United States District Court, M.D. North Carolina
MEMORANDUM OPINION AND ORDER
Catherine C. Eagles, District Judge.
Crop Protection, LLC sued Willowood for patent infringement,
seeking millions of dollars in lost profits on its fungicides
containing azoxystrobin. Willowood seeks to exclude the
opinions of Syngenta's expert witness on damages, Dr.
Benjamin Wilner, as speculative and unreliable because he
used inaccurate budget projections and irrelevant product
comparisons to calculate Syngenta's lost profits. The
Court will admit Dr. Wilner's opinions on lost profits
for the 5, 602, 076 Patent and the 5, 633, 256 Patent because
they are based on sufficient facts and data. However, the
Court will exclude his opinions on lost profits for the 5,
847, 138 Patent and the 8, 124, 761 Patent because they are
not based on sufficient facts or reliable principles.
also seeks to exclude Dr. Wilner's testimony about
Willowood's successful effort to obtain EPA registration
of its fungicides. The Court will admit Dr. Wilner's
testimony on Willowood's early entry into the market
because it is relevant to his theory of damages. The Court
will exclude his testimony on whether Willowood misused the
Formulators' Exemption because it is not relevant to his
calculation of damages, nor does Dr. Wilner appear competent
to testify to those facts.
motion will be granted in part and denied in part.
Background Facts on Infringement and Damages
uses the patents-at-issue to manufacture fungicides
containing azoxystrobin, which it sells in the agricultural
market. The ‘076 Patent and the ‘256 Patent claim
a group of chemical compounds that includes azoxystrobin. The
compound patents expired in February 2014. Doc. 96-1 at
¶ 29. The ‘138 Patent, which expired in December
2015, and the ‘761 Patent, which will expire in 2029,
both claim methods of manufacturing azoxystrobin.
Id. at ¶¶ 30-31. Syngenta seeks damages
for Willowood's infringement of each patent and an
injunction to prevent Willowood's continued infringement
of the ‘761 Patent. See Doc. 1 at pp. 26-27.
2013, Willowood imported five kilograms of azoxystrobin into
the United States, infringing the compound patents. Doc. 141
at 4. Willowood further infringed the compound patents by
commissioning a third party to use the azoxystrobin to
formulate fungicides. Id. at 6. Based on the
formulations, the EPA approved Willowood's application to
register its fungicides containing azoxystrobin in 2014.
Docs. 164-26, 164-27. Willowood began to sell its generic
azoxystrobin fungicides in the United States that same year
at substantially lower prices than Syngenta. See
Doc. 149-1 at 13. Syngenta asserts that Willowood's
infringement caused lost profits through its early entry into
the market and through its infringing sales.
contends that if Willowood had not infringed the compound
patents, Willowood would not have been able to formulate its
products and register with the EPA in 2014 and would not have
entered the market until late 2015. Id. at 11, 36.
Similarly, if Willowood had waited until the ‘138
Patent expired to use azoxystrobin made with the ‘138
Patent's claimed method, Willowood would have entered the
market in 2016. See Id. at 40. According to
Syngenta, Willowood's head start caused Syngenta to lose
sales, forced it to reduce prices to compete before its
exclusivity expired, and gave Willowood a greater market
presence than it would have had if it had entered the market
later. Id. at 15-16. Syngenta seeks to
recover lost profits for the compound and ‘138 Patents
from 2014-2017 caused by Willowood's head start in the
market. Id. at 27-40.
also asserts that Willowood's importation and sales of
azoxystrobin infringed the ‘138 and ‘761 patents
because Willowood's azoxystrobin is made through the
patents' claimed processes. See Id. at 11.
Syngenta seeks lost profit damages for Willowood's sales
that infringed the ‘138 Patent from
2014-2015 and the ‘761 Patent from 2014-2017.
Id. at 37-43. Syngenta's expert, Dr. Benjamin
Wilner,  calculated Syngenta's head-start
damages and damages from Willowood's infringing sales
together through a lost profits analysis. See Id.
His methods and analysis are discussed in more detail
The Law on Damages for Lost Profits
award of damages for patent infringement should be
“adequate to compensate for the infringement, but in no
event less than a reasonable royalty.” 35 U.S.C. §
284. A patentee may prove lost profit damages by creating a
hypothetical “but for world, ” where infringement
has been “factored out of the economic picture.”
Grain Processing Corp. v. Am. Maize-Prods. Co., 185
F.3d 1341, 1350 (Fed. Cir. 1999). “Reconstructing the
market [is] by definition a hypothetical enterprise.”
