IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF TEXAS

WACO DIVISION

WSOU INVESTMENTS, LLC d/b/a 

BRAZOS LICENSING AND 

DEVELOPMENT,

Plaintiff,

v. 

MICROSOFT CORPORATION, 

Defendant.

Civil Action No. 6:20-cv-460 

Civil Action No. 6:20-cv-464 

MICROSOFT CORPORATION’S MOTION TO EXCLUDE

IMPROPER DAMAGES OPINIONS AND TESTIMONY OF WSOU’S EXPERTS

PUBLIC VERSION

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TABLE OF CONTENTS

I. INTRODUCTION .............................................................................................................. 1

II. BACKGROUND ................................................................................................................ 2

A. The Asserted Patents and Accused Products .......................................................... 2

1. The ’519 Patent (-464 Action) .................................................................... 2

2. The ’758 Patent (-460 Action) .................................................................... 3

B. WSOU’s Expert Reports ......................................................................................... 3

1. Apportionment ............................................................................................ 3

2. Incremental Profits ...................................................................................... 5

III. LEGAL STANDARDS ...................................................................................................... 5

IV. WSOU’S REASONABLE ROYALTY OPINIONS SHOULD BE EXCLUDED. ........... 7

A. Mr. Lipoff’s Apportionment Opinion for the ’519 Patent Is Conclusory and 

Should Be Excluded. ............................................................................................... 7

B. Mr. Lipoff Failed To Apportion Out Non-Patented Features Of The Accused 

Products For The ’758 Patent. ................................................................................ 8

C. Messrs. Blok’s and Bratic’s Incremental Profits Analysis for Both Patents Is 

Not Tied To The Patents-In-Suit Or To The Accused Products. .......................... 10

V. CONCLUSION ................................................................................................................. 13

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TABLE OF AUTHORITIES

Page(s) 

CASES

Daubert v. Merrell Dow Pharm., Inc., 

509 U.S. 579 (1993) ...............................................................................................................5, 6

Droplets, Inc. v. Yahoo, Inc., 

Case No. 12 cv-03733-JST, Dkt. 1000 (N.D. Cal. Jan. 12, 2022) .....................................12, 13

Elder v. Tanner, 

205 F.R.D. 190 (E.D. Tex. 2001)...............................................................................................6

Exmark Mfg. Co. Inc. v. Briggs & Stratton Power Prods. Grp., LLC, 

879 F.3d 1332 (Fed. Cir. 2018)..................................................................................................9

Finjan, Inc. v. Blue Coat Sys., Inc., 

879 F.3d 1299 (Fed. Cir. 2018)................................................................................................10

Knight v. Kirby Inland Marine Inc., 

482 F.3d 347 (5th Cir. 2007) .....................................................................................................6

Kumho Tire Co. v. Carmichael, 

526 U.S. 137 (1999) ...................................................................................................................6

LaserDynamics, Inc. v. Quanta Comput., Inc., 

694 F.3d 51 (Fed. Cir. 2012)......................................................................................................7

MLC Intell. Prop. LLC v. Micron Tech., Inc., 

10 F.4th 1358 (Fed. Cir. 2021) ............................................................................................8, 10

Niazi Licensing Corp. v. St. Jude Med. S.C., Inc., 

30 F.4th 1339 (Fed. Cir. 2022) ................................................................................................10

Summit 6, LLC v. Samsung Elecs. Co. Ltd., 

802 F.3d 1283 (Fed. Cir. 2015)..................................................................................................6

Uniloc USA, Inc. v. Microsoft Corp., 

632 F.3d 1292 (Fed. Cir. 2011)................................................................................................12

United States v. Hicks, 

389 F.3d 514 (5th Cir. 2004) .....................................................................................................6

United States v. Valencia, 

600 F.3d 389 (5th Cir. 2010) .....................................................................................................6

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RULES

Fed. R. Evid. 104(a) .........................................................................................................................6

Fed. R. Evid. 702 ................................................................................................................... passim

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I. INTRODUCTION

Defendant Microsoft Corporation (“Microsoft”) moves to exclude certain damagesrelated opinions of Plaintiff WSOU Investments, LLC’s (“WSOU”) experts, Messrs. Stuart 

Lipoff, Justin Blok, and Walter Bratic, under Federal Rule of Evidence 702. WSOU’s damages

experts, Messrs. Blok and Bratic, offered opinions through their expert report regarding 

reasonable royalty damages related to Microsoft’s alleged infringement of U.S. Patent Nos. 

