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Case 0:10-cv-60524-WJZ Document 50

Entered on FLSD Docket 09/17/2010 Page 1 of 12

IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF FLORIDA CASE NO: 10-CV-60524-ZLOCH/ROSENBAUM PLASTICASE, INC., a Foreign corporation

) ) Plaintiff ) ) vs. ) ) INVICTA WATCH COMPANY ) OF AMERICA, INC., ) a Florida corporation ) ) Defendant ) _____________________________ /) DEFENDANT’S MOTION AND INCORPORATED MEMORANDUM TO BIFURCATE ISSUES OF LIABILITY AND DAMAGES Defendant, Invicta Watch Company of America, Inc., moves for an Order bifurcating the liability and damage issues in this matter. A separation of these issues will streamline the trial, promote judicial economy and eliminate prejudice to Invicta, which is already occurring. Defendant makes this Motion pursuant to Federal Rule of Civil Procedure 42(b). I. Factual Background: This action arises out of Plaintiff’s allegations that Invicta wrongfully copied its now-patented design for a plastic carrying or storage case. The lawsuit sounds in patent infringement, federal false designation of origin and Florida unfair competition.1

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These last two causes of action were recently added by amended complaint when Plaintiff became concerned that its patent infringement theory would not produce damages. The claims, really trade dress claims, are the subject of a Motion to Dismiss Counts III and IV. (D.E. 47) However, in the event that they are not dismissed, these causes of action are also easily bifurcated between liability and damages. The same analysis applies.


Case 0:10-cv-60524-WJZ Document 50

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Plaintiff, Plasticase, Inc., seeks injunctive relief and damages for the alleged infringement. In addition, Plasticase seeks to have its damages trebled due to willfulness. Defendant, Invicta, has asserted that Plasticase’s non-compliance with the patent marking requirements of 35 U.S.C. § 287(a) precludes recovery of pre-filing damages. Defendant has filed a Motion for partial summary judgment (D.E. 23) in connection with the failure to mark issue, which, if successful, will greatly limit, if not entirely preclude, an award of damages. Defendant has also requested that this Court stay damage discovery pending the Court’s ruling on the Summary Judgment Motion. (D.E. 34) The infringement issue and the failure to mark defense are clearly threshold issues to any consideration of damages. Notwithstanding Defendant’s challenges to its patent damages, Plasticase is aggressively moving forward with its discovery, including a recently filed Motion to Compel Discovery (D.E. 46). Plasticase has threatened Invicta’s customers with infringement litigation and has subpoenaed third party damage discovery from Invicta’s downstream customers. Plaintiff is also seeking trebled damages based on willful patent infringement. Given the innocent nature of Invicta’s infringement due to Plasticase’s failure to notify the public that its case design was patented, and given Invicta’s good faith efforts to voluntarily cease manufacture and distribution of further accused products upon receiving actual notice of infringement, Plasticase’s harassing tactics are unfairly prejudicial to Invicta’s business relationships. In addition to eliminating this prejudice to Invicta’s business relations, the proposed bifurcation will promote efficiency and further convenience by preventing presentation of unnecessary damage evidence at trial and eliminating any present need for damage discovery. Resolution of the threshold issues

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and temporary elimination of the damage issue will reduce the number of discovery disputes and also allow the Court to streamline the trial on the issues of infringement and failure to mark. II Argument: A. Legal Standard Bifurcation is authorized by Federal Rule of Civil Procedure 42(b), which provides: “For convenience, to avoid prejudice, or to expedite and economize, the court may order a separate trial of one or more separate issues, claims, crossclaims, or third-party claims.” “Under Rule 42(b), a district court has broad discretion in separating issues and claims for trial as part of its wide discretion in trial management.” Medtronix Xomed, Inc. v. Gyrus ENT L.L.C., 440 F. Supp.2d 1333, 1334 (M.D. Fla 2006) citing Gardco Manufacturing, Inc. v. Herst Lighting Co., 820 F.2d 1209, 1212 (Fed. Cir. 1987). Rule 42(b) “affords district court discretion to order separate trials where such order would further convenience, avoid prejudice, or promote efficiency.” Medtronix, 440 F.Supp.2d at 1335 quoting Griffin v. City of Opa-Locka, 261 F.3d 1295, 1301 (11th Cir. 2001) accord In Re Nitro Leisure Products, LLC, 2003 Lexis 27555 (S.D. Fla. 2003) and Continental Insurance Co. v. Polly Roberts, et. al, 2008 Lexis 118256 (M.D. Fla 2008). Thus, the factors for Florida district courts to consider in electing to bifurcate are whether the severance of issues furthers convenience, avoids prejudice, or promotes efficiency. Indeed, the Eleventh Circuit “recognized that Rule 42(b) ‘confers broad discretion on the district court in this area, permitting bifurcation merely ‘in furtherance of convenience.’” Medtronix 440 F.Supp. 2d at 1335 [emphasis added] quoting Harrington v. Cleburne

