Eplus Inc. v. Lawson Software, Inc.

• Decision Date: 26 March 2013
• Docket Number: Civil Action No. 3:09cv620.
• Citation: 946 F.Supp.2d 449
• Court: U.S. District Court — Eastern District of Virginia
• Parties: ePLUS INC., Plaintiff, v. LAWSON SOFTWARE, INC., Defendant.

946 F.Supp.2d 449

ePLUS INC., Plaintiff,

v.LAWSON SOFTWARE, INC., Defendant.

Civil Action No. 3:09cv620.

United States District Court,

E.D. Virginia,

Richmond Division.

March 26, 2013.

Craig Thomas Merritt, Belinda Duke Jones, Henry Irving Willett, III, Paul Wilbur Jacobs, II, Rowland Braxton Hill, IV, Samuel Perry Coburn, Christian & Barton LLP, Richmond, VA, David Michael Young, Jennifer Ann Albert, Scott Lynn Robertson, April Elise Weisbruch, Eleanor Martha Hynes, Goodwin Procter LLP, Washington, DC, Lana Svetlana Shiferman, Daniel Mark Forman, Michael Gavin Strapp, Srikanth Kadumpalli Reddy, Goodwin Procter LLP, Boston, MA, for Plaintiff.

Bradford Anthony Cangro, Robert William Busby, Jr., Morgan Lewis & Bockius LLP, Donald Robert Dunner, Finnegan Henderson Farabow Garrett & Dunner LLP, Washington, DC, Daniel Johnson, Jr., Morgan Lewis & Bockius LLP, Palo Alto, CA, Daniel William McDonald, Eric Ronald Chad, Merchant & Gould PC, Minneapolis, MN, Rita Emily Tautkus, Morgan Lewis & Bockius LLP, San Francisco, CA, Azar Mouzari, Christopher Dean Dusseault, Jason Charn–Jieh Lo, Timothy Patrick Best, Gibson, Dunn & Crutcher LLP, Los Angeles, CA, Dabney Jefferson Carr, IV, Megan Conway Rahman, Robert Armistead Angle, Timothy James St. George, Troutman Sanders LLP, Stephen Dennis Otero, Capital One Services LLC, Richmond, VA, Daniel James Thomasch, Josh Krevitt, Richard William Mark, Gibson, Dunn & Crutcher LLP, New York, NY, Erika Harmon Arner, Finnegan Henderson Farabow Garrett & Dunner LLP, Reston, VA, Sarah Elizabeth Simmons, Gibson, Dunn & Crutcher LLP, Dallas, TX, for Defendant.

MEMORANDUM OPINION

ROBERT E. PAYNE, Senior District Judge.

This matter is before the Court on Lawson Software, Inc.'s (“Lawson”) MOTION TO STRIKE EXPERT OPINIONS OF DR. KEITH UGONE (Docket No. 892). For the reasons below, the motion will be denied as to testimony about disgorgement of profits and denied as moot as to testimony about cost savings.

PROCEDURAL BACKGROUND

On January 27, 2011, following a two-week trial, a jury returned a verdict of infringement in favor of ePlus Inc. (“ePlus”) and against Lawson finding that several claims of three of the patents-in-suit had been infringed. On May 23, 2011, the Court issued a permanent injunction as part of the remedy for the infringement, enjoining Lawson and “any person in active concert or participation with them ... from directly or indirectly making, using, offering to sell, or selling within the United States or importing into the United States” certain product configurations and services. Injunction Order (Docket No. 729). On September 9, 2011, ePlus filed a Motion to Show Cause, alleging that Lawson was in contempt of the Injunction Order. (Docket No. 798). The focus of ePlus' contempt motion concerned an application of one of the infringing system configurations, Requisition Self–Service (“RSS”). Lawson redesigned this application and created Requisition Center (“RQC”). ePlus alleges that the new RQC product is not colorably different from RSS.¹

On February 16, 2012, ePlus filed its MOTION TO STRIKE TESTIMONY OF LAWSON ECONOMIC EXPERT JONATHAN D. PUTNAM CONCERNING AWARD OF ROYALTY AND UNOPPOSED REQUEST FOR EXPEDITED BRIEFING (Docket No. 902), contending that Dr. Putnam's testimony concerning reasonable royalty rates should be stricken because his calculations were based on Dr. Mangum's calculations. Lawson filed an opposition, and ePlus filed a reply.

In the meantime, ePlus's expert Dr. Keith Ugone filed a report suggesting that disgorgement would be the appropriate measure of damages should the Court find Lawson in contempt. Ugone Rpt. (Docket No. 869). Dr. Ugone argued that ePlus should either be awarded the profits that Lawson made because of its use of RQC or the costs that Lawson saved by not complying with the Court's Injunction Order. Id. On February 15, 2012, Lawson filed its MOTION TO STRIKE EXPERT OPINIONS OF DR. KEITH UGONE (Docket No. 892) and supporting memorandum, objecting to Dr. Ugone's testimony on the ground that disgorgement is a punitive remedy, and arguing that such remedies are inappropriate in civil contempt proceedings. The opposition and reply to Lawson's motion were filed shortly thereafter.

