InteraXon Inc. et al v. Neurotek, LLC et al

Filing 167

ORDER LIFTING STAY; Granting in Part and Denying in Part 141 Plaintiffs' Motion to File a First Amended Complaint; Denying 146 Defendant's Motion to Postpone Deadlines; Regarding 147 Plaintiffs' Second Discovery Letter and [14 4] Defendant's Discovery Letter; Denying 149 Defendant's Motion to Strike; Denying 158 Defendant's Motion for Administrative Relief to Expand page Limits. Signed by Judge Kandis A. Westmore on 1/3/2017. (kawlc2, COURT STAFF) (Filed on 1/3/2017)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 Case No. 15-cv-05290-KAW 7 8 INTERAXON INC., et al., 10 v. 11 United States District Court Northern District of California ORDER LIFTING STAY; GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION TO AMEND; DENYING DEFENDANT'S MOTION TO POSTPONE AND MOTION TO STRIKE; REGARDING DISCOVERY LETTERS Plaintiffs, 9 NEUROTEK, LLC, et al., 12 Defendants. Re: Dkt. Nos. 141, 144, 146, 147, 149, 158 13 14 Currently pending before the Court are: (1) Plaintiffs InteraXon Inc.'s and InteraXon U.S., 15 Inc.'s (collectively, "InteraXon") motion for leave to file a first amended complaint; (2) Defendant 16 Jonathan D. Cowan's discovery letter regarding production of documents pursuant to Patent Local 17 Rule 3.4(a); (3) Defendant's motion to postpone deadlines; (4) Plaintiffs' second discovery letter 18 brief regarding the adequacy of Defendant's infringement contentions; (5) Defendant's motion to 19 strike Plaintiffs' second discovery letter brief and preliminary claim constructions; and (6) 20 Defendant's motion to expand page limits. The Court deems these matters suitable for disposition 21 without a hearing pursuant to Civil Local Rule 7-1(b). Having reviewed the papers filed by the 22 parties and the relevant legal authority, the Court resolves the parties' numerous disputes as set 23 forth below. 24 25 I. BACKGROUND Plaintiffs filed the instant suit against Defendants NeuroTek, LLC, MindWaves, Ltd., and 26 Dr. Jonathan D. Cowan (collectively, "Defendants") on November 18, 2015, seeking a declaration 27 of non-infringement and a declaration of invalidity as to Patent No. 5,983,129 ("'129 Patent"). 28 (Compl., Dkt. No. 1.) InteraXon manufactures the MUSE Headband. (Compl. ¶ 4.) Around 1 October 2013, Defendants accused InteraXon of infringing on the '129 Patent, and offered to 2 license it. (Compl. ¶ 29.) In November 2014, Defendants demanded that InteraXon "cease and 3 desist" from infringing on the '129 Patent, or enter into a licensing agreement. (Compl. ¶ 30.) The 4 parties began negotiations for a license, during which Defendants withdrew the cease and desist 5 demand, but InteraXon alleges that Defendants threatened to reinstate that demand around May 6 2015. (Compl. ¶ 32.) InteraXon then filed the instant suit. Cowan has filed a counterclaim for 7 infringement on the '129 Patent. (Answer, Dkt. No. 63 ¶ 45.) 8 9 10 II. A. DISCUSSION Order Lifting Stay On October 26, 2016, the Court stayed the case pending the appointment of pro bono United States District Court Northern District of California 11 counsel for the limited purpose of representing Defendant in the course of settlement. (Dkt. No. 12 161.) The stay was to last until four weeks after the appointment of counsel. Counsel was 13 appointed on November 3, 2016. (Dkt. No. 162.) As more than four weeks have passed, the 14 Court LIFTS the stay on this case. This is separate from the discovery stay that the Court imposed 15 on Defendant for failure to provide adequate infringement contentions. (Dkt. No. 135 at 4.) As 16 discussed below, the discovery stay will remain in place. 17 B. 18 On October 5, 2016, Plaintiffs moved for leave to file a first amended complaint for 19 declaratory judgment of non-infringement. (Dkt. No. 141.) Defendant did not file an opposition. 20 Federal Rule of Civil Procedure 15(a)(2) provides that leave to amend a complaint should 21 be "freely given when justice so requires." Fed. R. Civ. P. 15(a)(2). "This policy is to be applied 22 with extreme liberality." Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 23 2003). The courts consider five factors when determining whether leave to amend should be 24 granted: "(1) bad faith, (2) undue delay, (3) prejudice to the opposing party, (4) futility of 25 amendment[,] and (5) whether plaintiff has previously amended his complaint." Allen v. City of 26 Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990). Not all factors carry equal weight. Eminence 27 Capital, LLC, 316 F.3d at 1052. Prejudice to the opposing party must be given the greatest 28 weight. Id. Absent prejudice, or a strong showing of bad faith, undue delay, or futility of Plaintiffs' Motion to File a First Amended Complaint 2 1 amendment, there exists a presumption under Rule 15(a) in favor of granting leave to amend. Id. 2 (citation omitted). 3 Here, Plaintiffs seek to add allegations incorporating Defendant's counterclaims, as well as 4 additional allegations regarding invalidity. (Proposed First Amended Compl. at ¶¶ 37, 39, 43-45, 5 50-59.) Plaintiffs also seek to add new causes of action for: (1) recovery of attorney's fees under 6 35 U.S.C. § 285, and (2) sanctions under 28 U.S.C. § 1927 and/or Federal Rule of Civil Procedure 7 11. (Id. at ¶¶ 62-89.) 8 The Court GRANTS IN PART and DENIES IN PART Plaintiffs' motion. Plaintiffs are permitted to add the allegations regarding Defendants' counterclaims and invalidity, as Defendant 10 has not opposed Plaintiffs' motion or suggested there is prejudice, bad faith, or undue delay. The 11 United States District Court Northern District of California 9 Court finds, however, that Plaintiffs' proposed new causes of action are futile. An assertion of an 12 "exceptional case" under 35 U.S.C. § 285 is not a separate cause of action, and "[t]herefore, 13 [Plaintiffs] should not be permitted to include a separate count based on exceptional case, or the 14 allegations underlying that nonexistent cause of action." Nycomed U.S. Inc. v. Glenmark Generics 15 Ltd., No. 08-CV-5023 (CBA)(RLM), 2010 WL 1257803, at *3 (E.D.N.Y. Mar. 26, 2010) 16 (denying leave to add separate cause of action, but permitting adding a demand for attorney's fees 17 under section 285 in the complaint's prayer for relief); see also Aventis Cropscience, N.V. v. 18 Pioneer Hi-Bred Int'l, Inc., 294 F. Supp. 2d 739, 743 (M.D.N.C. 2003) ("defendants' Section 285 19 attorney fees request is not a separate, surviving and independent cause of action, but rather a 20 collateral or ancillary issue which is dependent on the main action"). Plaintiffs have already 21 requested attorney's fees under section 285 in their prayer for relief, and no further amendment is 22 required. (See Compl. at 7, Dkt. No. 1.) Similarly, courts have found that sanctions under 28 23 U.S.C. § 1927 and Federal Rule of Civil Procedure 11 are not separate causes of action. See Flynn 24 v. Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor LLP, No. 3:09-cv-422-PMP- 25 RAM, 2010 WL 4339368, at *10 (D. Nev. Oct. 15, 2010) ("Section 1927 does not contain an 26 explicit right of action. Moreover, § 1927's plain text suggests Congress did not intend to imply a 27 private right of action"); Glannon v. Garrett & Assocs., Inc., 261 B.R. 259, 268 (D. Kan. 2001) 28 ("Several courts have determined that section 1927 is not an independent cause of action and must 3 1 be raised as part of the proceedings in front of the judge who witnessed the conduct at issue"); 2 Kraus Indus., Inc. v. Moore, No. 06-542, 2007 WL 2744194, at *10 (W.D. Penn. Sept. 18, 2007) 3 ("Federal Rule of Civil Procedure 11 does not provide for a separate and distinct cause of action"); 4 Turner v. Lerner, Sampson & Rothfuss, 776 F. Supp. 2d 498, 511 (N.D. Ohio 2011) ("Federal 5 Rule of Civil Procedure 11 . . . does not create a separate cause of action, but rather, creates a 6 means of punishing misconduct in a pending action"). Thus, Plaintiffs will not be permitted to add 7 the causes of action for attorney's fees and sanctions, or the underlying allegations thereon. C. 9 On October 8, 2016, Defendant filed a notice of unavailability, and requested that 10 deadlines be postponed. (Dkt. No. 146.) Defendant's motion is DENIED as moot; at the October 11 United States District Court Northern District of California 8 18, 2016 case management conference, the Court stayed all deadlines. (Dkt. No. 156.) Thus, no 12 postponement is required. Defendant's Motion to Postpone Deadlines 13 D. 14 On October 10, 2016, Plaintiffs filed their second discovery letter brief, contending that Plaintiffs' Second Discovery Letter Brief 15 Defendant's infringement contentions are still inadequate. (Dkt. No. 147.) Pursuant to the Court's 16 order, Defendant filed his opposition on October 20, 2016. (Dkt. No. 157.) 