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Mass Engineered Design, Inc. v. Planar Systems, Inc.

United States District Court, D. Oregon

June 19, 2017

MASS ENGINEERED DESIGN, INC., Plaintiff,
v.
PLANAR SYSTEMS, INC., Defendant.

          John Mansfield, Harris Bricken, Stephen F. Schlather, John J. Edmonds, Shea N. Palavan, and Brandon G. Moore, Collins, Edmonds, Schlather & Tower, PLLC, Of Attorneys for Plaintiff.

          Jacob S. Gill, Stoll Stoll Berne Lokting & Shlachter, P.C., Jenny W. Chen, Chen IP Law Group, Rueiguang Road, Taiwan (R.O.C.); Andrew T. Oliver, Amin, Turocy & Watson, LLP, Of Attorneys for Defendant.

          OPINION AND ORDER

          Michael H. Simon United States District Judge

         Plaintiff Mass. Engineered Design, Inc. (“Mass”) brings this lawsuit against Defendant Planar Systems, Inc. (“Planar”), alleging infringement of U.S. Patent No. RE36, 978 (the “'978 Patent”) and U.S. Patent No. 8, 102, 331 (the “'331 Patent”). Before the Court are five motions for summary judgment filed by Planar, asserting that: (1) there is no genuine issue of material fact that Planar acted willfully to support enhanced damages under the Patent Act; (2) Planar has not infringed the '331 Patent; (3) the '331 Patent is invalid; (4) Planar has not infringed the '978 Patent; and (5) the '978 Patent is invalid. Planar also moves to exclude the report and testimony of Mass's expert Peter Heuser, J.D., and portions of the report and testimony of Mass's expert J.E. Akin, Ph.D., P.E. The final motion before the Court is Mass's motion to exclude portions of the report and testimony of Planar's expert Raymond Yee, Ph.D., P.E.[1] For the following reasons, Planar's motions for summary judgment are denied, Planar's motion to exclude portions of the expert testimony of Dr. Akin is denied, Planar's motion to exclude the testimony of Mr. Heuser is granted in part and deferred in part, and Mass's motion to exclude portions of the testimony of Dr. Yee is denied.

         STANDARDS

          A. Summary Judgment

         A party is entitled to summary judgment if the “movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The moving party has the burden of establishing the absence of a genuine dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The court must view the evidence in the light most favorable to the non-movant and draw all reasonable inferences in the non-movant's favor. Clicks Billiards Inc. v. Sixshooters Inc., 251 F.3d 1252, 1257 (9th Cir. 2001). Although “[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge . . . ruling on a motion for summary judgment, ” the “mere existence of a scintilla of evidence in support of the plaintiff's position [is] insufficient . . . .” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 255 (1986). “Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quotation marks omitted).

         B. Expert Testimony

         The United States Court of Appeals for the Ninth Circuit has discussed the standard under which a district court should consider the admissibility of expert testimony. See City of Pomona v. SQM N. Am. Corp., 750 F.3d 1036 (9th Cir. 2014). As explained by the Ninth Circuit:

Rule 702 of the Federal Rules of Evidence provides that expert opinion evidence is admissible if: (1) the witness is sufficiently qualified as an expert by knowledge, skill, experience, training, or education; (2) the scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (3) the testimony is based on sufficient facts or data; (4) the testimony is the product of reliable principles and methods; and (5) the expert has reliably applied the relevant principles and methods to the facts of the case. Fed.R.Evid. 702.
Under Daubert [v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993)] and its progeny, including Daubert II [Daubert v. Merrell Dow Pharms, Inc., 43 F.3d 1311 (9th Cir. 1995)], a district court's inquiry into admissibility is a flexible one. Alaska Rent-A-Car, Inc. v. Avis Budget Grp., Inc., 738 F.3d 960, 969 (9th Cir. 2013). In evaluating proffered expert testimony, the trial court is “a gatekeeper, not a fact finder.” Primiano v. Cook, 598 F.3d 558, 565 (9th Cir. 2010) (citation and quotation marks omitted).
“[T]he trial court must assure that the expert testimony ‘both rests on a reliable foundation and is relevant to the task at hand.'” Id. at 564 (quoting Daubert, 509 U.S. at 597). “Expert opinion testimony is relevant if the knowledge underlying it has a valid connection to the pertinent inquiry. And it is reliable if the knowledge underlying it has a reliable basis in the knowledge and experience of the relevant discipline.” Id. at 565 (citation and internal quotation marks omitted). “Shaky but admissible evidence is to be attacked by cross examination, contrary evidence, and attention to the burden of proof, not exclusion.” Id. at 564 (citation omitted). The judge is “supposed to screen the jury from unreliable nonsense opinions, but not exclude opinions merely because they are impeachable.” Alaska Rent-A-Car, 738 F.3d at 969. Simply put, “[t]he district court is not tasked with deciding whether the expert is right or wrong, just whether his testimony has substance such that it would be helpful to a jury.” Id. at 969-70.
The test of reliability is flexible. Estate of Barabin v. AstenJohnson, Inc., 740 F.3d 457, 463 (9th Cir. 2014) (en banc). The court must assess the expert's reasoning or methodology, using as appropriate criteria such as testability, publication in peer-reviewed literature, known or potential error rate, and general acceptance. Id.; see also Primiano, 598 F.3d at 564. But these factors are “meant to be helpful, not definitive, and the trial court has discretion to decide how to test an expert's reliability as well as whether the testimony is reliable, based on the particular circumstances of the particular case.” Primiano, 598 F.3d at 564 (citations and quotation marks omitted); see also Barabin, 740 F.3d at 463. The test “is not the correctness of the expert's conclusions but the soundness of his methodology, ” and when an expert meets the threshold established by Rule 702, the expert may testify and the fact finder decides how much weight to give that testimony. Primiano, 598 F.3d at 564-65. Challenges that go to the weight of the evidence are within the province of a fact finder, not a trial court judge. A district court should not make credibility determinations that are reserved for the jury.

