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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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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Case No. 15-cv-05290-KAW

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INTERAXON INC., et al.,

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v.

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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,

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NEUROTEK, LLC, et al.,

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Defendants.

Re: Dkt. Nos. 141, 144, 146, 147, 149, 158
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Currently pending before the Court are: (1) Plaintiffs InteraXon Inc.'s and InteraXon U.S.,

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Inc.'s (collectively, "InteraXon") motion for leave to file a first amended complaint; (2) Defendant

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Jonathan D. Cowan's discovery letter regarding production of documents pursuant to Patent Local

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Rule 3.4(a); (3) Defendant's motion to postpone deadlines; (4) Plaintiffs' second discovery letter

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brief regarding the adequacy of Defendant's infringement contentions; (5) Defendant's motion to

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strike Plaintiffs' second discovery letter brief and preliminary claim constructions; and (6)

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Defendant's motion to expand page limits. The Court deems these matters suitable for disposition

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without a hearing pursuant to Civil Local Rule 7-1(b). Having reviewed the papers filed by the

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parties and the relevant legal authority, the Court resolves the parties' numerous disputes as set

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forth below.

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I.

BACKGROUND

Plaintiffs filed the instant suit against Defendants NeuroTek, LLC, MindWaves, Ltd., and

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Dr. Jonathan D. Cowan (collectively, "Defendants") on November 18, 2015, seeking a declaration

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of non-infringement and a declaration of invalidity as to Patent No. 5,983,129 ("'129 Patent").

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(Compl., Dkt. No. 1.) InteraXon manufactures the MUSE Headband. (Compl. ¶ 4.) Around

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October 2013, Defendants accused InteraXon of infringing on the '129 Patent, and offered to

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license it. (Compl. ¶ 29.) In November 2014, Defendants demanded that InteraXon "cease and

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desist" from infringing on the '129 Patent, or enter into a licensing agreement. (Compl. ¶ 30.) The

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parties began negotiations for a license, during which Defendants withdrew the cease and desist

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demand, but InteraXon alleges that Defendants threatened to reinstate that demand around May

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2015. (Compl. ¶ 32.) InteraXon then filed the instant suit. Cowan has filed a counterclaim for

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infringement on the '129 Patent. (Answer, Dkt. No. 63 ¶ 45.)

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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

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counsel for the limited purpose of representing Defendant in the course of settlement. (Dkt. No.

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161.) The stay was to last until four weeks after the appointment of counsel. Counsel was

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appointed on November 3, 2016. (Dkt. No. 162.) As more than four weeks have passed, the

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Court LIFTS the stay on this case. This is separate from the discovery stay that the Court imposed

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on Defendant for failure to provide adequate infringement contentions. (Dkt. No. 135 at 4.) As

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discussed below, the discovery stay will remain in place.

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B.

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On October 5, 2016, Plaintiffs moved for leave to file a first amended complaint for

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declaratory judgment of non-infringement. (Dkt. No. 141.) Defendant did not file an opposition.

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Federal Rule of Civil Procedure 15(a)(2) provides that leave to amend a complaint should

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be "freely given when justice so requires." Fed. R. Civ. P. 15(a)(2). "This policy is to be applied

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with extreme liberality." Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir.

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2003). The courts consider five factors when determining whether leave to amend should be

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granted: "(1) bad faith, (2) undue delay, (3) prejudice to the opposing party, (4) futility of

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amendment[,] and (5) whether plaintiff has previously amended his complaint." Allen v. City of

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Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990). Not all factors carry equal weight. Eminence

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Capital, LLC, 316 F.3d at 1052. Prejudice to the opposing party must be given the greatest

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weight. Id. Absent prejudice, or a strong showing of bad faith, undue delay, or futility of

Plaintiffs' Motion to File a First Amended Complaint

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amendment, there exists a presumption under Rule 15(a) in favor of granting leave to amend. Id.

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(citation omitted).

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Here, Plaintiffs seek to add allegations incorporating Defendant's counterclaims, as well as

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additional allegations regarding invalidity. (Proposed First Amended Compl. at ¶¶ 37, 39, 43-45,

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50-59.) Plaintiffs also seek to add new causes of action for: (1) recovery of attorney's fees under

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35 U.S.C. § 285, and (2) sanctions under 28 U.S.C. § 1927 and/or Federal Rule of Civil Procedure

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11. (Id. at ¶¶ 62-89.)