8,625,758 (“the ’758 Patent”) and 7,706,519 (“the ’519 Patent”). Their analysis suffers from at 

least two defects that render their opinions unreliable and correspondingly inadmissible. 

First, Messrs. Blok’s and Bratic’s jointly proposed reasonable royalties are not properly 

apportioned as to the claimed inventions even though the accused products contain both 

allegedly infringing and incontestably non-infringing features. For both the ’519 Patent and the 

’758 Patent, Messrs. Blok and Bratic rely on generic, unsupported conclusions made in WSOU’s 

technical expert Mr. Lipoff’s infringement reports and purported statements made by Mr. Lipoff 

during interviews with Messrs. Bratic and Blok. Mr. Lipoff’s conclusory statements do not 

provide a technical apportionment at all, much less a reliable one on which Messrs. Blok and 

Bratic could base their royalty analysis. See Blok Dep., 10:13-24, 13:11-17. 

Second, Messrs. Blok and Bratic derive their reasonable royalty by applying an arbitrary 

allocation of incremental profits between Microsoft and licensors of the asserted patents in a 

hypothetical negotiation. By using Microsoft’s company-wide R&D-to-operating expense ratio,

Messrs. Blok and Bratic fail to sufficiently tie their analysis to the patents-in-suit, the accused 

products, or any facts of these cases. 

Accordingly, the Court should exclude Mr. Lipoff’s apportionment opinions and Messrs. 

Blok’s and Bratic’s reasonable royalty analysis.

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II. BACKGROUND

A. The Asserted Patents and Accused Products 

1. The ’519 Patent (-464 Action)

The ’519 Patent is directed generally to a telephonic station which appears “virtuallyresident”—e.g. it may appear local to a calling station, while being physically located at a 

different location—in a telephonic network. ’519 Patent, 1:15-26, 4:21-31, 8:5-10, Cl. 1. The 

“virtually-resident” telephonic station is coupled to a packet data network and has a packet data 

network address that is dependent upon the location of its connection to the packet data network. 

Id. at 6:26-33. The ’519 patent includes an “indexer” that maps the identifier that makes the 

calling station appear virtually resident to a packet data network address. Id., 6:7-21. 

Mr. Lipoff explains the asserted claims using Figure 1 of the ’519 patent, reprinted 

below, which he describes as follows: “an exemplary network where a communication station 

(14) can appear to be virtually resident to telephonic switch (16) despite being physically 

resident outside switch 16 and instead resident in a packet data network (28). An index (52) and 

indexer (48) in a proxy server (34) provides for linking the identity of the communication station 

to the identity of the station within the PDN so that calls can be effected between the PDN (28) 

and the telephonic switch (16).” Lipoff 519 Inf. Rep., ¶¶ 71-72. 

Case 6:20-cv-00464-ADA Document 136 Filed 06/03/22 Page 7 of 21
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WSOU accuses Microsoft’s Skype for Consumer (SfC), Skype for Business (SfB), and 

Teams (collectively, “the Accused Skype Products”) of infringing the ’519 Patent. 

2. The ’758 Patent (-460 Action)

The ’758 patent describes a method for sponsoring a communication service that is 

provided directly to a user of that service, based on rules for charging that sponsor. See, e.g. ’758 

Patent, Abstract, 1:44-49. WSOU has accused Skype Manager, a tool for use with the Skype 

Consumer service of infringing the ’758 Patent. Skype Manager is a web-based management tool 

for SfC that allows SfC users serving as administrators to, among other things, create groups 

comprised of other users, create accounts for users, and allocate credits to those users. See Lipoff 

758 Inf. Rep., ¶¶ 59, 64-65. Skype Manager includes many features that are admittedly not 

addressed or covered by the ’758 Patent. 