Id. at 1043-44 (case citation alterations added, remaining alterations in original).

         “It is the proponent of the expert who has the burden of proving admissibility.” Lust v. Merrell Dow Pharm., Inc., 89 F.3d 594, 598 (9th Cir. 1996). Admissibility of the expert's proposed testimony must be established by a preponderance of the evidence. See Daubert, 509 U.S. at 592 n.10 (citing Bourjaily v. United States, 483 U.S. 171, 175-76 (1987)). The party presenting the expert must demonstrate that the expert's findings are based on sound principles and that they are capable of independent validation. Daubert II, 43 F.3d at 1316.

         BACKGROUND

         In this section, the Court sets forth the background relating to the issuance of the patents-in-suit and this lawsuit. Further factual background is set forth in the Discussion section below, when relevant to a specific motion.

         A. '978 Patent

         Mass alleges infringement claims 16, 18, 25, and 27 of the '978 Patent. The '978 Patent is titled “Dual Display System” and describes a specific type of stand for two electronic “displays” (or “monitors”). It was filed on October 13, 1998, and issued on December 5, 2000. The ‘978 Patent is a reissue of U.S. Patent No. 5, 687, 939, which was filed on April 26, 1996, and issued on November 18, 1997. The '978 Patent was reexamined, and on May 10, 2011, an Ex Parte Reexamination Certificate issued, adding new claims 18-38. New claims 18-37 are dependent on either claim 16 or 17.

         B. '331 Patent

         Mass also alleges infringement of claims 1, 4, 10, and 18 of the '331 Patent. The '331 Patent is titled “Horizontal Three Screen LCD Display System” and describes a specific type of stand for at least two “displays” (or “monitors”). The '331 Patent was originally filed as non-provisional application No. 10/129, 884, based on application No. PCT/IB00/01646, filed on November 13, 2000, which published on May 10, 2002 as PCT publication No. WO01/35197. It further claims priority to provisional application No. 60/165, 047, filed on November 12, 1999. The '331 Patent was issued on January 24, 2012, after extensive prosecution.

         C. Procedural History

         On November 12, 2009, Mass. sued Planar and others in the Eastern District of Texas, alleging infringement of the '978 patent (the “First Lawsuit”). Mass. served its complaint on Planar on February 26, 2010. On August 2, 2012, after health issues arose relating to Mass's lead counsel, Mass. and Planar, among others, stipulated to the dismissal of the First Lawsuit without prejudice.

         On May 2, 2014, Mass. sued Planar and others in several lawsuits filed in the Eastern District of Texas, alleging infringement of both the '978 and the '331 patents. On November 10, 2014, the district court consolidated the actions for pretrial issues only, including claim construction. On March 24, 2015, the Eastern District of Texas granted in part Planar's motion to transfer venue to the District of Oregon, “effective the day the Court issues its claim construction opinion.” ECF 24 at 1. The Eastern District of Texas issued its claim construction (Markman) decision on July 20, 2016. ECF 31. On July 26, 2016, the District of Oregon received the transfer of Mass's action against Planar. ECF 34; see also ECF 53 at 2.