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Country Bd. Of Educ., 251 F.3d 935, 938 (11th Cir. 2001) “[T]he issues of validity, title, infringement and damages in patent and copyright cases may be separately tried, unless this course will inconvenience the court or seriously prejudice the rights of some of the parties.” Medtronix, 440 F.Supp.2d at 1336 quoting Swofford v. B & W, Inc., 336 F.2d 406, 415 (5th Cir. 1964) Although a district court can separate issues for convenience, prejudice or efficiency, in the instant case, bifurcation furthers all three interests. Invicta seeks bifurcation of the issues into two logical segments. The threshold issues are (1) whether there is infringement of Plasticase’s design patents and, (2) if there is infringement, whether Invicta had notice of the patents such that Plasticase is entitled to monetary damages. The issue of willfulness can be addressed as prong three (3) of the initial stage because there can be no willfulness in the absence of notice. If the affirmative defense asserted for non-compliance with the marking requirements under 35 U.S.C. § 287(a) succeeds, given the facts in this case, there would be no need for consideration of willfulness or damages. Invicta voluntarily ceased making, using and/or selling the accused products upon receiving actual notice of the design patents. The bifurcation should occur before further damage discovery is required because such discovery may be unnecessary, resulting in an unnecessary expenditure of time and money to the parties, and a waste of the court’s judicial resources in addressing discovery disputes, which are already arising. Moreover, bifurcation before discovery will avoid prejudice to Invicta because it will not have to unnecessarily release proprietary information to Plasticase. Plasticase is already interfering with Invicta’s downstream customers in the nature of threats and subpoenas. Although, in theory, a protective order

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protects proprietary information, given the level of interference already occurring, Invicta would prefer to withhold the sales, customer and manufacturer information until it becomes relevant to the litigation. It is not uncommon for courts to bifurcate liability and damages before discovery as is requested here. Indeed, patent cases are frequently bifurcated to separate the liability and damage issues for expediency of the courts and the parties.

See Mag.

Instrument, Inc. v. J. Baxter Brinkmann Int’l Corp., 123 F.R.D. 543, 545 (N.D. Tex. 1988); Fuji Mach. Mfg. Co., Ltd. v. Hover-Davis, Inc., 982 F. Supp. 923, 924 (W.D.N.Y. 1997) (“In patent cases, bifurcation of liability and damages is not uncommon”); Scientific-Atlanta, Inc. ,v General Instrument Corp., 24 Fed. R. Serv. 3d 1239; 27 U.S.P.Q.2d 1158 (D. Md. 1993).

Indeed, in the Markman case, the court bifurcated

validity and damages. Markman v. Westview Instruments, Inc., 52 F.3d 967, 1002 (Fed. Cir. 1995)(en banc), aff’d, 517 U.S. 370 (1996). Other examples of issue severance in patent cases for convenience and streamlining go beyond bifurcation to trifurcation and even quad-furcation. See Ciena Corp. v. Corvis Corp., 210 F.R.D. 519, 521 (D. Del. 2002)(the court trifurcated the case into infringement and willfulness, invalidity, and damages) and C.R. Bard, Inc. v. M3 Sys., Inc., 1994 WL 362186 (N.D. Ill. July 11, 1994)(upholding the severance of trial into four segments: infringement, validity, antitrust claims and damages). B. Bifurcation is Easily Accomplished The issues in this case can be logically severed to resolve threshold issues and eliminate presently irrelevant issues. The issues of liability, the defense of failure to mark, and willfulness are completely distinct from the damage issue. Indeed

