Fitbit, Inc. v. AliphCom et al

Filing 76

ORDER granting 64 Motion to Bifurcate and Stay the Antitrust Counterclaim. Signed by Edward J. Davila on 5/27/2016 (ejdlc2S, COURT STAFF) (Filed on 5/27/2016) Modified on 5/27/2016 (ejdlc1S, COURT STAFF).

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

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FITBIT, INC.,

Case No. 5:15-cv-04073-EJD
Plaintiff,

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v.
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ALIPHCOM, et al.,
Defendants.

ORDER GRANTING PLAINTIFF’S
MOTION TO BIFURCATE AND STAY
DEFENDANTS’ ANTITRUST
COUNTERCLAIM
Re: Dkt. No. 64

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Plaintiff FitBit, Inc. (“Plaintiff”) filed a complaint against Defendants Aliphcom, Body

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United States District Court
Northern District of California

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Media, Inc., and Body Media (collectively “Defendants”) alleging infringement of a number of

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Plaintiff’s patents related to wearable fitness tracking devices. Defendants filed an answer denying

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these allegations and asserting a counterclaim of monopolization in violation of 15 U.S.C. § 2.

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Federal jurisdiction arises pursuant to 28 U.S.C. § 1331. Dkt. No. 64. Presently before the

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court is Fitbit’s motion to bifurcate and stay Aliphcom’s antitrust counterclaim. Aliphcom opposes

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the motion. Having carefully considered the pleadings and motion papers filed by the parties, the

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court finds, concludes and orders as follows:

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1. Courts have broad discretion under Federal Rule of Civil Procedure Pro 42(b) to bifurcate

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and stay counterclaims. Rule 42(b) rule provides as follows:
The court, in furtherance of convenience or to avoid prejudice, or
when separate trials will be conducive to expedition and economy,
may order a separate trial of any claim, cross-claim, counterclaim, or
third-party claim, or of any separate trial of any number of claims,
cross-claims, counterclaims, third-party claims. When ordering a
separate trial, the court must preserve any federal right to a jury trial.

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Rule 42(b)’s standards are read “in the disjunctive instead of in the conjunctive.” Giro Sport

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Design Inc. v. Pro-Tec Inc., 1989 WL 418774, at *2 (N.D. Cal. Mar. 16, 1989) (citing In Re Paris

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Air Crash of March 3, 1974, 69 F.R.D. 310 (1975)). As such, satisfaction of even one of the

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standards constitutes sufficient grounds for bifurcation. The burden of proving that bifurcation is

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Case No.: 5:15-cv-04073-EJD
ORDER GRANTING PLAINTIFF’S MOTION TO BIFURCATE AND STAY DEFENDANTS’
ANTITRUST COUNTERCLAIM

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justified rests with the party seeking it. Chip-Mender Inc. v. Sherwin-Williams Co., No. C-05-

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3465-PJH, 2006 WL 13058, at *13 (N.D. Cal. Jan 3, 2006) (citing Spectra-Physics Lasers, Inc. v.

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Uniphase Corp., 144 F.R.D. 99, 101 (N.D. Cal. 1992)).

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2. In the context of patent suits, district courts often stay an antitrust counterclaim until the

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issues of patent infringement and validity are resolved. In re Innotron Diagnostics, 800 F. 2d 1077,

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1084 (Fed. Cir. 1986); see also Eurand, 2009 WL 3172197, at *1. Those courts reason that such a

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separation simplifies issues, reduces jury confusion, and helps courts manage the volume and

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complexity of evidence presented to the jury. Masimo Corp v. Philips Elec. N. Am. Corp., 742 F.

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Supp. 2d 492, 496 (D. Del. 2010); see Baldwin Hardware Corp. v. Franksu Enter. Corp., No. CV90-4919-WDK, 1990 WL 357312, at *2 (C.D. Cal. Dec. 28, 1990) (“[S]eparating complex

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United States District Court
Northern District of California

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antitrust issues of market power and monopoly from patent, unfair competition and trade dress

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issues would reduce the likelihood of jury confusion and result in an earlier resolution of the

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issues in dispute.”); see also Orthophoenix, LLC v. Dfine, Inc., No. 13-1004-LPS, 2015 WL

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1938702, at *1 (D. Del. Apr. 28, 2015) (observing that trying patent infringement, patent validity,

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and antitrust issues before the same jury may lead to confusion).

