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Industrial Print Technologies LLC v. O'Neil Data Systems, Inc

United States District Court, N.D. Texas, Dallas Division

January 11, 2018

Industrial Print Technologies, LLC, Plaintiff,
v.
O'Neil Data Systems, Inc. and Hewlett-Packard Company Quad/Graphics, Inc. and Hewlett-Packard Company Vistaprint U.S.A., Inc. and Hewlett-Packard Company, Defendants.

          MEMORANDUM OPINION AND ORDER

          BARBARA M. G. LYNN CHIEF JUDGE.

         In this multidistrict patent litigation, Defendants seek to invalidate each of the asserted Variable Data Printing (“VDP”) patent claims based on two alleged prior art systems-the ElectroPress System and the Indigo E-Print 1000 System.[1] Plaintiff Industrial Print Technologies, LLC (“IPT”) has filed two motions to prevent Defendants from pursuing certain invalidity arguments based on these alleged prior art systems: (1) IPT's Motion to Strike Portions of Defendants' Invalidity Contentions [ECF #139]; and (2) IPT's Motion to Exclude Expert Testimony from Dr. John Paul Jones Regarding Invalidity Opinions Based on the ElectroPress System and Indigo E-Print 1000 System [ECF #277]. Simply stated, IPT argues that Defendants' invalidity contentions based on the E-Print 1000 and the ElectroPress Systems, and Dr. Jones's opinions based on those systems, are untimely. Defendants deny that their invalidity contentions are untimely. Alternatively, Defendants argue they had good cause to amend their contentions, and IPT is not prejudiced by any late disclosure. For the reasons stated, IPT's Motions are DENIED, to the extent the Motions seek to exclude expert opinion testimony or other evidence related to Defendants' invalidity contentions based on the E-Print 1000 and the ElectroPress Systems. To the extent the Motions seek other relief, the Court takes those matters under advisement.

         Background

         Prior to this case being consolidated into an MDL case and transferred to this Court, Defendants Hewlett-Packard Company (“HP”) and O'Neil Data Systems, Inc. (“O'Neil) served invalidity contentions related to the VDP patents on May 29, 2014 in the Eastern District of Texas. Defendants served additional contentions on March 27, 2015, after IPT added Defendant Quad/Graphics, Inc. (“Quad/Graphics”) to the case. On June 12, 2015, after the MDL consolidation, Defendants amended their contentions under the Local Patent Rules of this District. By agreement, and as ordered by the Court, the June 2015 contentions were considered the Defendants' preliminary invalidity contentions under Local Patent Rule 3-3. The Court issued its Claim Construction Order on February 12, 2016, and on March 14, 2016, IPT served its final infringement contentions. Defendants served their final invalidity contentions on April 4, 2016. It is these April 4, 2016 invalidity contentions that form the basis of IPT's two Motions.

         The discovery deadline established by the Court's Patent Scheduling Order was June 13, 2016. One week prior to that deadline, on June 7, 2016, the Court held a hearing to address various discovery issues. At the conclusion of the hearing, the Court ordered IPT to correct deficient infringement contentions. IPT served supplemental contentions in compliance with the Court's Order on July 8, 2016. IPT filed its Motion to Strike Portions of Defendants' Invalidity Contentions (“Motion to Strike”) on July 22, 2016. By agreement, the parties extended the deadline for fact discovery to October 21, 2016, and the deadline for expert discovery to April 21, 2017. IPT filed its Motion to Exclude Expert Testimony from Dr. John Paul Jones Regarding Invalidity Opinions Based on the ElectroPress System and Indigo E-Print 1000 System (“Motion to Exclude”) on June 30, 2017.