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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

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has not opposed Plaintiffs' motion or suggested there is prejudice, bad faith, or undue delay. The

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United States District Court
Northern District of California

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Court finds, however, that Plaintiffs' proposed new causes of action are futile. An assertion of an

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"exceptional case" under 35 U.S.C. § 285 is not a separate cause of action, and "[t]herefore,

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[Plaintiffs] should not be permitted to include a separate count based on exceptional case, or the

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allegations underlying that nonexistent cause of action." Nycomed U.S. Inc. v. Glenmark Generics

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Ltd., No. 08-CV-5023 (CBA)(RLM), 2010 WL 1257803, at *3 (E.D.N.Y. Mar. 26, 2010)

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(denying leave to add separate cause of action, but permitting adding a demand for attorney's fees

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under section 285 in the complaint's prayer for relief); see also Aventis Cropscience, N.V. v.

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Pioneer Hi-Bred Int'l, Inc., 294 F. Supp. 2d 739, 743 (M.D.N.C. 2003) ("defendants' Section 285

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attorney fees request is not a separate, surviving and independent cause of action, but rather a

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collateral or ancillary issue which is dependent on the main action"). Plaintiffs have already

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requested attorney's fees under section 285 in their prayer for relief, and no further amendment is

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required. (See Compl. at 7, Dkt. No. 1.) Similarly, courts have found that sanctions under 28

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U.S.C. § 1927 and Federal Rule of Civil Procedure 11 are not separate causes of action. See Flynn

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v. Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor LLP, No. 3:09-cv-422-PMP-

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RAM, 2010 WL 4339368, at *10 (D. Nev. Oct. 15, 2010) ("Section 1927 does not contain an

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explicit right of action. Moreover, § 1927's plain text suggests Congress did not intend to imply a

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private right of action"); Glannon v. Garrett & Assocs., Inc., 261 B.R. 259, 268 (D. Kan. 2001)

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("Several courts have determined that section 1927 is not an independent cause of action and must
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be raised as part of the proceedings in front of the judge who witnessed the conduct at issue");

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Kraus Indus., Inc. v. Moore, No. 06-542, 2007 WL 2744194, at *10 (W.D. Penn. Sept. 18, 2007)

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("Federal Rule of Civil Procedure 11 does not provide for a separate and distinct cause of action");

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Turner v. Lerner, Sampson & Rothfuss, 776 F. Supp. 2d 498, 511 (N.D. Ohio 2011) ("Federal

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Rule of Civil Procedure 11 . . . does not create a separate cause of action, but rather, creates a

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means of punishing misconduct in a pending action"). Thus, Plaintiffs will not be permitted to add

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the causes of action for attorney's fees and sanctions, or the underlying allegations thereon.
C.

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On October 8, 2016, Defendant filed a notice of unavailability, and requested that

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deadlines be postponed. (Dkt. No. 146.) Defendant's motion is DENIED as moot; at the October

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United States District Court
Northern District of California

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18, 2016 case management conference, the Court stayed all deadlines. (Dkt. No. 156.) Thus, no

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postponement is required.

Defendant's Motion to Postpone Deadlines

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D.

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On October 10, 2016, Plaintiffs filed their second discovery letter brief, contending that

Plaintiffs' Second Discovery Letter Brief

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Defendant's infringement contentions are still inadequate. (Dkt. No. 147.) Pursuant to the Court's

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order, Defendant filed his opposition on October 20, 2016. (Dkt. No. 157.)

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With respect to independent claim 1, Plaintiffs argue that the infringement contentions do

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not adequately specify where the various components and software functions are found. (Dkt. No.

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147 at 2.) Having reviewed the infringement contentions, the Court determines that, particularly

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given that Defendant is a pro se litigant, the infringement contentions for independent claim 1

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appear to be adequate. For example, Plaintiffs point to the Independent Claim 1C answer, which

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states in relevant part: "The system's microprocessor performs the necessary calculations,

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supported by other components in the processing system. The specifically matched software

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which the microprocessor runs to create these calculations is provided by InteraXon."