         DISCUSSION

         A. Willfulness

         “Section 284 of the Patent Act provides that, in a case of infringement, courts ‘may increase the damages up to three times the amount found or assessed.'” Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S.Ct. 1923, 1928 (2016) (quoting 35 U.S.C. § 284). “[T]here is no precise rule or formula for awarding damages under § 284.” Id. at 1932 (quotation marks omitted). “The sort of conduct warranting enhanced damages has been variously described in our cases as willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or-indeed- characteristic of a pirate.” Id. Such damages “are not to be meted out in a typical infringement case, but are instead designed as a ‘punitive' or ‘vindictive' sanction for egregious infringement behavior” and “are generally reserved for egregious cases of culpable behavior.” Id.

         Whether infringement is “willful” is by definition a question of the infringer's intent, the answer to which must be inferred from all the circumstances. Ortho Pharm. Corp. v. Smith, 959 F.2d 936, 944 (Fed. Cir. 1992); Gustafson, Inc. v. Intersystems Indus. Prods., Inc., 897 F.2d 508, 510-11 (Fed. Cir. 1990); see also Friedman v. Live Nation Merch., Inc., 833 F.3d 1180, 1186 (9th Cir. 2016) (“A determination of willfulness requires an assessment of a defendant's state of mind.”). “Courts consider several factors when determining whether an infringer has acted in bad faith and whether damages should be increased.” Liquid Dynamics Corp. v. Vaughan Co., Inc., 449 F.3d 1209, 1225 (Fed. Cir. 2006). They include:

(1) whether the infringer deliberately copied the ideas or design of another; (2) whether the infringer, when he knew of the other's patent protection, investigated the scope of the patent and formed a good-faith belief that it was invalid or that it was not infringed; and (3) the infringer's behavior as a party to the litigation.

Read Corp. v. Portec Inc., 970 F.2d 816, 827 (Fed. Cir. 1992), superseded on other grounds as recognized in Hoechst Celanese Corp. v. BP Chems. Ltd., 78 F.3d 1575, 1578 (Fed. Cir. 1996).

         Planar argues that there is no evidence that it acted in bad faith or engaged in willful, wanton, malicious, deliberate, consciously wrongful, or flagrant conduct. HighGrade is the manufacturer of the allegedly infringing products sold by Planar. At some point, Planar entered into an indemnification agreement with HighGrade, in which HighGrade agreed to indemnify Planar for any claims of patent infringement. Although no party provided a written copy of the indemnification agreement to the Court, at oral argument, counsel for Planar represented that the indemnification agreement was entered into in April 2008, before Mass. filed the First Lawsuit for patent infringement against Planar.

         At Planar's Rule 30(b)(6) deposition of Mr. Stephen M. Going, Planar's former General Counsel, Mr. Going testified that the separate indemnification agreement by HighGrade in favor of Planar was “unique” and that generally with its suppliers Planar relied on its purchase order standard terms and conditions, which included an indemnification clause. ECF 129-2 at 16. Mr. Going did not know the specific circumstances under which the separate indemnification agreement with HighGrade was executed. Id. at 17.

         After Mass. filed the suit and Planar became aware of the alleged infringement, Planar expressly stated that it was continuing to sell the allegedly infringing products in large part because it had an indemnification agreement with HighGrade. See ECF 129-3 at 19-20, 25, 26-27. Viewing the evidence in the light most favorable to Mass. and drawing all reasonable inferences in favor of Mass, the Court finds the existence of the “unique” indemnification agreement with HighGrade and Planar's express reliance on that agreement to continue selling the allegedly infringing products after Planar was put on notice of the alleged infringement through the filing of the original lawsuit (for the '978 Patent) and this lawsuit (for the '331 Patent) is sufficient to create a genuine issue of fact on the question of willfulness. Cf. SynQor, Inc. v. Artesyn Techs., Inc., 2013 WL 12084744, at *12 (E.D. Tex. July 19, 2013), report and recommendation adopted, 2013 WL 12085171 (E.D. Tex. July 29, 2013) (finding, in the context of willful blindness, that the fact that the defendants refused to continue sales until they entered into an indemnification agreement “tips the scale in creating a genuine issue of material fact as to whether Defendants' were willfully blind” as to the patent infringement because the defendants were “protecting [their] own financial interest by entering into indemnification agreements shielding [them] from liability”).

         Planar also argues that because Mass. did not move for a preliminary injunction and because Planar did not have knowledge of the patents-in-suit before this lawsuit was filed, Mass. cannot exclusively rely on post-filing conduct for willfulness, citing to In re Seagate Tech., LLC, 497 F.3d 1360, 1374 (Fed. Cir. 2007). This argument fails for three reasons. First, Mass. had knowledge of the '978 Patent before this lawsuit, from the previously-filed lawsuit against Planar involving the '978 Patent. Second, Mass. is not exclusively relying on post-suit conduct, because the indemnification agreement entered-into between HighGrade and Mass. occurred before this litigation. Third, the Federal Circuit has explained that seeking a preliminary injunction is not required for a patentee to rely on post-filing conduct. Mentor Graphics Corp. v. EVE-USA, Inc., 851 F.3d 1275, 1295-96 (Fed. Cir. 2017) (finding that the district court “erred in concluding that Synopsys could not present evidence of post-filing willful infringement because Synopsys did not seek a preliminary injunction” because “there is ‘no rigid rule' that a patentee must seek a preliminary injunction in order to seek enhanced damages”).

