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Loggerhead Tools, LLC v. Sears Holdings Corp.

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

September 20, 2016

LOGGERHEAD TOOLS, LLC, Plaintiff,
v.
SEARS HOLDINGS CORPORATION and APEX TOOL GROUP, LLC, Defendants.

          MEMORANDUM OPINION AND ORDER

          JQHN W. DARRAH, United States District Court Judge

         Plaintiff LoggerHead Tools, LLC (“LoggerHead”) filed a Second Amended Complaint (“SAC”) against Defendants Sears Holdings Corporation (“Sears”) and Apex Tool Group, LLC (“Apex”) (collectively, the “Defendants”), alleging, inter alia, various patent and trademark violations associated with United States Patents No. 6, 889, 579 (the “‘579 Patent”) and No. 7, 992, 470 (the “‘470 Patent”). Defendant Apex has filed a Motion to Exclude the Testimony of Christopher J. Bokhart [267], on the calculation of royalty patent damages and trade dress damages. For the reasons set forth more fully below, Apex's Motion [267] is granted in part and denied in part.

         BACKGROUND

         Dan Brown was awarded the ‘579 Patent in 2005 and the ‘470 Patent in 2011 and is the founder and President of LoggerHead. (SAC, ¶¶ 10, 11, 13.) Brown founded LoggerHead in 2005 and began selling the Bionic Wrench. (Id. at ¶ 17.) In 2009, Sears placed an order for 15, 000 Bionic Wrench units for sale over the Christmas season. (Id. at ¶ 38.) In 2010, Sears ordered 75, 000 Bionic Wrench units. (Id. at ¶ 39.) Sears and LoggerHead entered into a one-year supply agreement, which had an effective start date of February 1, 2011, and expired February 1, 2012. (Id. at ¶ 40.) Sears represented that they would purchase more Bionic Wrench units in 2012. (Id. at ¶ 47.) In September 2012, Sears announced the “Max Axess Locking Wrench” (“MALW”) and began retailing the MALW in their stores. (Id. at ¶ 62.) LoggerHead submitted an expert report by Christopher J. Bokhart on the issue of economic damages.

         LEGAL STANDARD

         Under the Federal Rule of Evidence 702, trial courts must determine, as a precondition to admissibility, whether expert evidence rests on a reliable foundation and is relevant. Manpower, Inc. v. Ins. Co. of Pennsylvania, 732 F.3d 796, 806 (7th Cir. 2013). “Expert testimony is admissible when the testimony is reliable and would assist the trier of fact to understand the evidence or determine a fact at issue in a case.” Lewis v. CITGO Petroleum Corp., 561 F.3d 698, 705 (7th Cir. 2009) (citing Fed.R.Evid. 702; Daubert v. Merrell Down Pharmaceuticals, Inc., 509 U.S. 579, 589-91 (1993)). “The proponent of the expert bears the burden of demonstrating that the expert's testimony would satisfy the Daubert standard.” Id. However, “the rule on expert testimony [is] notably liberal.” Krist v. Eli Lilly & Co., 897 F.2d 293, 298 (7th Cir. 1990).

         ANALYSIS

         In assessing the admissibility of proposed expert testimony, the focus “must be solely on principles and methodology, not on the conclusions that they generate.” Daubert, 509 U.S. at 595. A court must “make the following inquiries before admitting expert testimony: first, the expert must be qualified as an expert by knowledge, skill, experience, training, or education; second, the proposed expert must assist the trier of fact in determining a relevant fact at issue in the case; third, the expert's testimony must be based on sufficient facts or data and reliable principles and methods; and fourth, the expert must have reliably applied the principles and methods to the facts of the case.” Lees v. Carthage College, 714 F.3d 516, 521-22 (7th Cir. 2013). Apex does not challenge Bokhart's knowledge, skill, experience, training, or education or the relevancy of Bokhart's report. Apex does challenge the basis of parts of the report and the reliability. There is no bright-line reliability test, and the reliability inquiry should be “flexible.” Kumho Tire Co. v. Carmichael, 526 U.S. 137, 139 (1999). However, there must be “a link between the facts or data the expert has worked with and the conclusion the expert's testimony is intended to support.” United States v. Mamah, 332 F.3d 475, 478 (7th Cir.2003).

         Patent Royalty Damages

         Upon a finding of infringement, “the court shall award the claimant 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, together with interest and costs as fixed by the court.” 35 U.S.C. § 284. “The patentee bears the burden of proving damages.” Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1315 (Fed. Cir. 2011). Bokhart assumed a hypothetical negotiation between the parties. “In litigation, a reasonable royalty is often determined on the basis of a hypothetical negotiation, occurring between the parties at the time that infringement began.” Uniloc, 632 F.3d at 1312 (citing Wang Labs. Inc. v. Toshiba Corp., 993 F.2d 858, 869-70 (Fed. Cir. 1993)). “Although a reasonable royalty calculation includes some approximation, the Federal Circuit requires sound economic and factual predicates for that analysis.” Sloan Valve Co. v. Zurn Indus., Inc., 33 F.Supp.3d 984, 990 (N.D. Ill. 2014) (internal quotations and citations omitted).

         Several factors are relevant when determining a reasonable royalty:

1. The royalties received by the patentee for the licensing of the patent in suit, proving or tending to prove an established royalty.
2. The rates paid by the licensee for the use of other patents comparable to the patent in suit.
3. The nature and scope of the license, as exclusive or non-exclusive; or as restricted or non-restricted in terms of territory or with respect to whom the manufactured product may be sold.
4. The licensor's established policy and marketing program to maintain his patent monopoly by not licensing others to use the invention or by granting licenses under special ...

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