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(Infringement Contentions at 3-4, Dkt. No. 143-1.) Plaintiffs argue that Defendant fails to

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"meaningfully identify the . . . 'necessary calculations,' 'other components,' or 'specifically

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matched software.'" In comparing the infringement contention with the patent, however, it

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appears that the "necessary calculations" refers to Independent Claim 1C's "subtracting said
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representative reference signal from said representative frontal lobe brainwave signal to produce a

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difference frontal lobe brainwave signal, and processing said difference frontal lobe signal to

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produce an AIndicator signal . . . ." ('129 Patent at 12:65-13:2, Dkt. No. 1-1.) "Specifically

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matched software" would seem to refer to a software application provided by Plaintiffs, which

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must be downloaded onto the user's computing system – i.e., a smartphone, computer, or tablet –

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in order to use the Muse. "Other components," meanwhile, seems to refer to components in the

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user's computing system which are required to make the computing system work. Assuming the

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Court's understanding is correct, the Court finds that the infringement contentions for independent

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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

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United States District Court
Northern District of California

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agreement with the above characterization.

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Although the Court finds that the infringement contentions for independent claim 1 are

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adequate, the Court concludes that the infringement contentions for the dependent claims are not.

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The Court previously found that Defendants' statement of "A combination of the answers to 1A-E"

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was inadequate because it required Plaintiffs to guess as to how such answers may be combined.

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(Dkt. No. 135 at 3.) Defendant's amended infringement contentions now seek to "incorporate" the

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answers to 1A-1E; this is no more specific than Defendant's prior infringement contentions.

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(Infringement Contentions at 4-5.) Even if the dependent claims include answers from

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Independent Claims 1A-E, combining or incorporating prior answers fails to adequately specify

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where that dependent step takes place. For example, as to dependent claim 9 ("where the step of

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processing said difference frontal lobe brainwave signal includes rejecting eye movement and

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other artifacts"), it is not clear how this step of processing would be performed in every location

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identified in the infringing product in Independent Claims 1A-D, such as the sensors on the Muse's

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band (1A), the electrically conducting part of the sensors (1B), or the interface between the

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systems and a device that displays the precalculated Attention Indicator values to the user (ID).

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Defendant must provide infringement contentions that do not incorporate, rely upon, or depend on

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prior answers in any way, and are properly limited to show where the dependent claim at issue is

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alleged to take place in the accused infringing product.
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Plaintiffs also argue that the infringement contentions fail to adequately explain any theory

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of indirect infringement, but instead appear to show that Claims 1A and 1B are performed by the

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Muse (constituting direct infringement) while Claims 1C, 1D, and 1E are performed by another

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entity, such as the user's computer (constituting indirect infringement). (Dkt. No. 147 at 3.) Per

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Defendant's opposition, that appears to be precisely what Defendant is alleging, except that Claim

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1E is a combination of both direct and indirect infringement since it repeats all other steps. (Dkt.

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No. 157 at 3-4.) Thus, no one entity performs every step of Claim 1.

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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

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does not respond to Plaintiffs' argument. (See Dkt. No. 157.) Upon review of the infringement

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United States District Court
Northern District of California

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contentions, it seems that Defendant himself does not believe that the doctrine of equivalents is

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applicable in this case, as he asserts that the processing would directly meet Claim 1C "without the

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need to apply the doctrine of equivalents[; Defendant] mention[s] it here because [Defendant]

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anticipate[s] that the Plaintiff, driven by desperation, will argue to the contrary." (Infringement

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Contentions at 7.) Accordingly, the Court will strike Defendant's contentions regarding the

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doctrine of equivalents. If Defendant should later find, through discovery, sufficient evidence in

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support of a doctrine of equivalents theory, Defendant may move the Court to amend his

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infringement contentions pursuant to Patent Local Rule 3-6, upon a showing of good cause. See

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Finjan, Inc. v. Proofpoint, Inc., Case No. 13-cv-5808-HSG, 2015 WL 15174920, at *10 (N.D. Cal.

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Apr. 2, 2015).

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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

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above within 14 days of the date of this Order. Because Defendant's infringement contentions are

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not in compliance with the Patent Local Rules, the discovery stay will remain in place and

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Defendant will not be permitted to seek discovery from Plaintiffs. The Court denies Defendant's

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request for sanctions and additional discovery.

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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

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12, 2016, Plaintiffs filed an opposition. (Dkt. No. 152.) The Court DENIES Defendant's motion.

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With respect to Plaintiffs' discovery letter brief, the Court finds that the parties adequately

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met and conferred prior to Plaintiffs filing their discovery letter brief. (See Dkt. No. 152, Exh. 1.)

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While it would be preferable for the parties to file a joint discovery letter following the

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requirements of the Court's standing order, the Court has previously allowed the parties to file

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separate discovery letters, in light of Defendant's pro se status. (See Dkt. No. 128.) Moreover,

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Defendant was given the opportunity to respond in full to Plaintiffs' discovery letter. (Dkt. Nos.