B. WSOU’s Expert Reports

1. Apportionment

For apportioning with respect to the ’519 Patent, Messrs. Bratic and Blok ostensibly rely 

on Mr. Lipoff’s opinion that the Accused Skype Products share the common “central” ability “to 

place and receive telephone calls to and from third parties that use external legacy connections 

outside of the [SfC], [SfB], or Teams networks.” Lipoff 519 Inf. Rep., ¶ 41; Blok Dep., 9:20-

10:7. From this unsupported assertion, Messrs. Bratic and Blok purport to apportion the allegedly 

infringing versus non-infringing features of the Accused Skype Products based on speculation—

not on any replicable, reliable methodology. For example, as to SfC, Messrs. Bratic and Block 

calculate revenues purportedly attributable only to the teachings of the asserted claims of the 

’519 Patent while apportioning out revenues for Skype Manager and SMS texting, the only two 

other SfC features they choose to account for, without explanation or basis as to their decision. 

See Blok Rep., Appendix B, ¶ 98 (acknowledging that “SfC includes various features and 

Case 6:20-cv-00464-ADA Document 136 Filed 06/03/22 Page 8 of 21
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functionalities”), ¶¶ 103-104 (discussing SfC revenue calculation based on apportioning out only 

Skype Manager and SMS Text). That Messrs. Bratic and Block “assumed that revenues related 

to SfB and Teams ability for users to make and receive phone calls via PSTN . . . are reported 

together” thus leading them to jointly analyze those products’ profitability and commercial 

success further erodes the adequacy of their methodology. Id. ¶ 108 (emphasis added). Messrs. 

Bratic’s and Blok’s interpretation of Mr. Lipoff’s conclusory opinion on what the ’519 Patent 

covers with respect to the features and functionalities of the Accused Skype Products results in 

royalty opinions that are speculative and unrooted from credible methodology, rendering them 

inadmissible under Rule 702. 

For the ’758 Patent, Messrs. Blok and Bratic depend on Mr. Lipoff’s statements that 

“[a]ll of the essential features of Skype Manager require practicing each and every limitation of 

the asserted claims” (Blok Rep., Appendix A, ¶ 120; Lipoff 758 Inf. Rep., ¶ 68) and that “[t]he 

features and functions of Skype Manager read directly on the main ’758 patent claims” (Blok 

Rep., Appendix A, ¶ 120; Lipoff 758 Inf. Rep., ¶ 69) in order to conduct “the appropriate 

Georgia-Pacific analysis . . . where, as here, the ’758 Patent claims the entire concept of Skype 

Manager.” Blok Rep., Appendix A, ¶ 123. Based on Mr. Lipoff’s opinion, Messrs. Blok and 

Bratic assume that the entirety of the “incremental profits [generated] from Skype Manager in 

the U.S. of approximately from June 2, 2014 through May 2021” is directly 

attributed Skype Manager’s use of the claimed invention. Id. ¶ 135; see also Blok Dep., 13:22-

15:24. Messrs. Bratic and Blok proceed to utilize the figure as a base from which 

to determine the “appropriate split” between Alcatel-Lucent and Microsoft. See Blok Rep., 

Appendix A, ¶¶ 139-143; Blok Dep., 17:10-18:23. But, as detailed below, Mr. Lipoff’s opinion 

that the entirety of Skype Manager can be attributed to the teachings of the ’758 Patent is wholly 

Case 6:20-cv-00464-ADA Document 136 Filed 06/03/22 Page 9 of 21
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conclusory, undermined by his own deposition testimony, and not based on any replicable, 

reliable methodology. Mr. Lipoff’s failure to distinguish between allegedly infringing and 

irrefutably non-infringing features of Skype Manager as attributable to the teachings of the ’758 

Patent renders Messrs. Bratic’s and Blok’s reasonable royalty opinions inadmissible under Rule 

702. 