17 With respect to independent claim 1, Plaintiffs argue that the infringement contentions do 18 not adequately specify where the various components and software functions are found. (Dkt. No. 19 147 at 2.) Having reviewed the infringement contentions, the Court determines that, particularly 20 given that Defendant is a pro se litigant, the infringement contentions for independent claim 1 21 appear to be adequate. For example, Plaintiffs point to the Independent Claim 1C answer, which 22 states in relevant part: "The system's microprocessor performs the necessary calculations, 23 supported by other components in the processing system. The specifically matched software 24 which the microprocessor runs to create these calculations is provided by InteraXon." 25 (Infringement Contentions at 3-4, Dkt. No. 143-1.) Plaintiffs argue that Defendant fails to 26 "meaningfully identify the . . . 'necessary calculations,' 'other components,' or 'specifically 27 matched software.'" In comparing the infringement contention with the patent, however, it 28 appears that the "necessary calculations" refers to Independent Claim 1C's "subtracting said 4 1 representative reference signal from said representative frontal lobe brainwave signal to produce a 2 difference frontal lobe brainwave signal, and processing said difference frontal lobe signal to 3 produce an AIndicator signal . . . ." ('129 Patent at 12:65-13:2, Dkt. No. 1-1.) "Specifically 4 matched software" would seem to refer to a software application provided by Plaintiffs, which 5 must be downloaded onto the user's computing system – i.e., a smartphone, computer, or tablet – 6 in order to use the Muse. "Other components," meanwhile, seems to refer to components in the 7 user's computing system which are required to make the computing system work. Assuming the 8 Court's understanding is correct, the Court finds that the infringement contentions for independent 9 claim 1 are sufficient. If the Court's understanding is not correct, however, Defendant must amend his infringement contentions to add further specificity; failure to do so will be construed as 11 United States District Court Northern District of California 10 agreement with the above characterization. 12 Although the Court finds that the infringement contentions for independent claim 1 are 13 adequate, the Court concludes that the infringement contentions for the dependent claims are not. 14 The Court previously found that Defendants' statement of "A combination of the answers to 1A-E" 15 was inadequate because it required Plaintiffs to guess as to how such answers may be combined. 16 (Dkt. No. 135 at 3.) Defendant's amended infringement contentions now seek to "incorporate" the 17 answers to 1A-1E; this is no more specific than Defendant's prior infringement contentions. 18 (Infringement Contentions at 4-5.) Even if the dependent claims include answers from 19 Independent Claims 1A-E, combining or incorporating prior answers fails to adequately specify 20 where that dependent step takes place. For example, as to dependent claim 9 ("where the step of 21 processing said difference frontal lobe brainwave signal includes rejecting eye movement and 22 other artifacts"), it is not clear how this step of processing would be performed in every location 23 identified in the infringing product in Independent Claims 1A-D, such as the sensors on the Muse's 24 band (1A), the electrically conducting part of the sensors (1B), or the interface between the 25 systems and a device that displays the precalculated Attention Indicator values to the user (ID). 26 Defendant must provide infringement contentions that do not incorporate, rely upon, or depend on 27 prior answers in any way, and are properly limited to show where the dependent claim at issue is 28 alleged to take place in the accused infringing product. 