         Defendants' June 2015 preliminary invalidity contentions identified documents called “E-Print 1000 I” and “E-Print 1000 II” as two specific prior art references. IPT argues that one of these references lacked sufficient detail to implicate the validity of the VDP patents, and the other reference bore no indication that it had been publicly available so as to qualify as prior art. IPT further argues that Defendants failed to allege that there was any “system” based on anything beyond what was disclosed by the documents. Although the June 2015 contentions included separate charts comparing the two E-Print documents to the VDP claims, IPT argues that Defendants did not identify any witnesses with knowledge about the E-Print documents or indicate that Defendants would contend the documents were evidence of any alleged prior art printing system.

         In their April 2016 final invalidity contentions, Defendants disclosed an ElectroPress and Electrobook Press “System, ” citing publicly-available patents and new articles. Defendants also disclosed an alleged E-Print 1000 “System” and two new E-Print1000 publications. Throughout July and August 2016, Defendants disclosed at least six witnesses, Michael Christopher, Tom Bourman, Amir Gaash, David Leshem, Kobi Himelboim, and Richard Gaspar as having knowledge of the E-Print 1000 System. IPT deposed these individuals in August, October, and December 2016. After the depositions were complete, Defendants served Dr. Jones's expert report on IPT. In his expert report, Dr. Jones proffers three invalidity opinions directed to the VDP Patents, two of which are based on the ElectroPress and E-Print 1000 Systems.

         By its Motion to Strike, IPT moves to strike all references to the art cited for the first time in Defendants' April 4, 2016 final invalidity contentions, specifically including all references to the asserted VDP Patents to the ElectroPress and ElectroBook Press Systems and HP's E-Print 1000 “System.”[2] IPT argues that Defendants should not be allowed to rely on any of these prior art references at summary judgment or at trial, either directly or through expert testimony, because Defendants' disclosure of its invalidity contentions based on these prior art references was untimely and without leave of court. IPT further argues that Defendants did not have good cause to add these new references and Defendants were not diligent in trying to discover the prior art references on which they now rely. Similarly, by its Motion to Exclude, IPT argues -that the Court should preclude Dr. Jones from presenting his invalidity theories based on the ElectroPress System and E-Print 1000 System. IPT insists that Defendants failed to disclose these systems as alleged prior art according to the deadlines established by this Court's Local Patent Rules, and that Defendants' failure to comply with the Rules resulted in prejudice to IPT, in that IPT was prevented from conducting necessary discovery regarding those systems.

         Defendants respond that their April 4, 2016 final invalidity contentions were specifically allowed by Local Patent Rule ¶¶3-6(b)(1) & (b)(2), because the invalidity contentions were served within 50 days after the Court entered its Claim Construction Order and IPT had already served its final infringement contentions, and also because amended invalidity contentions were necessary in light of the Court's construction of various disputed terms. Defendants also argue that they had good cause to amend and that they were diligent in searching for prior art. The Motions are ripe for determination.

         Legal Standards

         This Court follows the Northern District of Texas's Local Patent Rules, adopted in Amended Miscellaneous Order No. 62 (“Local Patent Rules”). Local patent rules aid in efficiently managing the various stages of patent litigation. See O2 Micro Int'l Ltd. v. Monolithic Power Sys., Inc., 467 F.3d 1355, 1364 (Fed. Cir. 2006); Summit 6 LLC v. HTC Corp., 2015 WL 11117869, at *1 (N.D. Tex. Jan. 8, 2015). Local Patent Rule 3-1 “requires a party claiming patent infringement to disclose its asserted claims and preliminary infringement contentions early in the litigation so that ‘the case takes a clear path, focusing discovery on building precise final infringement or invalidity contentions and narrowing issues for Markman, summary judgment, trial, and beyond.'” Gen. Elec. Co. v. Mitsubishi Heavy Indus., Ltd., 2012 WL 9148157, at *2 (N.D. Tex. Feb. 10, 2012). Shortly after service of infringement contentions, defendants serve preliminary invalidity contentions, identifying “each item of prior art that allegedly anticipates each asserted claim or renders it obvious, ” including combinations of prior art. Local Patent Rule 3-3. “The purpose of this structure is to streamline the discovery process by narrowing the issues for claim construction and trial.” Summit 6 LLC, 2015 WL 11117869, at *1.