2. Incremental Profits

In deriving their proposed reasonable royalties as to both patents, Messrs. Blok and 

Bratic apply the ratio of Microsoft’s research and development (“R&D”) expenses to operating 

expenses (the “R&D-to-operating expenses ratio”). Blok Rept., Appendix A, ¶ 139; id. Appendix 

B, ¶ 159. They assert that “it is reasonable to expect that the parties [to the hypothetical 

negotiation] would have considered Microsoft’s R&D-to-operating expenses ratio in order to 

determine how to split the incremental benefits Microsoft obtained from practicing” the asserted 

patents. Id., Appendix A, ¶ 140; id. Appendix B, ¶ 161. Messrs. Blok and Bratic then use 

Microsoft’s company-wide R&D expenses to operating expenses ratio to divide the alleged 

incremental profits for the accused services between the patent owner and Microsoft, rather than 

any financial data relating specifically to the accused technology or either asserted patent.

III. LEGAL STANDARDS

An expert witness may provide opinion testimony only if “(a) 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; (b) the testimony is based on sufficient facts or data; (c) the 

testimony is the product of reliable principles and methods; and (d) the expert has reliably 

applied the principles and methods to the facts of the case.” Fed. R. Evid. 702. 

Rule 702 requires the district court to act as a gatekeeper to “ensure that any and all 

scientific testimony or evidence admitted is not only relevant, but reliable.” Daubert v. Merrell 

Case 6:20-cv-00464-ADA Document 136 Filed 06/03/22 Page 10 of 21
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Dow Pharm., Inc., 509 U.S. 579, 589 (1993). The “basic gatekeeping obligation” articulated in 

Daubert applies not only to scientific testimony but to all expert testimony. Kumho Tire Co. v. 

Carmichael, 526 U.S. 137, 147 (1999). Accordingly, “a district court may exclude evidence that 

is based upon unreliable principles or methods, legally insufficient facts and data, or where the 

reasoning or methodology is not sufficiently tied to the facts of the case.” Summit 6, LLC v. 

Samsung Elecs. Co. Ltd., 802 F.3d 1283, 1295 (Fed. Cir. 2015). A district court shall consider 

“whether the theory or technique the expert employs is generally accepted; whether the theory 

has been subjected to peer review and publication; whether the theory can and has been tested; 

whether the known or potential rate of error is acceptable; and whether there are standards 

controlling the technique’s operation.” Knight v. Kirby Inland Marine Inc., 482 F.3d 347, 351 

(5th Cir. 2007) (citing Daubert, 509 U.S. at 593). The ultimate inquiry in a Rule 702 

determination is whether the expert’s testimony is sufficiently reliable and relevant to be helpful 

to the finder of fact and thus to warrant admission at trial. United States v. Valencia, 600 F.3d 

389, 424 (5th Cir. 2010). Accordingly, conclusory opinions “without any elaboration or 

reasoning” should be excluded as they “will not assist the trier of fact.” Elder v. Tanner, 205

F.R.D. 190, 193-94 (E.D. Tex. 2001). “It is not sufficient simply to list the resources [the expert] 

utilized and then state an ultimate opinion without some discussion of their thought process.” Id. 

at 194. The proponent of expert testimony bears the burden of showing, by a preponderance of 

the evidence, that the expert is qualified under Rule 702. See Fed. R. Evid. 104(a); Daubert, 509 

U.S. at 592, n.10; United States v. Hicks, 389 F.3d 514, 525 (5th Cir. 2004) (“The proponent of 

expert testimony [] has the burden of showing that the testimony is reliable.”).

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IV. WSOU’S REASONABLE ROYALTY OPINIONS SHOULD BE EXCLUDED.

A. Mr. Lipoff’s Apportionment Opinion for the ’519 Patent Is Conclusory and 

Should Be Excluded.

