Free Letter - District Court of Delaware - Delaware

Case 1:04-cv—O1373-KAJ Document 161 Filed O2/07/2006 Page 1 of 4
PR1cKETT,]0NEs & ELL1oTT
warm Dim; Din; " ""O"E$$‘O""“ "$$OC‘·“T‘°N Dover ornce
($03888.6520 1310 KING STREET, Box 1328 11 NORTH STATE S’11u31:1‘
Writer`s%I(Q<;cc0py Numberzz WILMINGTON DELAWARE 19899 DOVER, DELAWARE 19901
888-6331 ’ TEL: 302 8783841
$.M..1 Add rcss . TEM <802> 888-8800 me Emi 67..5884
l’MLul—;[email protected] FAX: (302) 658-8111
http: / / www.prickett.com
February 7, 2006
The Honorable Kent A. Jordan VIA EFILE AND HAND DELIVERY
United States District Court
844 King Street
Wilmington, DE 19801
RE: Ampex Corporation v. Eastman Kodak Company, et al.,
C.A. No. 04-1373-KAJ
Dear Judge Jordan:
This letter responds to Ampex’s discovery letter filed yesterday in anticipation of tomorrow‘s
February 8, 2006 conference call with the Court.
Ampex’s attempt to compel additional discovery must be addressed in the larger context of the
extensive discovery regarding the single asserted patent that has taken place since the December
2004 initiation of this dispute. In the combined ITC and Delaware actions, Ampex has now
served on Eastman Kodak Company ll sets of docrunent requests (285 total requests), ll sets of
interrogatories (131 total interrogatories), and 3 sets of requests for admission (211 total
requests) (this does not include discovery served on and responded to by defendant Altek
Corporation). Kodak has responded (or will timely respond) to each of these sets of requests,
and, including source code, has produced the equivalent of well over 1,000,000 pages of
documents. It has also made millions of pages of documents stored on databases available for
inspection. In contrast, Ampex has produced less than 150,000 pages.
Ampex’s voracious appetite for documents, however, remains unsatisfied. It now seeks
additional documents of, at best, marginal relevance. Its strategy appears at least as much
designed to burden defendants with the expense and disruption of discovery as it is to obtain
relevant infomation. Ampex, whose only significant business is the licensing and enforcement
of its patents, has little to lose from such a strategy as it has no significant ongoing business
operations that are subject to defendants’ discovery.
Ampex’s Interrogatory No. 2 Regarding A Reasonable Royalty Rate and A Royalty Base
Ampex’s letter seeks to compel Kodak to provide the reasonable royalty rate to which Kodak
would have agreed in a hypothetical negotiation and the base to which that rate should be
applied. Ampex’s request improperly seeks pure expert testimony rather factual information. See
Joy Tech., Inc. v. Fla/ct, Inc., 954 F. Supp. 796 at 806-807 (D. Del. 1996) (relying on the opinion
testimony of qualified experts to calculate reasonable royalty damages); Oxford Gene Tech. Ltd.,
v. Mergen Ltd, 345 F. Supp.2d 431 at 441-442 (D. Del. 2004). Kodak is obligated to provide all
of the underlying factual information that may be relevant to the determination of a reasonable
royalty rate and the base to which that rate will apply, including licenses, sales information, and
financial infomation. Until the deadline for expert reports, however, Kodak is not obligated to
provide an opinion, based on that underlying factual infomation, of what the reasonable royalty
l9660.3\296756v1

Case 1 :04-cv—O1373-KAJ Document 161 Filed O2/07/2006 Page 2 of 4
The Honorable Kent A. Jordan
February 7, 2006
Page 2
rate should be. In fact, until he has reviewed all of the factual information produced in fact
discovery, including Ampex’s licenses (some have not yet been produced) and the 30(b)(6)
deposition of Ampex regarding damages issues (not yet taken), Kodak’s expert will likely not
have finalized his opinion on what that rate would be. Ampex’s attempt to obtain early expert
opinion should be denied.
Evidence of Payment, Including Royalty Reports
Ampex seeks an order compelling Kodak to produce royalty reports provided to Kodak by
licensees of two of Kodak’s digital still camera patents, the ‘ 107 and ‘831 patents. As an initial
matter, these two patents are utterly irrelevant to a determination of the value of Ampex’s ‘ 121
patent. Nonetheless, in the interest of compromise, Kodak produced the licenses of these two
patents} The licenses include, among other information, the licensing rate. In its continued grab
for more, Ampex now seeks Kodak’s royalty reports relating to those licenses.
Ampex has not been able to articulate any reason why these reports, which represent Kodak’s
most sensitive business data relating to its licensees (several of whom also happen to be Ampex's
licensees), should be produced. Kodak has produced the licenses without redactions, thus
providing Ampex with the licensing rate infomation, and a witness will be provided to address
questions Ampex may have about the terms of the agreements. Ampex’s assertion that it needs
the royalty reports for “some of the licenses" to determine "implied royalty rates" is misplaced.
Ampex fails to identify which licenses it is referring to, or to explain why such reports are
necessary when the royalty rates are explicitly set forth in the licenses.
Because the business infomation Ampex seeks relating to Kodak's licensees is most sensitive, to
the extent that the Court is considering granting any portion of Ampex’s request for royalty
reports, Kodak requests that its licensees be given a period of time in advance to move for a
protective order, or take other necessary steps to protect their interests.
Redactions
As explained above, Kodak has sought to compromise with Ampex regarding the scope of
production regarding the Kodak ‘l07 and ‘83l patents. Ampex acknowledges that the parties
had reached a compromise on the production of correspondence related to the licensing of
Kodak's ‘ 107 and ‘831 patents, but neglects to infom the Court that after this compromise was
reached, Ampex served non-party subpoenas for these same documents on the Lerner, David law
tim (counsel for Sony Corporation in litigation between Kodak and Sony) as well as the Andre-
Troner tim that has assisted Kodak in its licensing negotiations (the subpoena to the Andre-
Troner tim also demands a deposition). Ampex has also recently threatened to serve a
document and deposition subpoena on another company that has assisted Kodak in analyzing
products for potential infringement of Kodak's patents, Semiconductor Insights.
Ampex also mischaracterizes the parties’ earlier compromise and Kodak's supposed "unduly
narrow reading of that compromise." There has been no narrow reading of what was a clear
compromise. As we informed the Court in our discovery letter dated January 11, 2006, Kodak
1 Kodak has still not produced 2 license agreements -- for licensees Alfred B. Levine and
Skanhex Technologies Inc. -- because those entities have still not consented to their production.
Kodak thus joins Ampex's request that the Court issue an Order that these two licenses be
produced so that Kodak can produce them.
l9660.3\296756vl