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United States District Court
Northern District of California

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153, 157.) Therefore, the Court declines to strike Plaintiffs' discovery letter brief.

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With respect to Plaintiffs' preliminary claim constructions, the Court finds that Plaintiffs

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were not required to meet and confer prior to exchanging preliminary claim constructions. Patent

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Local Rule 4-1(a), which concerns the exchange of claim terms, does not require the parties to

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meet and confer. Defendant instead relies on Patent Local Rule 4-1(b), which requires a meet and

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confer after the parties have exchanged their preliminary claim constructions. Accordingly, the

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Court declines to strike Plaintiffs' preliminary claim constructions.

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F.

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On October 7, 2016, Defendant filed a discovery letter brief seeking to enforce Patent

Defendant's Discovery Letter Brief

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Local Rule 3-4(a), and seeking "requirements, specifications, scripts, formulas, and artwork . . .

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along with all 'other documentation sufficient to show that the operation of any aspect or elements

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of an Accused Instrumentality identified by the patent claimant in its Patent L.R. 3-1(c) chart."

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(Dkt. No. 144.) Pursuant to the Court's order, Plaintiffs filed their opposition on October 21,

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2016. (Dkt. No. 159.)

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The Court DENIES Defendant's request that Plaintiffs produce the requested documents.

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First, because Defendant's infringement contentions are still not adequate, the discovery stay

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imposed on Defendant is still in place. Second, Plaintiffs represent that they have already

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produced the documentation sought by Defendant, and have made other documents – i.e., source
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code – available for Defendant to inspect. (Dkt. No. 159 at 3.) While Defendant contends that

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Plaintiffs should e-mail him these additional documents, rather than requiring him to make a trip

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to inspect the documents, Plaintiffs are under no such obligation. Federal Rule of Civil Procedure

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34 states that absent objections, a response to a request for production "must . . . state that

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inspection and related activities will be permitted as requested," although "[t]he responding party

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may state that it will produce copies of documents or of electronically stored information instead

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of permitting inspection." (Emphasis added.) In short, a party is not required to produce copies of

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documents or electronically stored information in lieu of permitting an inspection.

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G.

Defendant's Motion for Administrative Relief to Expand Page Limits

Finally, on October 20, 2016, Defendant requested that the Court issue "general Orders"

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United States District Court
Northern District of California

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requiring Plaintiffs to answer Defendant's request for production, or to allow each side to file

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discovery letter briefs of 15 pages. (Dkt. No. 158.) On October 21, 2016, Plaintiffs filed an

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opposition. (Dkt. No. 159.)
The Court DENIES Defendant's request. First, the Court will not issue any "general

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orders." Second, as discussed above, the discovery stay imposed on Defendant remains in place.

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Third, Defendant has not provided any specific reasons why discovery letter briefs of 15 pages are

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required to resolve any ongoing dispute; Defendant only argues generally that Plaintiffs did not

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provide adequate responses, without identifying specific documents (with the exception of sales

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and financial information) that Defendant contends needs to be provided.

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Once Defendant has filed adequate infringement contentions and the stay is lifted, the

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parties are to meet and confer to determine what documents Defendant believes must still be

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produced, and to narrow any outstanding disputes. Defendant should, if possible, seek guidance

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from his pro bono counsel. After the parties have determined what disputes remain and how many

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pages are required to present the dispute to the Court, the parties may request a page extension.1

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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).
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III.

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CONCLUSION

For the reasons stated above, the Court: (1) LIFTS the stay on the instant case; (2)
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GRANTS IN PART and DENIES IN PART Plaintiffs' motion for leave to file an amended
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complaint; (3) DENIES Defendant's motion to postpone the deadlines as moot; (4) finds that
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Defendant's infringement contentions are inadequate and not in compliance with the Patent Local
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Rules, and that Defendant is not permitted to seek discovery from Plaintiffs until Defendant serves
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infringement contentions that are in compliance with the Patent Local Rules; (5) DENIES
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Defendant's motion to strike Plaintiffs' discovery letter and preliminary claim construction; (6)
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DENIES Defendant's discovery letter brief request that Plaintiff produce documents pursuant to
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Patent Rule 3-4(a); and (7) DENIES Defendant's motion for administrative relief to expand page
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limits.
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United States District Court
Northern District of California

IT IS SO ORDERED.
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Dated: January 3, 2017
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__________________________________
KANDIS A. WESTMORE
United States Magistrate Judge

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