With regard to the ’519 Patent, Mr. Lipoff’s “technical apportionment” analysis consists 

of statements asserting that the “central” feature shared across the Accused Skype Products is the 

ability “to place and receive telephone calls to and from third parties that use external legacy 

connections outside of the [SfC], [SfB], or Teams networks.” Lipoff 519 Inf. Rep., ¶ 41; see also 

id., ¶ 44 (“The ability to interwork between the [Accused Skype Products] and legacy voice 

systems is common to all three Accused [Skype] Products.”). Mr. Lipoff contends that while 

there are various differences among the three accused products (SfC, SfB, and Teams), “these 

differences . . . are not material to [his] infringement analysis.” Id., ¶ 44. He concludes that the 

’519 Patent reads on the accused products because, allegedly, “all aspects of PSTN calling in 

[SfC], [SfB], and Teams are dependent on capabilities and implementations described” in the 

’519 Patent and thus the “entirety” “not just a portion or feature” of the Accused Skype Products’ 

PSTN calling features are covered by the ’519 Patent. Id., ¶ 46. This is the entirety of Mr. 

Lipoff’s “technical apportionment” from which Mr. Bratic and Mr. Blok begin their royalty 

opinion. Mr. Lipoff incorrectly disregards multiple aspects of the accused products that the ’519 

Patent admittedly does not cover, and he does so without reason apart from his conclusory 

statement that these aspects “are not material” to his infringement analysis. He does not set forth 

any methodology or basis for why he believes various features and functionalities of the accused 

products are “not material” to his infringement analysis, and his apportionment analysis—to the 

extent it exists among his conclusory assertions—is completely unreliable. LaserDynamics, Inc. 

v. Quanta Comput., Inc., 694 F.3d 51, 69 (Fed. Cir. 2012) (rejecting apportionment that was 

“plucked out of thin air based on vague qualitative notions of the relative importance of the 

Case 6:20-cv-00464-ADA Document 136 Filed 06/03/22 Page 12 of 21
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[accused technology]”); MLC Intell. Prop. LLC v. Micron Tech., Inc., 10 F.4th 1358, 1373 (Fed. 

Cir. 2021) (“We have repeatedly held that when the accused technology does not make up the 

whole of the accused product, apportionment is required.”). 

B. Mr. Lipoff Failed To Apportion Out Non-Patented Features Of The Accused 

Products For The ’758 Patent. 

Mr. Lipoff did not conduct any apportionment analysis of the ’758 Patent. Instead, he 

simply opined that the ’758 Patent covered the entirety of the accused product. See, e.g., Blok 

Rep., Appendix A, ¶ 120-121 (citing generally Lipoff 758 Inf. Rep. in stating “the ’758 Patent 

covers Skype Manager in its entirety”); see also id., ¶ 135 (“[I]t is Mr. Lipoff’s opinion that the 

’758 Patent covers Skype Manger in its entirety.”). These statements are belied by the record 

evidence, including Mr. Lipoff’s own deposition testimony. Messrs. Bratic’s and Blok’s 

wholesale reliance on these statements and corresponding failure to apportion out unpatented 

features of Skype Manager warrants exclusion of their reasonable royalty opinions. 

For example, Messrs. Bratic and Blok explain that: “According to Luis Carrasco, 

Microsoft’s Group Product manager for [Skype for Consumer], there are paid functionalities 

available within Skype Manager.” Blok Rep., Appendix A, ¶ 93. Yet notably absent from 

Messrs. Bratic’s and Blok’s report is any description of the free features available to Skype 

Manager users through SfC, for example, the ability to video call and text message other users. 

Carrasco Dep., 35:21-36:4, 38:23-39:15 (describing Skype-to-Skype video calling and 

messaging as the “two major services in Skype, which kind of are the reasons Skype is known.”). 

Additionally, Mr. Lipoff concedes he did not test or form an opinion on whether various core 

SfC and Skype Manager features and functionalities were infringing including: the ability of an 

administrator to invite users to join their group (Lipoff Dep., 74:4-75:1), the ability of a user to 

purchase their own Skype Credit (id., 76:11-19), call forwarding (id., 76:20-77:1), voicemail (id., 

Case 6:20-cv-00464-ADA Document 136 Filed 06/03/22 Page 13 of 21
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77:2-8), Skype-to-Skype video calling (id., 77:9-16), the ability of an administrator to allocate 

subscriptions to users (id., 77:17-78:3), and Skype Connect (id., 79:22-80:6). Because neither 

Mr. Lipoff nor Messrs. Blok and Bratic apportioned out the use of Skype Manager’s noninfringing features and functionalities, these non-infringing uses are included in their royalty 

base. Notably, Mr. Lipoff admits to limiting his report and opinions to the “specific functionality 

of Skype Manager that [he] identified that [he] believe[s] infringes the patent[.]” This admission 

alone wholly erodes the reliability and relevance of his technical analysis for any apportionment 

purposes. Id., 80:2-6. 