5 1 Plaintiffs also argue that the infringement contentions fail to adequately explain any theory 2 of indirect infringement, but instead appear to show that Claims 1A and 1B are performed by the 3 Muse (constituting direct infringement) while Claims 1C, 1D, and 1E are performed by another 4 entity, such as the user's computer (constituting indirect infringement). (Dkt. No. 147 at 3.) Per 5 Defendant's opposition, that appears to be precisely what Defendant is alleging, except that Claim 6 1E is a combination of both direct and indirect infringement since it repeats all other steps. (Dkt. 7 No. 157 at 3-4.) Thus, no one entity performs every step of Claim 1. 8 In addition, Plaintiffs challenge Defendant's contentions regarding the doctrine of equivalents, arguing that it simply repeats the claim language. (Dkt. No. 147 at 4.) Defendant 10 does not respond to Plaintiffs' argument. (See Dkt. No. 157.) Upon review of the infringement 11 United States District Court Northern District of California 9 contentions, it seems that Defendant himself does not believe that the doctrine of equivalents is 12 applicable in this case, as he asserts that the processing would directly meet Claim 1C "without the 13 need to apply the doctrine of equivalents[; Defendant] mention[s] it here because [Defendant] 14 anticipate[s] that the Plaintiff, driven by desperation, will argue to the contrary." (Infringement 15 Contentions at 7.) Accordingly, the Court will strike Defendant's contentions regarding the 16 doctrine of equivalents. If Defendant should later find, through discovery, sufficient evidence in 17 support of a doctrine of equivalents theory, Defendant may move the Court to amend his 18 infringement contentions pursuant to Patent Local Rule 3-6, upon a showing of good cause. See 19 Finjan, Inc. v. Proofpoint, Inc., Case No. 13-cv-5808-HSG, 2015 WL 15174920, at *10 (N.D. Cal. 20 Apr. 2, 2015). 21 22 23 Finally, the Court finds that Defendant is correct that Patent Local Rules 3-1 and 3-2 do not require the production of documents demonstrating his infringement theory. Defendant is to provide revised infringement contentions consisting with the discussion 24 above within 14 days of the date of this Order. Because Defendant's infringement contentions are 25 not in compliance with the Patent Local Rules, the discovery stay will remain in place and 26 Defendant will not be permitted to seek discovery from Plaintiffs. The Court denies Defendant's 27 request for sanctions and additional discovery. 28 6 1 2 E. Defendant's Motion to Strike Plaintiffs' Discovery Letter and Preliminary Claim Construction On October 11, 2016, Defendant filed a motion to strike Plaintiffs' discovery letter brief and preliminary claim constructions for failure to meet and confer. (Dkt. No. 149.) On October 4 12, 2016, Plaintiffs filed an opposition. (Dkt. No. 152.) The Court DENIES Defendant's motion. 5 With respect to Plaintiffs' discovery letter brief, the Court finds that the parties adequately 6 met and conferred prior to Plaintiffs filing their discovery letter brief. (See Dkt. No. 152, Exh. 1.) 7 While it would be preferable for the parties to file a joint discovery letter following the 8 requirements of the Court's standing order, the Court has previously allowed the parties to file 9 separate discovery letters, in light of Defendant's pro se status. (See Dkt. No. 128.) Moreover, 10 Defendant was given the opportunity to respond in full to Plaintiffs' discovery letter. (Dkt. Nos. 11 United States District Court Northern District of California 3 153, 157.) Therefore, the Court declines to strike Plaintiffs' discovery letter brief. 12 With respect to Plaintiffs' preliminary claim constructions, the Court finds that Plaintiffs 13 were not required to meet and confer prior to exchanging preliminary claim constructions. Patent 14 Local Rule 4-1(a), which concerns the exchange of claim terms, does not require the parties to 15 meet and confer. Defendant instead relies on Patent Local Rule 4-1(b), which requires a meet and 16 confer after the parties have exchanged their preliminary claim constructions. Accordingly, the 17 Court declines to strike Plaintiffs' preliminary claim constructions. 18 F. 19 On October 7, 2016, Defendant filed a discovery letter brief seeking to enforce Patent Defendant's Discovery Letter Brief 20 Local Rule 3-4(a), and seeking "requirements, specifications, scripts, formulas, and artwork . . . 21 along with all 'other documentation sufficient to show that the operation of any aspect or elements 22 of an Accused Instrumentality identified by the patent claimant in its Patent L.R. 3-1(c) chart." 