NetFuel, Inc. v. Cisco Systems Inc.

Background

NetFuel alleged that Cisco infringed U.S. Patent Nos. 7,747,730 and 9,663,659. The patents concern software agents used to monitor and manage computer networks and network devices. NetFuel accused features in Cisco’s IOS, IOS XE, IOS XR, and NX-OS operating systems.

The parties filed motions under Federal Rule of Civil Procedure 26 and Federal Rule of Evidence 702 to exclude portions of opposing experts’ reports and testimony. Rule 702 requires expert testimony to be helpful, based on sufficient facts or data, produced by reliable methods, and reliably applied to the case. Under Daubert, the court acts as a gatekeeper against unreliable or irrelevant expert opinions.

NetFuel’s Motion Concerning Dr. Almeroth

NetFuel argued that Dr. Almeroth’s invalidity report was improperly ghost-written because it repeated portions of Cisco’s earlier invalidity contentions. The court rejected that argument. It found that Dr. Almeroth helped draft the report, supplied the information and opinions in it, worked on it for more than 100 hours, reviewed multiple drafts, and signed it after providing feedback. The court therefore found that he substantially participated in preparing the report.

NetFuel also argued that Dr. Almeroth’s opinions about whether the patents were anticipated or obvious were conclusory and unreliable. The court disagreed. It found that his report explained his claim interpretations, used the claim elements identified in NetFuel’s infringement contentions where appropriate, and included element-by-element comparisons with prior art. The court held that his report and testimony were permissible and denied NetFuel’s motion to strike portions of his testimony.

Cisco’s Motion Concerning NetFuel’s Damages Experts

Cisco challenged two damages theories offered by Walter Bratic: an apportioned-profit theory and a per-unit royalty theory. Bratic relied in important respects on Dr. Rubin’s technical opinions.

The court excluded the apportioned-profit analysis because Dr. Rubin did not provide a discernible method or sufficient factual and economic support for his percentage estimates. The excluded opinions included his estimates that security, reliability, and availability represented 33% of the value of Cisco’s accused operating systems; that certain accused features accounted for 33% or 50% of that value; and that 70% of EPFT’s functionality and 40% of the functionality of the EEM-and-CoPP/LPTS combination were attributable to the patents. Because Bratic relied on those figures, the court also excluded the portions of his report relying on them.

The court also excluded Bratic’s $120-per-processor royalty calculation based on a prior BNP-Paribas transaction involving NetFuel’s PlexOS software. The court found that the 20% and 60% reductions used in the calculation were unsupported percentage estimates. It further found that Bratic did not explain how the economic differences between the earlier PlexOS transaction and the proposed patent license to Cisco affected the royalty rate. The court therefore found the transaction insufficiently comparable and excluded the related royalty opinions.

Disposition

Judge Edward J. Davila denied NetFuel’s motion to exclude portions of Dr. Almeroth’s testimony. He granted Cisco’s motion to exclude portions of Bratic’s report and the Rubin opinions on which those portions relied. The court also denied NetFuel’s request for leave to serve a supplemental damages report, finding that the deficiencies were extensive, that new theories and methods would be needed, and that allowing another report would prejudice Cisco in light of the existing trial schedule.

The order specified the report paragraphs to be struck, including Bratic’s per-unit royalty calculations based on the BNP agreement, his profit-apportionment analysis based on Rubin’s calculations, and the corresponding Rubin opinions.