WSOU attempts to circumvent the apportionment requirement by citing the Federal 

Circuit’s decision in Exmark (See Blok Rep., Appendix A, ¶ 122 & n. 233). But nothing in 

Exmark suggests that WSOU’s conclusory damages opinion is admissible. In Exmark, the 

Federal Circuit held that using accused lawn mower sales as the royalty base was permissible 

because the claims at issue expressly recited a lawn mower. “Thus, claim 1 covers the infringing 

product as whole, not a single component of a multicomponent product. There is no unpatented 

or non-infringing feature of the product.” Exmark Mfg. Co. Inc. v. Briggs & Stratton Power 

Prods. Grp., LLC, 879 F.3d 1332, 1348 (Fed. Cir. 2018). That is not the case here. The claims of 

the ’758 patent are directed to “[a] method for sponsoring a communication service[.]” ’758 

Patent, Cl. 1 (Preamble). But Skype Manager has many features and functions entirely unrelated 

to sponsoring use of a communication service and Mr. Lipoff and Messrs. Blok and Bratic fail to 

account for them.

Thus, even if WSOU proves that Microsoft infringes the ’758 patent, Skype Manager still 

has both allegedly infringing features and non-accused, indisputably non-infringing features. 

Accordingly, in order to recover damages, WSOU must apportion only to the patented features 

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of the accused product. See Niazi Licensing Corp. v. St. Jude Med. S.C., Inc., 30 F.4th 1339, 

1357 (Fed. Cir. 2022) (“Damages should be apportioned to separate out noninfringing uses”); 

MLC Intell. Prop. LLC, 10 F.4th at 1373 (citing Exmark, 879 F.3d at 1348); see also Finjan, Inc. 

v. Blue Coat Sys., Inc., 879 F.3d 1299, 1309 (Fed. Cir. 2018) (“[T]he ultimate combination of 

royalty base and royalty rate must reflect the value attributable to the infringing features of the 

product, and no more.”) (quoting Ericsson, Inc. v. D–Link Sys., Inc., 773 F.3d 1201, 1226 (Fed. 

Cir. 2014)). The failure to do so requires exclusion of the reasonable royalty opinions of Messrs. 

Blok and Bratic. MLC, 10 F. 4th at 1373 (affirming district court’s exclusion of expert opinion 

on reasonable royalty because expert “did not properly apportion either the royalty base or the 

royalty rate to account for the patented technology.”). 

C. Messrs. Blok’s and Bratic’s Incremental Profits Analysis for Both Patents Is 

Not Tied To The Patents-In-Suit Or To The Accused Products.

Messrs. Blok’s and Bratic’s allocation of alleged incremental profits based on the ratio of 

Microsoft’s R&D-to-operating expenses is arbitrary, speculative, unreliable, and unsupported for 

the purposes of determining reasonable royalty damages. As such, it should be excluded. 

For both patents-in-suit, Messrs. Blok and Bratic assert that “[t]he parties to the 

hypothetical negotiation would have recognized that this ratio represents the portion of 

Microsoft’s costs attributable to technology development, as compared to its costs associated 

with commercializing” the accused products. Blok Rep., Appendix A, ¶ 139; id., Appendix B, ¶ 

162. They further opine that “Microsoft’s R&D-to-operating expenses ratio is reflective of 

Microsoft’s own determination of how much money it should invest in technology development 

relative to the overall cost of product commercialization.” Id., Appendix A, ¶ 141; id., Appendix 

B, ¶ 160. Accordingly, they assert that the R&D-to-operating expenses ratio is “a reasonable

measure of the contribution of” the contributions of all three asserted patents to Microsoft’s 

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apportioned incremental benefits from the accused products. See id., Appendix A, ¶ 141. Messrs. 