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determination of the first issues will likely eliminate the second issue which will result in efficiency for the court and the parties. To prove its infringement claim, Plasticase will produce claim charts and likely offer the testimony of the inventors. In providing its defense of Plasticase’s failure to mark, Invicta will present evidence and call witnesses directed to Plaintiff’s storage and distribution practices and its mold making and packaging practices. Evidence on willfulness can be easily intertwined with the infringement and failure to mark issues. Indeed, if in proving its affirmative defense Defendant establishes that it had no actual notice of Plaintiff’s patent before the filing of the lawsuit, Defendant’s actions in allegedly copying cannot be found willful. In Gustafson, Inc. v. Intersystems Industrial Products, Inc., 13 USPQ.2d 1972, 1974 (Fed. Cir. 1990) the Federal Circuit quoted its holding in State Industries, Inc. v. A.O. Smith Corp., 751 F.2d 1226, 1236 (Fed. Cir. 1985) “to willfully infringe a patent, the patent must exist and one must have knowledge of it.” “It is obvious that a party cannot be held liable for ‘infringement’, and thus not for ‘willful’ infringement, of a nonexistent patent….” “Hence a party cannot be found to have ‘willfully’ infringed a patent of which the party had no knowledge.” Gustafson, 13 USPQ.2d at 1974. In response to Defendant’s Interrogatory No. 8, Plaintiff admitted that it provided no actual notice to Defendant “prior to the filing of the instant lawsuit, that Defendant had infringed [the patents in suit].” Plaintiff does assert that Defendant had sufficient constructive notice. However, Plaintiff is unable to meet its burden of proving compliance with the patent marking statute by a preponderance of the evidence. In its Opposition to Defendant’s Motion for Partial Summary Judgment (D.E. 35), Plasticase has come up with an estimated date of September 29, 2009, which date

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amounts to little more than a guess. Plasticase cannot prove a date certain that it “consistently marked substantially all of its patented products, and it was no longer distributing unmarked products. [Emphasis added.] American Medical Systems, Inc. v. Medical Engineering Corp., 6 F.3d 1523, 1538 (Fed. Cir. 1993). Thus, the testimony and evidence necessary for the affirmative defense are substantially the same as the testimony and evidence necessary for a determination of willful patent infringement. These are threshold questions to damages of any kind. This testimony and evidence for infringement and failure to mark is completely distinct from the evidence on damages. Proof of damages includes the number of products manufactured and sold by or for Invicta, the cost of each product and the revenue from the product. Additionally, there may be further calculations required in that the cases at issue were merely packaging for Defendant’s watches and the pricing of the product is driven by the watches not the packaging. This issue may even require expert testimony. Thus, bifurcation is likely to save the court and the parties from discovery and trial on damages and willfulness. C. Bifurcation is Proper in this Case Because it Expedites, Economizes and Avoids Prejudice.

The proposed bifurcation will promote convenience, expedition and economy. There is a very likely possibility that Defendant will succeed in its affirmative defense of failure to mark and the issues of pre-filing damages and also willfulness will be moot. No damages exist after Defendant received actual notice because Invicta ceased its activities and the parties promptly entered a preliminary injunction on consent. (D.E. 15) Bifurcation may eliminate the need for witnesses on damages as well as the expenditure

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of money and resources on damage discovery. Furthermore, extensive, separate discovery will be necessary to determine damages. That discovery is likely to lead to the revelation of trade secrets and proprietary information. In Novopharm Limited v. Torpharm, 181 F.R.D. 308, 312 (E.D.N.C. 1998) the court noted that bifurcating the action and staying discovery saved time and expense and protected sensitive information. In addition to the foregoing, one of the most important considerations in deciding to bifurcate is prejudice to any party. Bifurcating this case will not prejudice either party but it may prevent further harassment of Defendant and its downstream customers. Plaintiff is already menacing these customers with correspondence and third party discovery.2 Additionally, bifurcation will allow Defendant to protect is sales, pricing, manufacturing, customer and other proprietary information. In theory, this information should be protected by the Protective Order. However, Plasticase has already sent threatening letters to Invicta’s downstream customers threatening them with infringement litigation. These customers may have the same failure to mark defense as the Defendant. Additionally, Invicta is seeking information from the downstream customers through 3rd party subpoenas. This activity is prejudicial to Invicta where the defense of no notice exists and where Invicta already voluntarily ceased manufacture and distribution of the accused cases promptly after the filing of this case. Thus, bifurcating this matter may avoid additional and unnecessary prejudice to Invicta which may last long beyond this litigation.

