Timeline helps in establishing diligence to amend invalidity contentions

In Positive Technologies, Inc. v. Sony Electronics, Inc. (January 28, 2013), Judge Illston (Northern District of California) granted Defendants Amazon.com, Inc.'s and Barnes & Nobles, Inc.'s motion to amend their invalidity contentions to add "conforming amendments" and "new-art amendments".  Both amendments are said to relate to the Court's claim construction order.  The Court focuses on the two aspects of good cause for the proposed amendments, including diligence in discovery the new information and the passage of time in seeking to add the new information to the contentions once discovered.  Defendants argue that the amendments, particularly the new prior art, relate to an expansive claim construction concerning two types of devices covered in the Court's claim construction order.  Although six months elapsed between the claim construction order and when the Defendants located the new prior art, the detail surrounding Defendants' efforts appears to have persuaded the Court the allow the proposed amendments. In this case, the Court ruled that since fact discovery had not yet closed, and in light of Plaintiff failing to articulate whether the prior art was relevant, whether Defendants were engaging in "gamesmanship" for the amendments, and what type of prejudice would result to the Plaintiff, the Court permitted the proposed amendments.

Takeaways - it appears to be increasingly relevant to track the timing contention efforts once the initial contentions have been served.  Details on these activities remain important to the Court when considering proposed amendments to invalidity contentions.

Newly asserted method claims provide basis for invalidity contention supplement

In Medtronic Corevalve LLC v. Edwards Lifesciences Corp. (June 25, 2012), Judge Selna (Central District of California) granted Defendant Edwards' request to supplement its invalidity contentions to add additional prior art references.  The main basis for Defendant Edwards' request focused on a new search conducted by defendant after plaintiff asserted additional method claims in the litigation. The Court focused  on Patent Local Rule 3-6 of the Central District of California to consider permitting the requested supplements.  The Court explained that it

must first consider whether [Defendant] Edwards acted diligently in discovering the bases for the amendment and whether Edwards timely moved for leave to amend.  

(Order at 3).

The Court analyzed when the references were first identified by the Defendant, and then how long thereafter that the motion for leave to amend was filed.  As for prejudice, the Court noted that Plaintiff Medtronic has taken the position that is own infringement contentions are "preliminary," and thus it would be unfair for Medtronic to reserve its right to amend, while not granting that same benefit to Defendant.

In further analyzing potential prejudice, the Court summarized another argument raised by Plaintiff:

On the other hand, Medtronic contends that it will be prejudiced by the amendment because the parties will have exchanged their claim terms and proposed constructions by June 20, 2012, five days before this motion will be heard by the Court.  (Opp'n Br. 11.)  Therefore, Medtronic "will ... be forced to approach the early stages of claim construction without knowing whether the new references will be allowed into the case."  (Id.)  Furthermore, Medtronic worries that if good cause for the amendment is found her, Edwards will "almost certainly continue its 'search and analysis of relevant prior art'" and seek leave to amend the invalidity contentions again in the future.  (Id. at 12.)

The Court rejected this argument reasoning that the claim construction briefing is not due for several months, the trial is more than a year away, and further requests to supplement will require additional motion practice.  (Order at 6-7).

Takeaways - Diligence is the main focus of these types of motions.  Again, however, we see the consideration of a "claim construction" impact when evaluating a proposed invalidity contention supplement.   This prejudice to the claim construction process seems to be the main argument raised by a plaintiff when facing supplement requests.

Rejected claim constructions pave way for invalidity contention supplement

In Baden Sports, Inc. v. Wilson Sporting Goods Co. (June 28, 2012), Judge Pechman (Western District of Washington) granted Defendant Wilson's request to supplement its invalidity contentions to add additional prior art references.  The main basis for Defendant Wilson's request focused on the Court's adoption of Plaintiff's proposed constructions for each of the four disputed terms. In permitting the requested supplement, the Court focuses on Local Patent Rule W.D. Wash. 124 of the Western District of Washington and notes that amendments to contentions require a "showing of good cause ... absent undue prejudice to the non-moving party."  (Order at 2).   The Court identified five factors underlying a good cause analysis including:

"(1) the reasons proffered for the need to amend after the deadline for submitting contentions had passed, (2) the diligence of the moving party, (3) the importance of the proposed amendments, together with any prejudice to the moving party if amendment is denied, (4) potential prejudice to the non-moving party, and (5) the availability of a continuance to cure any prejudice."  Convolve, Inc. v. Compaq Computer Corp., 2007 WL 700904 at *2 (S.D.N.Y Mar. 7, 2007).