Case 1 :04-cv—O1373-KAJ Document 161 Filed O2/07/2006 Page 3 of 4
The Honorable Kent A. Jordan
February 7, 2006
Page 3
agreed to produce correspondence that relates to the "substance" of the ‘l07 and ‘83l patents.
This is what Kodak has been doing and continues to do. Kodak was also clear in negotiating the
compromise that it would be redacting those portions of the responsive documents that concern
patents other than the ‘ 107 and ‘831 patents (even Ampex does not contend that these other
patents are relevant to this litigation). The parties were close to negotiating a further
compromise whereby Kodak would produce additional documents that address more than just
the "substance" of the '107 and '831 patents, and in response, Ampex would withdraw its
document and deposition subpoena on Andre-Troner, and would not pursue a subpoena against
Semiconductor Insights. However, yesterday, after submitting its letter to the Court in which it
stated that the parties are "c1ose" to a further compromise, Ampex scuttled any deal by pulling its
offer to forego the Andre-Troner deposition. Kodak requests that the Court hear argument
tomorrow as to whether Andre-Troner should be forced to produce the same documents that
Kodak and Lerner, David are producing, and whether it should have to submit to a deposition.
As Ampex notes, Kodak has acknowledged some minimal errors in redactions, and has agreed to
cooperate with Ampex to ensure that any errors are corrected. But Ampex overstates the number
and severity of redaction errors. For example, Ampex complains that Exhibit D is incomplete,
but that is how the document was found in the files (as Kodak has explained to Ampex, these
documents come from the files of the Andre-Troner firm). Exhibit D is also clearly the same
letter as Exhibit E, which was produced in its entirety but for a couple of redactions that Kodak
is correcting. Ampex complains that Exhibit F was redacted in its entirety, but appears to have
misunderstood that documents were produced with blue slip-sheets to indicate where documents
begin and end, and that Exhibit F is a redacted attachment (redacted because it does not pertain
to the ‘l07 and ‘83l patents) to a document that was not redacted in its entirety. As noted above,
Kodak has always indicated that it will work with Ampex to address any concerns about the
redactions, and fix any errors. There is no need for Court supervision of the redaction process.
Documents Related to the Ofoto Acquisition
Ofoto is an online service (it can be reached at www.ofoto.com) that allows users to download
and share digital images. It is not restricted to users of Kodak cameras only. Although Kodak
considers materials relating to Ofoto irrelevant to any issue in this case, once again, in an effort
to compromise, Kodak produced or made available for inspection copious documents relating to
Ofoto. Ampex wants more, however, and so would have Kodak re—review its documents to
specifically produce documents relating to "Kodak's reasons and motivations for acquiring
Ofoto.” Ampex argued in its letter yesterday that the Ofoto documents are relevant to the sixth
Georgia Pacyic factor, which covers "convoyed" sales, but the comrection between Ofoto and
Ampex's "thtm1bnail" patent-in-suit is far too tenuous. In essence, Ampex is arguing that its
patented “technology" is an essential feature that drives the sale of Kodak's digital still cameras,
that Kodak's camera sales somehow drive its Ofoto service, and that documents relating to
Kodak's purchase of Ofoto are thus fair game for discovery. The simple response is this -- the
purchase of the entire Ofoto company demonstrates nothing about Kodak’s willingness to license
a patent relating to the storage and generation of thumbnails. Ampex has never shown that the
technology claimed in the ‘ 121 patent drives the sales of Kodak's digital still cameras. Ampex
has never shown that sales of Kodak's cameras are related to revenues or profits from Ofoto,
especially given that users of any digital camera can download photos and make use of the
services of ofoto.com. Ampex’s request should be denied.
l9660.3\296756vl

Case 1 :04-cv—O1373-KAJ Document 161 Filed O2/07/2006 Page 4 of 4
The Honorable Kent A. Jordan
February 7, 2006
Page 4
Respectfully submitted, Z
PAUL M. LUKOFF
Del. Bar # 96
PML/mhl
cc: Clerk of the U.S. District Court (Via Hand Deliver)
Jack B. Blumenfeld, Esquire (Via Efiling)
Norman H. Beamer, Esquire (Via E—Mail & FedEx)
Jesse J. Jenner, Esquire (Via E-Mail)
S. Calvin Walden, Esquire (Via Email)
Michael J. Stunmersgill, Esquire (Via Email)
Jordan L. Hirsch, Esquire (Via Email)
19660.sx2967s6v1