2

As is more fully explained in Defendant’s Response to Plaintiff’s Motion to Compel, the downstream customers are not guilty of direct infringement because they purchased the accused products before Defendant had notice of the patents. Threats to these innocent infringers can only be calculated to interfere with Defendant’s business relationships.

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Case 0:10-cv-60524-WJZ Document 50

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III. Damage Discovery Should be Stayed. Defendant herein renews its Motion to Stay Discovery (D.E. 34) pending a ruling on its Summary Judgment motion (D.E. 23) and in the event that said motion is denied, further requests that the court stay damage discovery pending the outcome of the proposed first phase of bifurcation. The reasons, facts and law supporting the Motion to Stay apply equally to a Motion to Stay pending the outcome of the liability phase of the bifurcated case. Accordingly, Defendant’s Motion to Stay (D.E. 34) is incorporated herein by reference, as thought set forth in full, in support of a stay during the liability phase of the bifurcated matter. IV Conclusion In this case, where Plasticase disregarded the patent marking statute and continued to distribute unmarked products after the issuance of its patents, Plasticase is precluded from obtaining pre-suit damages. Damages ceased to accrue thereafter because the parties promptly entered into a preliminary injunction. (D.E. 15) The liability phase in a bifurcated case is likely to be dispositive of the complex and complicated issue of patent infringement damages. Once the threshold issues are addressed there will likely be no need to present testimony and evidence on damages. There is no reason for the parties to conduct damage discovery at this time. Bifurcation will not require duplicate discovery, nor will it require overlapping testimony or evidence. Bifurcation will streamline this case, promote judicial economy and eliminate prejudice. Invicta respectfully requests that the Court enter an Order bifurcating this matter into issues of liability (including defenses) and willfulness followed by the issue of damages, if necessary.

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Case 0:10-cv-60524-WJZ Document 50

Entered on FLSD Docket 09/17/2010 Page 10 of 12 CASE NO: 10-CV-60524-ZLOCH/ROSENBAUM

Respectfully submitted,

Dated: September 17, 2010

/s/ Robert M. Schwartz Robert M. Schwartz, Esq. Florida Bar No. 304018 Robert M. Schwartz, P.A. 2445 Hollywood Boulevard Hollywood, Florida 33020 Telephone: (954) 924-0707 Facsimile: (954) 924-0717 Email: litigation@patentmiami.com Attorneys for Defendant, Invicta Watch Company of America, Inc..

CERTIFICATE OF GOOD FAITH CONFERENCE

I hereby certify that counsel for the movant has conferred with all parties or non-parties who may be affected by the relief sought in this motion in a good faith effort to resolve the issues but has been unable to do so or has made reasonable efforts to confer with all parties or non-parties who may be affected by the relief sought in the motion, but has been unable to do so. /s/ Robert M. Schwartz__________ Robert M. Schwartz, Esq.

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Case 0:10-cv-60524-WJZ Document 50

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CERTIFICATE OF SERVICE I HEREBY CERTIFY that on the 17th day of September, 2010, I electronically filed the foregoing document with the Clerk of the Court using CM/ECF. I also certify that the foregoing document is being served this day on all counsel of record identified on the attached Service List in the manner specified, either via transmission of Notices of Electronic Filing generated by CM/ECF or in some other authorized manner for those counsel or parties who are not authorized to receive electronically Notices of Electronic Filing. /s/ Robert M. Schwartz _____________ ROBERT M. SCHWARTZ, ESQUIRE Florida Bar No. 304018 Robert M. Schwartz, P.A. Attorney for Defendant 2445 Hollywood Boulevard Hollywood, Florida 33020 Telephone: (954) 924-0707 Facsimile: (954) 924-0717 Email: litigation@patentmiami.com

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Case 0:10-cv-60524-WJZ Document 50

Entered on FLSD Docket 09/17/2010 Page 12 of 12 CASE NO: 10-CV-60524-ZLOCH/ROSENBAUM Service List

PLASTICASE, INC. V. INVICTA WATCH COMPANY OF AMERICA, INC. CASE NO: 10-CV-60524-ZLOCH/ROSENBAUM

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA Geoffrey Lottenberg Ury Fischer Lott & Friedland 355 Alhambra Circle Suite 1100 PO Drawer 141098 Coral Gables, FL 33134-1098 Tel: 305-448-7089 Fax: 305-446-6191 Email: glottenberg@lfiplaw.com Email: ufischer@lfiplaw.com

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