In considering Defendant Wilson' request, the Court noted that it "adopted none of Wilson's proposed claim constructions."  (Order at 2).  Following the claim construction order, Wilson initiated an expanded search in light of the broader construction of the term "seam."  The Court recognized that although "Wilson should have perhaps conducted that broader search earlier, it is reasonable to grant leave given the completely adverse outcome of the Markman hearing, which is the precise situation contemplated by LPR 124."  (Order at 3).

As to diligence, Wilson conducted the search quickly, updated its contentions with the new information, and shortly thereafter moved to supplement.  The Court dispensed with any claim of prejudice noting that "the amendments are relatively minor and there is still time to allow Baden to conduct discovery and expert analysis relating to the amended material."  (Order at 3).

Takeaways - Diligence remains the main consideration for supplemental contentions.  Although the Court noted that Wilson likely should not have been so limiting in its initial search, the Court balanced the factors and permitted the supplement.  This process raises a question though - how was Wilson expected to know precisely the breadth of Plaintiff's proposed constructions when it served its invalidity contentions prior to the parties exchanging claim construction positions?

Cases weighing invalidity contention impact on claim construction process

We're going through our invalidity contention decisions database to identify cases where a Court's decision considers the impact of supplemental invalidity contentions on the claim construction process under local patent rules. We previously identified the following cases in other blog posts:

• CardSoft, Inc. v. VeriFone Systems, Inc. (May 28, 2012), Judge Payne (Eastern District of Texas)
• Nano-Second Technology Co., Ltd. v. Dynaflex Int'l (June 6, 2012), Judge Lew (Central District of California)
• Bayer Cropscience AG v. Dow Agrosciences LLC (June 7, 2012), Judge Schneider (District of Delaware)

We'll review our database of 85+ cases and eventually identify all relevant cases for this topic.

To start things off, let's consider Play Visions, Inc. v. Dollar Tree Stores, Inc. (November 30, 2010), Judge Pechman (Western District of Washington).

In this case, Judge Pechman granted Defendants' request to amend their preliminary invalidity contentions finding good cause for the proposed amendment, relying on Local Patent Rule LR 124.  The Court first determined that the Defendants had been diligent in searching for prior art, and that the contentions supplement were timely provided, with the motion to amend the contentions  was filed roughly two months after the contention deadline.

The Court weighed the potential prejudice to the plaintiff and determined that

There is no evidence of prejudice given that the parties have yet to engage in claims [sic] construction and discovery does not end for months.

(Order at 4).  Again we see a focus on the claim construction impact with respect to invalidity contentions supplement.  Here, the Court was entirely focused on prejudice to a party under the guise of claim construction.  From the outset, the Court frames the issue:

Restrictions on amendment to invalidity contentions are aimed at avoiding the "shifting sands" approach to claim construction.  See Halo Elecs., Inc. v. Bel Fuse Inc., 2010 WL 3489593, at *1 (N.D. Cal. Sept. 3, 2010) (granting motion for leave to amend invalidity contentions where the defendants argued they search diligently over a broad spectrum of prior art).

(Order at 2).  So again, the focus remains on whether allowing supplemental contentions will in some way impact claim construction discovery.  We've already explained our viewpoint that Phillips is at odds with how the local patent rules are being applied when prior art supplements are linked to the claim construction process.

We'll continue to report our findings in subsequent posts.

Court declines supplement to invalidity contentions despite importance

In CardSoft, Inc. v. VeriFone Systems, Inc. (May 28, 2012), Judge Payne (Eastern District of Texas) denied Defendant VeriFone's request to supplement its invalidity contentions to add two additional prior art references. In denying the requested supplement, the Court focuses on Patent Local Rule 3-6(b) of the Eastern District of Texas and notes that amendments to contentions require a "showing of good cause."  (Order at 1).   The four standard factors underlying a good cause analysis included:  (1) explanation for party's failure to timely move for leave to amend; (2) importance of the amendment; (3) potential prejudice resulting from amendment; and (4) availability of continuance to cure prejudice.  The Court then determined that the defendant was not diligent because it should have investigated prior art processing terminals based on plaintiff's identification of alleged infringing products.