         Under the Local Patent Rules, failure to comply with the requirements for preliminary infringement and invalidity contentions, including requirements of specificity and detail, may result in appropriate sanctions. Local Patent Rules 3-1(b), 3-3(b). The rules do not specify the actions the Court may or must take if there is non-compliance with the requirements for disclosure of contentions. However, the Federal Circuit has held that because local patent rules are “essentially a series of case management orders, ” the Court may impose “any ‘just' sanction for the failure to obey a scheduling order, including ‘refusing to allow the disobedient party to support or oppose designated claims or defenses, or prohibiting that party from introducing designated matters in evidence.'” O2 Micro Int'l, 467 F.3d at 1363. Local Patent Rule 3-3 provides that preliminary invalidity contentions must be served within 45 days from the date infringement contentions are served. “Each party's preliminary infringement contentions and preliminary invalidity contentions will be deemed to be that party's final contentions.” Local Patent Rule 3-6. However, within 50 days from the date the claim construction order is filed, final invalidity contentions may be served without leave of court if (1) “a party claiming patent infringement has served its final infringement contentions, ” or (2) “the party opposing a claim of patent infringement believes in good faith that the presiding judge's claim construction ruling so requires.” Id.

         Apart from these two exceptions, the Local Patent Rules provide that “[a]mendment of preliminary or final infringement contentions or . . . invalidity contentions . . . may be made only by order of the presiding judge upon a showing of good cause.” Local Patent Rule 3-7. “Good cause . . . may include newly discovered instrumentalities, newly discovered bases for claiming infringement, or newly discovered prior art references.” Id. A party seeking amendment of its preliminary invalidity contentions must state “that the newly discovered instrumentalities, newly discovered bases for claiming infringement, or newly discovered prior art references were not known to that party prior to the motion despite diligence in seeking out the same.” Id. “[U]nlike the liberal policy for amending pleadings, the philosophy behind amending claim charts . . . is decidedly conservative.” Genetech, Inc. v. Amgen, Inc., 289 F.3d 761, 774 (Fed. Cir. 2002). “Good cause, ” according to the Federal Circuit, “requires a showing of diligence.” O2 Micro Int'l, 467 F.3d at 1366. “The burden is on the movant to establish diligence rather than on the opposing party to establish a lack of diligence.” Id. Courts generally have broad discretion to grant untimely motions to supplement invalidity or infringement contentions, but in exercising that discretion, four factors are typically considered: “(1) the explanation for the failure to meet the deadline; (2) the importance of the thing that would be excluded; (3) potential prejudice in allowing the thing that would be excluded; and (4) the availability of a continuance to cure such prejudice.” Mobile Telecomms., Techs., LLC v. Blackberry Corp., 2015 WL 12698061, at *1 (N.D. Tex. May 19, 2015) (Lynn, J.).

         Under Local Patent Rule 3-6, within 50 days from the date the presiding judge's claim construction ruling is filed, a party opposing a claim of patent infringement may serve final invalidity contentions without leave of court that amend its preliminary invalidity contentions if “the party opposing a claim of patent infringement believes in good faith that the presiding judge's claim construction ruling so requires.” Local Patent Rule 3-6(b). This exception permits a party to respond to an unexpected claim construction by the court, but does not mean that after every claim construction order, new infringement or invalidity contentions may be filed. See Cell & Network Selection LLC v. AT&T Inc., 2014 WL 10727108, at *2 (E.D. Tex. Nov. 10, 2014) (“Traditionally, the Court's adoption of another's party construction alone is not sufficient to support a party's good faith belief it was surprised by the Court's ruling.” (internal quotation marks omitted)); Nike, Inc. v. ...


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