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July 14, 2022

Expert Testimony Excluded Based on Inadmissible Evidence

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Circuit Judge Bryson, sitting by designation in the US District Court for the District of Delaware, excluded a plaintiff's damages expert opinion because the evidence relied upon by the expert was unreliable and therefore inadmissible, but permitted the plaintiff to serve short addendum opinions. IOENGINE, LLC v. PayPal Holdings, Inc., C.A. No. 18-452-WCB (D. Del. June 23, 2022) (Bryson, J.)

IOENGINE asserted two patents against PayPal and Ingenico in Delaware. Less than a month before the first trial, the district court struck essentially all of IOENGINE's damages report, including testimony regarding a non-party license, two previous jury verdicts on a related patent involving different defendants and different products, and two settlements related to those jury verdicts. The order left IOENGINE with essentially no damages case to present at trial.

Two days after the order issued, IOENGINE requested a conference to discuss the damages issues and the parties engaged in letter briefing. IOENGINE asked the district court to reconsider its decision, arguing that the expert's testimony was admissible under FRE 703, even if the underlying licenses, verdicts and settlement agreements were not admissible. Alternatively, IOENGINE requested the ability to serve short addendums to its technical and damages reports, or a bifurcation or adjournment of the trial date. PayPal and Ingenico argued that FRE 703 did not make the damages expert's testimony admissible, and that any addendum or change in trial date would be highly prejudicial.

Judge Bryson ruled that FRE 703 did not permit IOENGINE's damages expert to testify about otherwise inadmissible evidence. First, the district court looked to the Advisory Committee Notes for FRE 703. The notes explained that FRE 703 applied to situations such as a medical expert relying on hearsay statements by patients and their families and opinions by other medical professionals, because a medical expert would rely on that sort of information in diagnosing and treating a patient. Next, the court turned to a leading Third Circuit case holding that the reliability requirements of FRE 702 are equivalent to the requirements in FRE 703. The Third Circuit further held that the evidence on which an expert relies must meet a threshold requirement of reliability. Finally, the court cited another district court order that applied this standard. The order stated that the court was not judging the credibility of the expert witness, but rather whether the opinion was based on reliable data.

In balancing the parties' various interests, Judge Bryson allowed IOENGINE to file addendums, but because these issues were of IOENGINE's own creation, he attempted to find the solution that was most fair to PayPal and Ingenico. The court bifurcated the first trial, allowing the liability portion to go forward but holding the damages trial in abeyance. If IOENGINE prevailed on infringement and validity, a damages trial would be set. The second trial was adjourned until the first trial was resolved. The court gave IOENGINE one week to submit its short addendums (one to two pages for the technical expert and no more than 10 for the damages expert).

Practice Note: When preparing expert reports, practitioners should ensure that the expert's key documents and information are reliable sources on which an expert in the field would rely. FRE 703 does not necessarily salvage a report when the court finds the evidence unreliable, and the court may not be particularly forgiving regarding requests to supplement or amend a report that the court has struck through a Daubert challenge.

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