The Court explained:

The Court is not satisfied that VeriFone acted diligently to discover the Omni 300 and OTA prior art.  These references are related to VeriFone's own products, which it should have uncovered even if CardSoft never accused the Omni 3200 payment terminals of infringement.  Furthermore, it took VeriFone nearly eight months to produce the references, and then another four months to disclose its invalidity contentions based upon the references.  The Court is not persuaded that this shows diligence on VeriFone's part.  Verifone's lack of an adequate explanation to explain its delay weighs strongly against granting leave.

(Order at 3).

In the end, the Court was not persuaded that diligence was shown.   We were surprised at how the Court resolved the other good cause prongs involving prejudice.  As to prejudice, the Court explained:

The importance of these references are quite clear, which weighs in favor of granting VeriFone leave to amend.  However, their importance only adds to the prejudice suffered by CardSoft because it was deprived of a meaningful opportunity to consider these references during the claim construction process.  Because claim construction was nearly over by the time VeriFone disclosed its invalidity contentions based on the Omni 300 and OTA prior art, and claim construction is now complete, a continuance is not available to cure CardSoft's prejudice.

If the impact on claim construction was not an appropriate factor for invalidity contention supplements, there would be little, if any, prejudice to CardSoft.  Maybe the supplement request would have been granted.  As we previously suggested here and here, the link between invalidity contentions and claim construction prejudice is tenuous.  In this case, the prior art is not part of the intrinsic evidence, and the court noted the importance of the prior art references, yet the supplement request was denied.  Although claim construction was concluded, should that fact really impact the inclusion of additional invalidity contentions?  The claims mean what they mean.  If the claims encompass the prior art then it is what it is.

Takeaways - Diligence is the paramount consideration for supplemental contentions.  This ruling indicates that although Defendant VeriFone continued its prior art investigation at a measured pace, the defendant did not move quick enough.  Tough case, tough decision.  I would prefer not to see the balance of a decision rest on how an invalidity contention supplement impacts claim construction as a reason for denying the supplement.  I don't believe the rules were intended to exclude prior art because a plaintiff lacked non-intrinsic prior art during the claim construction process.  I continue to look at the evolution of the local rules for linkage between invalidity contentions and claim construction.  It would be helpful if someone could point me to any local patent rule comments on this issue.  I'm particularly interested in comments detailing why invalidity contentions must precede claim construction.  Is it to allow the patent owner to craft proposed constructions in light of prior art (extrinsic evidence)?  What principle of claim construction would that be based on?  These are somewhat rhetorical questions.  Care to comment?

Court denies addition of single prior art reference to invalidity contentions

In Nano-Second Technology Co., Ltd. v. Dynaflex Int'l (June 6, 2012), Judge Lew (Central District of California) denied Defendants' request to supplement its invalidity contentions to add an additional prior art reference. In denying the requested supplement, the Court noted that pursuant to Patent Local Rule 3-6 of the Northern District of California, amendments to contentions require a "timely showing of good cause."  (Order at 3).   The Court determined that defendants were not diligent because they were presumably aware of the prior art reference as of the filing of the complaint.  The underlying facts of this motion is where things get interesting.

Plaintiff's patent alleged to be infringed by the defendants is U.S. Patent No. 5,800,311 ("the '311 patent").  The plaintiff's '311 patent was identified to the defendants when the complaint was served in 2010.  At some point after defendants served their invalidity contentions, they realized that the asserted '311 patent admitted the Figure 5 depiction of a "conventional wrist exerciser" was prior art.  For this reason, defendants wanted to rely on the conceded prior art disclosed in Figure 5 and use the '311 patent as prior art.  The Court determined that the defendants lacked the required diligence in identifying the '311 patent as prior art, explaining that:

Regarding the first prong of the good cause inquiry, the Court finds that Defendants cannot meet their burden to establish their diligence in seeking to amend their Preliminary Invalidity Contentions.  Defendants have had in their possession a copy of the '311 Patent since the filing of the Complaint on November 30, 2010, and the language of the '311 Patent is clear that FIG. 5 is a depiction of the prior art.

(Order at 3).

It seems understandable how the Court can reach this conclusion as to lack of diligence.  What's surprising about this decision is how the Court resolved the second good cause prong - prejudice.  For the second prong, the Court explained:

In addition, in addressing the second prong of the good cause inquiry, the Court finds that Plaintiff will be prejudiced by allowing the requested amendment.  Though expert reports are now not due until June 29, 2012, Plaintiff has stated that it prepared its claim construction briefing based in part on Defendants' original invalidity contentions.  The Court finds that allowing the proposed amendment now in light of Defendants' lack of diligence in seeking [sic] amendment "would undercut one of the purpose [sic] of the patent local rules to provide the parties with certainty as to the opposing party's legal theories."  Apple, Inc. v. Samsung Electronics Co. Ltd., 2012 WL 1067548, at *7 (N.D. Cal. Mar. 27, 2012) (citing 02 Micro, 467 F.3d at 1363).