23 (Dkt. No. 144.) Pursuant to the Court's order, Plaintiffs filed their opposition on October 21, 24 2016. (Dkt. No. 159.) 25 The Court DENIES Defendant's request that Plaintiffs produce the requested documents. 26 First, because Defendant's infringement contentions are still not adequate, the discovery stay 27 imposed on Defendant is still in place. Second, Plaintiffs represent that they have already 28 produced the documentation sought by Defendant, and have made other documents – i.e., source 7 1 code – available for Defendant to inspect. (Dkt. No. 159 at 3.) While Defendant contends that 2 Plaintiffs should e-mail him these additional documents, rather than requiring him to make a trip 3 to inspect the documents, Plaintiffs are under no such obligation. Federal Rule of Civil Procedure 4 34 states that absent objections, a response to a request for production "must . . . state that 5 inspection and related activities will be permitted as requested," although "[t]he responding party 6 may state that it will produce copies of documents or of electronically stored information instead 7 of permitting inspection." (Emphasis added.) In short, a party is not required to produce copies of 8 documents or electronically stored information in lieu of permitting an inspection. 9 G. Defendant's Motion for Administrative Relief to Expand Page Limits Finally, on October 20, 2016, Defendant requested that the Court issue "general Orders" 10 United States District Court Northern District of California 11 requiring Plaintiffs to answer Defendant's request for production, or to allow each side to file 12 discovery letter briefs of 15 pages. (Dkt. No. 158.) On October 21, 2016, Plaintiffs filed an 13 opposition. (Dkt. No. 159.) The Court DENIES Defendant's request. First, the Court will not issue any "general 14 15 orders." Second, as discussed above, the discovery stay imposed on Defendant remains in place. 16 Third, Defendant has not provided any specific reasons why discovery letter briefs of 15 pages are 17 required to resolve any ongoing dispute; Defendant only argues generally that Plaintiffs did not 18 provide adequate responses, without identifying specific documents (with the exception of sales 19 and financial information) that Defendant contends needs to be provided. 20 Once Defendant has filed adequate infringement contentions and the stay is lifted, the 21 parties are to meet and confer to determine what documents Defendant believes must still be 22 produced, and to narrow any outstanding disputes. Defendant should, if possible, seek guidance 23 from his pro bono counsel. After the parties have determined what disputes remain and how many 24 pages are required to present the dispute to the Court, the parties may request a page extension.1 25 26 1 27 28 The parties are not permitted to file discovery letter briefs on every single request; the parties may file one discovery letter brief per set of requests (i.e., one letter concerning disputes over five requests contained in a single set of requests for production, not five letters concerning disputes over five requests contained in a single set of requests for production). 8 III. 1 CONCLUSION For the reasons stated above, the Court: (1) LIFTS the stay on the instant case; (2) 2 GRANTS IN PART and DENIES IN PART Plaintiffs' motion for leave to file an amended 3 complaint; (3) DENIES Defendant's motion to postpone the deadlines as moot; (4) finds that 4 Defendant's infringement contentions are inadequate and not in compliance with the Patent Local 5 Rules, and that Defendant is not permitted to seek discovery from Plaintiffs until Defendant serves 6 infringement contentions that are in compliance with the Patent Local Rules; (5) DENIES 7 Defendant's motion to strike Plaintiffs' discovery letter and preliminary claim construction; (6) 8 DENIES Defendant's discovery letter brief request that Plaintiff produce documents pursuant to 9 Patent Rule 3-4(a); and (7) DENIES Defendant's motion for administrative relief to expand page 10 limits. 11 United States District Court Northern District of California IT IS SO ORDERED. 12 Dated: January 3, 2017 13 __________________________________ KANDIS A. WESTMORE United States Magistrate Judge 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9

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