Id. “To prevent the hypothetical from lapsing
into pure speculation, ” courts require “sound
economic proof of the nature of the market.”
Id.; see also Versata Software, Inc. v. SAP Am.,
Inc., 717 F.3d 1255, 1265 (Fed. Cir. 2013).
hypothetical nature of the evidence does not make it
inadmissible. Indeed, the Federal Circuit “has affirmed
lost profit awards based on a wide variety of reconstruction
theories, ” including the theories of lost sales and
price erosion. Crystal Semiconductor Corp.
v. TriTech Microelecs. Int'l, Inc., 246 F.3d 1336,
1355-56 (Fed. Cir. 2001); see also Grain Processing,
185 F.3d at 1350 (collecting cases).
obtain damages for lost sales, the patentee must show
“a reasonable probability that he would have made the
asserted sales ‘but for' the infringement.”
Grain Processing, 185 F.3d at 1349. Under the
Panduit factors, the patentee satisfies this by
proving “(1) demand for the patented product, (2)
absence of acceptable noninfringing substitutes, (3) his
manufacturing and marketing capability to exploit the demand,
and (4) the amount of the profit he would have made.”
Panduit Corp. v. Stahlin Bros. Fibre Works, Inc.,
575 F.2d 1152, 1156 (6th Cir. 1978).
to obtain damages under a price erosion theory, a patent
owner must (1) “show that ‘but for'
infringement, it would have sold its product at a higher
price;” (2) “present evidence of the (presumably
reduced) amount of product the patentee would have sold at
the higher price;” and (3) “account for the
nature, or definition, of the market, similarities between
any benchmark market and the market in which price erosion is
alleged, and the effect of the hypothetically increased price
on the likely number of sales at that price in the
market.” Ericsson, Inc. v. Harris Corp., 352
F.3d 1369, 1378 (Fed. Cir. 2003) (quotations omitted).
Experts can use the benchmark methodology to calculate
price erosion damages by “select[ing] a product similar
to the patented product and compar[ing] the performance of
that benchmark in a market free of infringement with the
performance of the patented product in the market affected by
infringement.” Crystal, 246 F.3d at 1357;
see Ericsson, 352 F.3d at 1378-79 (calculating price
erosion by comparing the actual performance of the patented
product to the performance of a benchmark product made by the
patentee in a market with the same conditions but without
Overview of Dr. Wilner's Evidence
report, Dr. Wilner calculated Syngenta's lost profits
caused by Willowood's infringement. For each year from
2014-2017 and for each of the patents-at-issue, he used
benchmarks to determine what Syngenta's gross profits
would have been for azoxystrobin in a hypothetical market
unaffected by Willowood's infringement. See Doc. 149-1 at
27-43. From these hypothetical gross profits, he subtracted
both Syngenta's actual gross profits on azoxystrobin and
the estimated incremental costs that Syngenta would have
incurred to obtain the hypothetical gross
profits. Id. at 25, 33-35, 67-68. The
amount of money that remained was, in his opinion,
Syngenta's lost profits. Id. at 35, 67. Stated
another way: Hypothetical Gross Profits in a Non-Infringing
World minus Syngenta's Actual Gross Profits minus
Incremental Costs equals Syngenta's Lost Profit Damages.
on the particular year and patents-at-issue, Dr. Wilner chose
two benchmarks,  which he used to calculate Syngenta's
hypothetical gross profits. He used the first benchmark-the
extent to which a benchmark product's actual gross
profits either met its budgeted gross profits or increased or
decreased from the past year-to adjust the second
benchmark-Syngenta's budgeted gross profits or past gross
profits for azoxystrobin. Dr. Wilner's choice of
benchmarks and his calculations are described in more detail
later in this opinion, as the Court examines the
admissibility of his opinions.
expert testimony to be admissible, Dr. Wilner must base his
opinions “on sufficient facts or data” and must
employ “reliable principles and methods.”
Fed.R.Evid. 702. “[T]he trial judge must ensure that
any and all scientific testimony or evidence admitted is not
only relevant, but reliable.” Daubert v. Merrell
Dow Pharm., Inc., 509 U.S. 579, 589 (1993). However, the
fact finder, not the court, must determine whether an expert
is credible and whether the expert's opinions are
correct. Apple Inc. v. Motorola, Inc., 757 F.3d
1286, 1314 (Fed. Cir. 2014), overruled in part not
relevant here by Williamson v. Citrix Online, LLC, 792
F.3d 1339, 1349 (Fed. Cir. 2015) (en banc); i4i Ltd.