         B. Noninfringement of the '331 Patent

         Planar argues that Mass. fails to provide evidence showing a genuine issue of fact that Planar directly infringed the '331 Patent because many elements of the asserted claims, or claims on which the asserted claims depend, are not present. These elements include aspects of the support arms, connections to the monitors, and support column placement. Planar also notes that a number of the accused products are not sold with any monitors. Planar argues that there is insufficient evidence showing that Planar has assembled the accused products with at least two monitors and that the '331 Patent requires at least two displays for a product to infringe.

         Regarding indirect infringement, Planar similarly argues that there is insufficient evidence that any end user assembled the products with at least two monitors. For contributory infringement, Planar also argues that there are substantial noninfringing uses of the accused products and thus no contributory infringement.

         1. The Accused Products that Do Not Include Monitors

         Some of the accused products are sold without monitors. Planar argues that Mass. provides insufficient evidence relating to those products that Planar or end users assemble them with at least two displays, as required by the '331 Patent. Mass. responds that inclusion of monitors is not required by the asserted claims of the '331 Patent, and that only the presence of connectors that serve the purpose of connecting monitors is required. Mass. further responds that if inclusion of monitors is required, assembly by Planar is not required because a manufacturer cannot avoid liability by selling infringing products unassembled. Mass. also asserts that there is sufficient evidence that the accused products are capable of infringing, are assembled in an infringing manner by Planar and end users, and are necessarily infringing.

         The Court agrees that Claims 1 and 9[2] do not require that monitors be attached. See Section B.3 below. Moreover, even if the presence of monitors is required, the Court agrees with Mass. that there is sufficient evidence to create an issue of fact for the jury on infringement by Planar and end users.

         “[T]he patent laws do not allow a manufacturer to avoid infringement simply by selling a dissembled device that would infringe on assembly.” EBS Automotive Servs. v. Ill. Tool Works, Inc., 2011 WL 4021323, at *5 (S.D. Cal. Sept. 12, 2011); see also High Tech Med. Instrumentation, Inc. v. New Image Indus., Inc., 49 F.3d 1551, 1556 (Fed. Cir. 1995). Planar argues that the devices do not infringe because they might not be assembled attached to two monitors. Planar relies on ACCO Brands, Inc. v. ABA Locks Manufacturer Co. to argue that Mass. must prove either (1) specific instances of infringement, or (2) that Planar's accused products sold without monitors “necessarily infringe.” 501 F.3d 1307, 1313 (Fed. Cir. 2007).

         The Court finds the facts of the pending case are more similar to Toshiba Corp. v. Imation Corp., 681 F.3d 1358 (Fed. Cir. 2012), and Lucent Techs, Inc. v. Gateway, Inc., 580 F.3d 1301 (Fed. Cir. 2009), than to ACCO, and is persuaded by how the Federal Circuit distinguished ACCO in those cases. In Toshiba, the Federal Circuit found sufficient evidence to preclude summary judgment because the manufacturer “designed the DVDs to be used in an infringing way and instructed users to use them in the infringing way by finalizing the DVDs or using the disc-at-once mode.” Toshiba, 681 F.3d at 1365. The court noted that it was “not the first time we have concluded that where an alleged infringer designs a product for use in an infringing way and instructs users to use the product in an infringing way, there is sufficient evidence for a jury to find direct infringement.” Id. (citing, by way of example, Lucent). The court distinguished ACCO on the ground that the products in that case were sold only with instructions describing noninfringing use and the only other evidence relied upon by the patentee “was its expert testimony that the infringing mode was the ‘natural and intuitive way' to operate the device, ” although the “expert ‘had no opinion' on whether others used the device in an infringing mode.” Id. at 1366 (quoting ACCO, 501 F.3d at 1313).

         Similarly, in Lucent, the Federal Circuit found circumstantial evidence sufficient to uphold the jury's verdict where the products were designed to practice the claimed invention and sold with instructions on how to use the products in an infringing way. Lucent, 580 F.3d at 1318. Further, the patentee's expert opined that he and his wife used the product in an infringing way and that he found it “hard to imagine that we're the only two people in the world that ever used it” in that manner. Id. The court also distinguished ACCO because in Lucent the products were sold ...


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