Illumina, Inc. v. BGI Genomics Co., Ltd

Background

Illumina alleged that BGI’s sequencers and related reagents infringed two Illumina patents. BGI filed counterclaims alleging that Illumina’s DNA-sequencing systems infringed a BGI patent. In this order, the court considered BGI’s motion to strike portions of the report and testimony of Illumina’s damages expert, Dr. Stephen D. Prowse. The opinion also refers to a related case, No. 20-cv-01465-WHO.

The parties agreed that BGI had not sold an accused product to a third party in the United States. Prowse therefore offered opinions about whether a permanent injunction was appropriate and about the reasonable royalty for BGI’s allegedly infringing research-and-development activities in the United States before a preliminary injunction issued in June 2020.

Legal standard

The court applied Federal Rule of Evidence 702, which permits qualified expert testimony when the expert’s specialized knowledge will help decide an issue, the opinion rests on sufficient facts or data, the methods are reliable, and the expert reliably applied those methods. Under the Supreme Court’s decision in Daubert, expert evidence must be relevant and reliable. The court explained that disputes affecting an opinion’s accuracy or persuasive force generally go to its weight, meaning how much consideration it deserves, rather than its admissibility, meaning whether it may be presented at all.

Rulings on Prowse’s opinions

The court granted in part without prejudice and denied in part BGI’s motion to strike.

The court denied the motion as to Prowse’s failure to account separately for the incremental benefit of the accused research and development. Prowse concluded that the relevant benefit was the return on BGI’s United States research and development because moving the work elsewhere was not a viable, cost-effective alternative. The court found that he reasonably relied on information from Illumina’s technical expert and BGI’s own employees.

The court granted without prejudice the motion concerning Prowse’s use of the 2014 World Intellectual Property Organization innovation index while excluding data from later years. The court found that Prowse had not adequately explained why later changes in the index should be disregarded, including changes that narrowed or reversed the difference between the United States and China. The court stated that Prowse would need to better explain his approach or revise it before testifying about that analysis.

The court denied the motion concerning Prowse’s failure to discount the research-and-development expenditures to their 2014 present value. Although BGI argued that his lump-sum royalty calculation ignored the time value of money, the court found that this challenge concerned the accuracy or weight of his calculation rather than the reliability of his method under Rule 702.

The court also denied the motion concerning Prowse’s inclusion of research-and-development expenses allegedly connected to BGI’s DNBSEQ technology. Prowse relied on Illumina’s technical expert and testimony from BGI-related employees, including Avanindra Chaturvedi. The court concluded that BGI could challenge the inclusion of particular expenses through cross-examination rather than by excluding the opinions.

Finally, the court granted without prejudice the motion concerning Prowse’s unexplained increase to the royalty calculation based on the Georgia-Pacific factors. The court found that Prowse did not explain why he averaged his two data points or why, and by how much, the factors justified increasing the resulting figure. The court stated that mathematical precision was not required, but some explanation of why a factor affected the royalty and generally to what extent was required.

Sealing and next steps

The court ruled that the first administrative motion to seal was granted in part and denied in part, and that the other two administrative motions to seal were granted. The court allowed sealing for specified confidential financial, research-and-development, valuation, sales, pricing, licensing, product-development, and business information, but denied sealing for portions that did not require protection, such as descriptions of patents and background about the DNA-sequencing industry. BGI could file a redacted version of one exhibit within 14 days.

Prowse could amend his report by August 16, 2021. If BGI requested it, Prowse was required to sit for a two-hour deposition on or before August 30, 2021. Judge Orrick entered the order on July 23, 2021.