Sixth Circuit in Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152 (6th Cir. 1978), is a well-recognized method for determining whether the “but for” test has been satisfied. “There is no particular required method to prove but for causation. One ‘useful, but non-exclusive' method to establish the patentee's entitlement to lost profits is the Panduit test first articulated by the Sixth Circuit.” Mentor Graphics Corp. v. ...


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