As we suggested previously, the link between invalidity contentions and resulting prejudice in connection with claim construction preparation is fairly tenuous.  Although the prior art reference here, the '311 patent, is actually part of the intrinsic record and not extrinsic evidence, is it accurate for plaintiff to suggest that inclusion of prior art admissions for its own patent somehow results in prejudice to its claim construction preparation and strategy?  On the first prong of good cause, we take no issue with the Court's determination.  On the second prong though, plaintiff has stretched a bit.

Takeaways - Diligence is the driving consideration for supplemental contentions.  Organizing invalidity contentions at an early stage in the litigation is key to marshaling all information at the outset of the case, and managing information during the collection and review process.  Maybe if the Defendants had a better coordination tool like PatDek (shameless plug), then they would have had more time to consider and appreciate the prior art concessions in the asserted '311 patent.

Third attempt to supplement invalidity contentions unsuccessful

In Bayer Cropscience AG v. Dow Agrosciences LLC (June 7, 2012), Judge Schneider (District of Delaware) denied Defendant Dow's third request to supplement its invalidity contentions. In denying the requested supplement, the Court noted that the diligence of the moving party is the "key" fact that courts consider when assessing good cause for amendments to contentions.   Relying on 02 Micro Intern. Ltd., 467 F.3d 1355, 1364-1367 (Fed. Cir. 2006), the Court explained:

Pursuant to the [02 Micro] decision, the key fact courts should look at to determine whether good cause exists to grant an amendment to a contention is the diligence of the moving party.  Diligence has two aspects to it.  One is whether the moving party acted diligently to discover that an amendment was appropriate.  The second aspect is whether the moving party promptly moved to amend its contentions after it learned an amendment was necessary.  The burden is on Dow to show diligence, rather than on Bayer to establish Down was not diligent.  Dow has not satisfied its burden.

(Order at 3).  Dow sought three sets of amendments.  One amendment concerned supplementing its contentions to include arguments, not prior art, that respond to Plaintiff's amended contentions.  This proposal was rejected.  The second amendment sought to incorporate by reference past briefing by Dow.  This proposal was also rejected.  The third set of amendments sought to add two recently discovered prior art references.  This third proposal was similarly rejected.  The reasoning underlying the third proposal is explored below.

For the prior art supplement, Plaintiff Bayer noted the following:

DAS makes no showing whatsoever that it has been diligently searching for prior art; provides no explanation as to how or why the two new pinches of prior art eluded that search; and does not even attempt to explain the circumstances as to how this alleged new prior art came to light.

(Order at 6-7) (citing Bayer Answering Brief at 10-11).  The Court essentially agreed with Bayer explaining that, as to the Perkins reference learned of by interviewing the reference's author, "Dow did not explain why it did not conduct its interview earlier" and as to the second Fraley reference, the Court rejected the premise that good cause exists when a reference is intended to rebut arguments by the opposing party.  (Order at 7).  The Court opined that if supplementing contentions to rebut arguments were permitted, "amended contentions would never cease."  (Order at 7).

Takeaways - Good cause and diligence continue to control supplemental contentions.  In future posts, I will comment on why invalidity contention supplements should continue to be governed by the good cause requirement, but that the stage of the litigation should be given minimal to no deference, unless expert discovery has commenced.

Judge Schneider in this case found it significant that

In view of the parties' efforts to date and the upcoming Markman hearing, Bayer will be prejudiced if it is now compelled to revise its prosecution and defense strategy to respond to Dow's 'shifting sands' defense.  This is the scenario the patent rules were designed to prevent.  

(Order at 8).

I respectfully disagree.  Supplementing prior art, specifically prior art not of record for the challenged patent, should have no bearing on the Markman hearing, and is unlikely to require a response by the plaintiff that rises to the level of "prejudice."  If the supplemented prior art is not compelling, the prior art will essentially be a non-issue.  If the prior art is compelling, the prior art rises in importance and should be part of the litigated merits.  Expert discovery has yet to begin, and the plaintiff can address the reference in due course with the aid of its expert.  Further, because no claim construction order has issued, it would appear to be entirely premature to exclude merit-based evidence.  Yes, the local patent rules specify disclosure time frames, but are those time frames justified or merely for expedience?