Blok and Bratic do not cite any authority for these assertions. Nor do they identify any case in 

which a court has approved of this methodology. And Mr. Blok testified that he was not aware of 

any Microsoft documentation to support his and Mr. Bratic’s analysis at such a granular level. 

See Blok Dep., 22:9-23:3, 55:14-56:17. 

Critically, this method is flawed at least because Messrs. Blok and Bratic use companywide R&D and operational expenditures to generate their proposed damages figures, rather than 

making any attempt to identify R&D and operational expenditures that actually relate to the 

accused products. A company’s R&D costs are divided among the roster of products and 

services they offer and, importantly, account for research conducted with an eye toward future 

opportunities or product development. See Blok Dep., 22:19-23:3 (describing Microsoft’s R&D 

costs as used to “provide an understanding of how Microsoft allocates its revenue between 

developing technology and promoting that technology, irrespective of whether it relates to 

Skype.”); see also Blok Rep., Appendix A, ¶¶ 139-141; id., Appendix B, ¶¶ 159-161. Yet 

Messrs. Bratic’s and Blok’s analysis treats the R&D-to-operating expenses ratio with respect to 

the accused products as a continuous figure, failing to account for their development and initial 

implementation being far in the past. See Blok Dep., 20:20-21:16, 57:4-59:4; Blok. Rep., 

Appendix A, ¶ 142; id., Appendix B, ¶ 159. Messrs. Bratic and Blok ignore this and other 

pertinent realities. 

Because Messrs. Blok and Bratic use company-wide expenses instead of isolating R&D 

and operational expenditures specific to the accused products, their methodology necessarily 

includes Microsoft’s R&D expenditures toward activities entirely unrelated to the asserted 

patents or accused products. See id. at 93 (citing to Microsoft’s 2021 10-K in discussing that 

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R&D costs are divided among a broad range of a company’s products and services). Indeed, Mr. 

Blok conceded that the R&D and operating expense line items on which he and Mr. Bratic rely 

are not broken out in relation to any particular patent or product. See Blok Dep., 16:25-17:9, 

21:22-22:8 (testifying he does not believe Microsoft breaks out R&D or operating expenditures 

based upon specific projects), 55:14-56:17 (testifying that he had not seen R&D expense 

information related specifically to Skype for Consumer, Skype for Business, or Teams). Messrs. 

Blok and Bratic do not provide any basis for relying upon expenditures unrelated to the asserted 

patents or accused products. 

The failure to tie the R&D-to-operating expenses ratio to the patents-in-suit or the 

accused products constitutes an independent basis for excluding all of Messrs. Blok’s and 

Bratic’s incremental profits analyses. See Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 

1315 (Fed. Cir. 2011) (quoting Daubert, 509 U.S. at 591 (“An additional consideration under 

Rule 702—and another aspect of relevancy—is whether expert testimony proffered in the case is 

sufficiently tied to the facts of the case that it will aid the jury in resolving a factual dispute.”)). 

Instructive on this issue is the decision in Droplets, Inc. v. Yahoo, Inc., Case No. 12 cv-03733-

JST, Dkt. 1000 (N.D. Cal. Jan. 12, 2022). 

In Droplets, the court excluded a damages expert’s profit-split analysis, in part because 

the expert based his report on the defendant’s internal analysis of its ROI, and “fail[ed] to limit 

its focus to ROIs on investments in items similar to the accused features of the infringing 

product.” Droplets Order at 6. Although the expert limited his analysis to three specific ROIs, the 

court noted that “[t]he connection between these ROI estimates and [defendant’s] profits on 

[patentee’s] technology, however, is unstated.” Id. And while the patentee argued that there were 

similarities between the accused products and the ROIs, the court refused to speculate or gap-fill 

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where the expert did not “offer any explanation for how the projects in the historical ROIs are 

similar to the accused features.” Id.; see also id. (“[T]he onus is on [patentee] to identify and map 

these similarities.”).