On February 29, 2012, the Court heard argument on both Lawson's and ePlus's motions. The Court granted ePlus's motion, striking Dr. Putnam's testimony on reasonable royalty rates, on March 3, 2012 (Docket No. 944).

The foregoing facts form the basic context for the assessment of Lawson's motion to strike. The parties' arguments will be addressed in turn. Other facts will be found in the discussion of the analytical component to which they relate.

LEGAL STANDARD

Under Federal Rule of Evidence 702, an expert may testify if: “(1) 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; (2) the testimony is based on sufficient facts or data; (3) the testimony is the product of reliable principles and methods; and (4) the expert has reliably applied the principles and methods to the facts of the case.” The expert must file a report in which he provides a “complete statement of all opinions the witness will express and the basis and reasons for them.” Fed.R.Civ.P. 26(a)(2)(B)(i). These conditions represent the codification of the concepts announced in Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993). Daubert established that the trial judge must ensure that expert evidence is reliable and relevant. Relevant expert testimony is testimony that will “assist the trier of fact to understand the evidence or to determine a fact in issue.”

The Court has “wide discretion” in determining whether expert testimony would “assist the trier of fact.” Sun Yung v. Zom Clarendon, L.P., 453 Fed.Appx. 270, 277–78 (4th Cir.2011) ( quoting Mercado v. Austin Police Dep't, 754 F.2d 1266, 1269 (5th Cir.1985)); see also Kumho Tire Co. v. Carmichael, 526 U.S. 137, 152, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999) (noting that courts of appeals apply an “abuse-of-discretion standard” when reviewing a district court judge's decision to admit or exclude expert testimony). This is particularly true when “the court sits as the trier of fact, for [it] is then in the best position to know whether expert testimony would help [it].” Id. ( quoting Mercado, 754 F.2d at 1269).

DISCUSSION

A. Disgorgement Remedy

1. The Parties' Contentions

Lawson contends that Dr. Ugone's report should be stricken in its entirety because Dr. Ugone relies on the mistaken premise that disgorgement is an available compensatory remedy in a civil contempt proceeding when that contempt proceeding is being held due to the violation of an injunction prohibiting continued infringement of a patent. According to Lawson, the 1946 amendments to the Patent Act eliminating disgorgement as a remedy for infringement also eliminated the remedy of disgorgement in related civil contempt proceedings. And, regardless of whether the 1946 amendments eliminated the disgorgement remedy, Lawson contends that the Supreme Court's decision in United States v. United Mine Workers of Am., 330 U.S. 258, 303–04, 67 S.Ct. 677, 91 L.Ed. 884 (1947) eliminated disgorgement remedies in civil contempt cases in which the plaintiff fails to show “actual loss.” Lawson argues that the Fourth Circuit interpreted United Mine Workers as eliminating the remedy in its decisions in Carbon Fuel Co. v. United Mine Workers, 517 F.2d 1348 (4th Cir.1975) and Windsor Power House Coal Co. v. District 6, United Mine Workers of Am., 530 F.2d 312 (4th Cir.1976).

ePlus contends that disgorgement of profits is an available remedy in civil contempt proceedings; that the 1946 amendments to the Patent Act did not eliminate this remedy; and that it need not show its actual amount of loss or damages in order to recover a disgorgement remedy. ePlus points to language in Leman v. Krentler–Arnold Hinge Last Co., 284 U.S. 448, 52 S.Ct. 238, 76 L.Ed. 389 (1932), arguing that neither United Mine Workers nor the 1946 amendments to the Patent Act disturbed the holding in that case. ePlus points out that only one decision after the 1946 amendments has held that the amendments eliminated disgorgement of profits as a remedy in civil contempt proceedings.

2. Civil Contempt Remedies

In civil contempt proceedings, the chosen remedy must serve either or both of two purposes: “to coerce the contemnor into complying in the future with the court's order, or to compensate the complainant for losses resulting from the contemnor's past noncompliance.” See The Colonial Williamsburg Found. v. The Kittinger Co., 792 F.Supp. 1397, 1407 (E.D.Va.1992), aff'd38 F.3d 133 (4th Cir.1994) (citations omitted). Courts have broad discretion in choosing a remedy “based on the nature of the harm and the probable effect of alternative sanctions.” Id. ( quoting Connolly v. J.T. Ventures, 851 F.2d 930 (7th Cir.1988) (citing United Mine Workers, 330 U.S. 258, 303–04, 67 S.Ct. 677 (1947))). Here, the dispute between the parties is centered on whether the disgorgement remedy can be considered “compensatory.” Neither party argues that it is intended to be coercive.²

The Supreme Court addressed the issue of whether disgorgement of profits could be considered “compensatory” for the purposes of a civil contempt proceeding in Leman v. Krentler–Arnold Hinge Last Co., 284 U.S. 448, 52 S.Ct. 238, 76 L.Ed. 389 (1932). In that case, as in this one, the respondent was accused of violating a permanent injunction that had been granted after a finding of patent infringement. The Court of Appeals rejected a disgorgement of profits remedy, holding that compensatory civil contempt remedies had to be based on “pecuniary injury or damage.” Id. at 455, 52 S.Ct. 238. The Supreme Court reversed:

While the distinction is clear between damages, in the sense of actual pecuniary loss, and profits, the latter may none...