P'ship v. Microsoft Corp., 598 F.3d 831, 854 (Fed.
Cir. 2010) (“Daubert and Rule 702 are
safeguards against unreliable or irrelevant opinions, not
guarantees of correctness.”), aff'd, 564
U.S. 91 (2011). “Vigorous cross-examination,
presentation of contrary evidence, and careful instruction on
the burden of proof are the traditional and appropriate means
of attacking shaky but admissible evidence.” Summit
6, LLC v. Samsung Elecs. Co., 802 F.3d 1283, 1296 (Fed.
Cir. 2015) (quoting Daubert, 509 U.S. at 596).
does not object to Dr. Wilner's method: computing lost
profits by subtracting actual gross profits and incremental
costs from hypothetical gross profits calculated by adjusting
one benchmark with another. While this method does not use a
typical lost sales or price erosion approach, as long as
appropriate benchmarks are selected, it accounts for lost
sales and price erosion, and for inaccuracies in the
benchmarks. However, Willowood contends that Dr. Wilner's
opinions are inadmissible because he did not base his choice
of benchmarks on sufficient facts or data.
on a benchmark for price erosion, the party must offer
“substantial evidence of the similarities”
between the benchmark product and the infringed product and
between their two markets. Ericsson, 352 F.3d at
1379 (upholding price erosion damages using benchmark of
similar product with one technological difference, produced
by the same company, and sold in a similarly competitive
market). As long as an expert provides some evidence of their
similarities, then “[t]he degree of comparability
of” the products and their markets and the failure
“to control for certain variables are factual issues
best addressed by cross examination and not by
exclusion.” ActiveVideo Networks, Inc. v. Verizon
Commc'ns, Inc., 694 F.3d 1312, 1333 (Fed. Cir.
2012); see also i4i, 598 F.3d at 852 (“When
the methodology is sound, and the evidence relied upon
sufficiently related to the case at hand, disputes about the
degree of relevance or accuracy . . . may go to the
testimony's weight, but not its admissibility.”).
The Compound Patents
Dr. Wilner's Calculations
Wilner used two benchmarks to calculate damages for the
compound patents: Syngenta's budgeted gross profits for
azoxystrobin and the budgeted gross profits and actual
performance of mesotrione, an herbicide made by Syngenta.
Doc. 149-1 at 30. For 2014, Dr. Wilner calculated the extent
to which Syngenta's actual gross profits for mesotrione
met its budgeted gross profits. Id. at 33. He
assumed that but for Willowood's infringement, Syngenta
would have met its budgeted gross profits for azoxystrobin to
the same extent as it had for mesotrione. See id.
Using this method, he calculated that Syngenta's
hypothetical gross profits were $140, 943, 000. Id. at
34, 68 ln.4. After subtracting Syngenta's actual gross
profits and incremental costs from its hypothetical gross
profits, Dr. Wilner found that but for Willowood's
infringement, Syngenta lost $20, 020, 000 in 2014.
Id. at 67 lns.1-4, 68 lns.4-6. To determine the
extent of Syngenta's lost profits due to Willowood's
head start in the market, he followed a similar process for
2015, 2016, and 2017. Id. at 34-35, 67-68.
his choice of benchmark, Dr. Wilner opined that
“Syngenta's budgets are an informative benchmark
for what sales and profits would have been” for
azoxystrobin without Willowood's infringement.
Id. at 38; see Doc. 197 at 231:8-:21. Dr.
Wilner learned about “Syngenta's exacting budgeting
process” through discussions with several employees,
Doc. 149-1 at 30; see also Doc. 197 at 107:6-:18,
109:7-:14, whom Syngenta intends to call as trial witnesses
to testify about the budgeting process. See Doc. 221
at 48:2-:15. In his report, Dr. Wilner also noted several
factors evaluated in the budgeting process, including the
product's exclusivity status, the crops it protects, and
the weather patterns and geographic pressures affecting those
crops. Doc. 149-1 at 30-31.
Wilner also found mesotrione to be an appropriate benchmark
for azoxystrobin. Id. at 31-32; Doc. 197 at
243:3-244:1. The compound patents and Syngenta's data
exclusivity for mesotrione created similar barriers
against generics entering both markets. Doc. 149-1 at 31-32;
see Doc. 149-10 at 3. Mesotrione protects the same
major crops as azoxystrobin and both are top-sellers for
Syngenta. Doc. 149-1 at 31. Finally, the products have
comparable lifecycles, such as evolving mixtures of active
ingredients. Id. ...