The Droplets court also excluded the expert’s profit-split analysis based on his reliance 

on the defendant’s “customer lifetime values and its gross profit margins.” Id. at 7 (internal 

quotations omitted). Although the expert asserted that these figures were “sign[s] of what 

[defendant] would be willing to pay” for the patented technology, the court disagreed: 

There is no basis in economics for these assumptions. Neither 

Nordstrom’s gross profits on all of its products nor its costs of 

acquiring an additional customer are reliable indicators of what it 

would spend to use Droplets’s technology. See Nat’l Prod., Inc. v.

Arkon Res., Inc., No. C15-1553-JPD, 2017 WL 5499801, at *2-3 

(W.D. Wash. Nov. 16, 2017) (excluding expert testimony that 

relied on “estimated cost of goods sold” and “overhead expense” 

percentages that “were not tabulated from actual costs incurred 

from the sale and manufacture of only the accused products, but 

were instead calculated by dividing expenses incurred from the 

sales of all [defendant’s] products”). Thus, the Court excludes 

Bergman’s opinion based on these factors as well. 

Id. 

Like the expert in Droplets, Messrs. Blok and Bratic have not even attempted to explain 

how the R&D or operating expenditures they rely on relate to the accused features. Nor have 

they provided any economic basis for their assumption that Microsoft’s company-wide R&D-tooperating expenses ratio reflects its willingness to pay for the specific patented technology at 

issue in these cases. Therefore, WSOU cannot meet its burden of showing that the R&D-tooperating expenses ratio is the base of a reliable incremental profits analysis, and the Court

should exclude this analysis.

V. CONCLUSION

For the foregoing reasons, the Court should exclude the technical apportionment opinions 

of Mr. Lipoff and the reasonable royalty opinions of Messrs. Blok and Bratic. 

Case 6:20-cv-00464-ADA Document 136 Filed 06/03/22 Page 18 of 21
14 

DATED: May 27, 2022 Respectfully submitted,

/s/ Irene Yang

Melissa R. Smith, Bar No. 24001351

melissa@gillamsmithlaw.com 

James “Travis” Underwood, Bar No. 

24102587

travis@gillamsmithlaw.com

GILLAM & SMITH, LLP

303 South Washington Avenue

Marshall, Texas 75670

Tel: (903) 934-8450 

Fax: (903) 934-9257 

Michael J. Bettinger

mbettinger@sidley.com

Irene Yang

irene.yang@sidley.com

SIDLEY AUSTIN LLP

555 California Street, Suite 2000 

San Francisco, CA 94104

Tel: (415) 772-1200 

Fax: (415) 772-7400 

Richard A. Cederoth

rcederoth@sidley.com 

John W. McBride

jwmcbride@sidley.com

SIDLEY AUSTIN LLP

1 South Dearborn St.

Chicago, IL 60603

Tel: (312) 853-7000 

Fax: (312) 853-7036 

Brooke S. Boll

brooke.boll@sidley.com

SIDLEY AUSTIN LLP

555 West Fifth Street

Los Angeles, CA 90013

Tel: (213) 896-6633 

Fax: (213) 896-6600

Case 6:20-cv-00464-ADA Document 136 Filed 06/03/22 Page 19 of 21
15 

ATTORNEYS FOR MICROSOFT 

CORPORATION

Case 6:20-cv-00464-ADA Document 136 Filed 06/03/22 Page 20 of 21
16 

CERTIFICATE OF CONFERENCE

I certify that, pursuant to Local Rule CV-7(G), counsel for Microsoft conferred with 

counsel for WSOU regarding the relief sought in this motion, and was advised that Counsel for 

WSOU opposed. 

DATED: May 27, 2022 /s/ Melissa R. Smith

CERTIFICATE OF SERVICE

I hereby certify that on May 27, 2022, the documents filed with the Clerk of Court via the 

Court’s CM/ECF system under seal in the above-captioned cases were subsequently served on 

all counsel of record by electronic mail. 

DATED: May 27, 2022 /s/ Melissa R. Smith

Case 6:20-cv-00464-ADA Document 136 Filed 06/03/22 Page 21 of 21