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Trading Techs. Int'l, Inc. v. CQG, Inc.

United States District Court, N.D. Illinois, Eastern Division

November 19, 2014

TRADING TECHNOLOGIES INTERNATIONAL, INC., Plaintiff,
v.
CQG, INC., and CQGT, LLC, Defendants

For Trading Technologies International, Inc., Plaintiff, Counter Defendant: Paul H. Berghoff, LEAD ATTORNEY, McDonnell, Boehnen, Hulbert & Berghoff, Ltd., Chicago, IL; Alan Wayne Krantz, Kirsten L. Thomson, Leif R. Sigmond, Jr., Michael David Gannon, Michelle Lynn McMullen-Tack, S. Richard Carden, McDonnell Boehnen Hulbert & Berghoff LLP, Chicago, IL; Andrea Kay Orth, Brandon J Kennedy, Christopher D Butts, Mcdonnell Boehnen Hulbert & Berghoff Llp, Chicago, IL; George I. Lee, McDonnell, Jennifer M Kurcz, McDonnell, Jeremy E. Noe, McDonnell, Matthew J. Sampson, McDonnell, Paul S. Tully, McDonnell, Boehnen, Hulbert & Berghoff, Ltd., Chicago, IL; Steven F. Borsand, Trading Technologies International, Inc., Chicago, IL.

For CQG, Inc., CQGT, LLC, Defendants, Counter Claimants: Adam Glenn Kelly, Melaina D. Jobs, William J. Kramer, William Joshua Voller, Loeb & Loeb LLP, Chicago, IL; Christopher M Swickhamer, John Anthony Cotiguala, Loeb & Loeb Llp, Chicago, IL; Jared B. Briant, Nina Y. Wang, Faegre Baker Daniels, LLP, Denver, CO; Kara Eve Foster Cenar, Bryan Cave, Chicago, IL; Mariangela M. Seale, Bryan Cave LLP, Chicago, IL.

For Trading Technologies International, Inc., Counter Defendant: Andrea Kay Orth, Kirsten L. Thomson, Michelle Lynn McMullen-Tack, Mcdonnell Boehnen Hulbert & Berghoff Llp, Chicago, IL; Michael David Gannon, McDonnell, Boehnen, Hulbert & Berghoff, Ltd., Chicago, IL; Paul S. Tully, McDonnell Boehnen Hulbert & Berghoff, Chicago, IL.

ORDER

Sharon Johnson Coleman, United States District Judge.

Before the Court is defendants CQG, Inc., and CQGT, LLC, (" CQG") motion to exclude the testimony of Raymond S. Sims [606] in which CQG moves for exclusion of Trading Technologies International, Inc.'s (" TT") damages expert's testimony pursuant to Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharms.., 509 U.S. 579, 589, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993), arguing that Sims' dramatically inflates TT's proposed royalty base and royalty rate.[1] For the reasons stated herein, the Court denies the motion.

Legal Standard

Admissibility of expert testimony is within the discretion of the Court, and this Court has " wide latitude in performing its gatekeeping function and determining both how to measure the reliability of expert testimony and whether the testimony itself is reliable." Bielskis v. Louisville Ladder, Inc., 663 F.3d 887, 894 (7th Cir. 2011). " Expert testimony is permitted to assist the trier of fact with technical issues that lay people would have difficulty resolving on their own." Stollings v. Ryobi Technologies, Inc., 725 F.3d 753, 765 (7th Cir. 2013). When assessing the admissibility of expert testimony, courts generally apply four factors: (1) the qualifications of the witness; (2) whether the witness' testimony will assist the trier of fact in determining a relevant issue; (3) whether the testimony is based on sufficient data and reliable principles; and (4) whether the witness reliably applied the principles to the facts of the case. Lees v. Carthage College, 714 F.3d 516, 521-22 (7th Cir. 2013).

Statement

Raymond S. Sims is a Vice President of Charles River Associates in its Chicago office, retained by TT to offer opinions on the amount of economic damages suffered by TT due to the alleged infringement by CQG of the patents-in-suit. Charles River Associates is an international business consulting firm focusing on, among other things, intellectual property matters in the context of strategy, licensing, valuation, and litigation consulting. Sims offers the opinions in his report based on his experience as a consultant to a wide variety of business and industrial clients and governmental agencies on matters involving financial and statistical analysis and modeling for the purpose of evaluating the economic impact of business decisions, transactions, and economic events.

CQG moves to exclude Sims' testimony for the following reasons: (1) the " Applicable Trade Approach" is unreliable; (2) the " Alternative Approach" is unreliable; (3) Sims' prescribed monthly minimum royalty is inappropriate; (4) Sims' prescribed royalty rate is inflated excessively; (5) Sims misapplied the Georgia Pacific factors when he examined a hypothetical negotiation between TT and CQG.

A patentee is entitled to " damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer." 35 U.S.C. § 284. Generally, reasonable royalties must be based on the " smallest salable patent-practicing unit." Versata Software, Inc. v. SAP America, Inc. et al., 717 F.3d 1255, 1268 (Fed. Cir. 2013). The exception to the general rule is that royalties may be assessed on the entire market value of the accused product " only where the patented feature creates the basis for customer demand or substantially creates the value of the component parts." Id. The " entire market value" exception is different from an approach that assesses royalties only on infringing sales. Id.

(1) Applicable Trade Approach

The Applicable Trade Approach to assess a royalty base that Sims articulates in his report is reliable. Sims states that because TT's patent does not require that an order is actually filled, only that one is entered, the royalty base should apply to every trade entered in CQG's accused software, along with every trade viewable in the invention. This approach does not apply to every trade entered in every one of CQG's products, but sets as a royalty base only the orders that were entered in or viewable in CQG's accused products. Therefore, this approach includes any order entered in an accused product that was filled on an exchange, but not an order entered in a non-accused ...


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