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3. Plaintiff argues that judicial economy, convenience of the parties, and

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streamlining of complex litigation favors the bifurcation and stay of the antitrust claim.

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Additionally, Plaintiff contends that Defendant’s characterization of the market as one for

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connected fitness trackers differs from its own, and is precisely the type of issue that broadens the

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scope of discovery, requires expert economic testimony, and increases overall litigation expenses.

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Finally, Plaintiff concludes that the immense cost, scope, and expense associated with allowing

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antitrust discovery to continue is contrary to Rule 42(b)’s goal of resource preservation.

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4. Defendants counter that Plaintiff’s motion to bifurcate and stay its antitrust counterclaim

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should be denied for several reasons. First, they argue the efficiency gained by a bifurcation is

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outweighed by the harm suffered by Defendants. According to Defendants, a stay would give

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Plaintiff the chance to consolidate its control over the market for connected activity trackers and

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Case No.: 5:15-cv-04073-EJD
ORDER GRANTING PLAINTIFF’S MOTION TO BIFURCATE AND STAY DEFENDANTS’
ANTITRUST COUNTERCLAIM

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increase a competitor’s barrier to entry to such an extent that Defendants would be excluded from

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the market. Second, Defendants assert that a bifurcation and stay would not improve efficiency

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because the discovery relevant to the antitrust claim is not substantively distinct from the

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discovery relevant to patent infringement claims. Finally, Defendants argue that even if the

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antitrust claim were bifurcated, the existence of significant evidentiary overlap between patent and

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antitrust issues favors the continuation of discovery.

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5. The court finds that bifurcation and stay of the antitrust counterclaim is appropriate for

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multiple reasons. First, resolving issues of patent validity and infringement before addressing the

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antitrust counterclaim may render the antitrust claim moot - thereby conserving judicial economy.
Apotex, Inc. v. Senju Pharm. Co., Ltd., 921 F. Supp. 2d 308, 314 (D. Del. Feb. 7, 2013) (“The

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United States District Court
Northern District of California

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court has stayed antitrust litigation where there was a possibility that the resolution of the

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underlying patent claims could moot, narrow, or otherwise simplify the antitrust claims.”); see

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also Iptronics v. Avago Technologies U.S., Inc., No. 14-CV-05647-BLF, 2015 WL 5029282, at *8

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(N.D. Cal. Aug. 25, 2015) (same). In addition, to prevail on the antitrust claim, Defendants must

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prove that Plaintiff’s suit is “objectively baseless,” which requires convincing a court that no

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“reasonable patent owner” could believe that Defendants’ products infringed Plaintiff’s patents.

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Eurand, 2009 WL 3172197, at * 2. And even if Defendant prevails on the question of

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infringement, a court may still rule that the suit was not objectively baseless because Plaintiff may

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well have filed the suit with a realistic expectation of prevailing on the merits. Id.; see also

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Apotex, 921 F. Supp. 2d 308, 314-15 (D. Del. Feb. 7, 2013) (reasoning that while a winning

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lawsuit is by definition a reasonable effort at petitioning for redress and therefore not a sham, a

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losing lawsuit does not necessarily mean that the litigation was a sham because a party may have

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had entirely reasonable ground for bringing the suit) (citations and internal quotations omitted).

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As such, it is highly likely that the antitrust issues will be resolved or rendered moot upon

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resolution of patent infringement and validity issues. Therefore a bifurcation and stay would

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conserve judicial economy.

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Case No.: 5:15-cv-04073-EJD
ORDER GRANTING PLAINTIFF’S MOTION TO BIFURCATE AND STAY DEFENDANTS’
ANTITRUST COUNTERCLAIM

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6. Second, the lack of evidentiary overlap between patent validity, infringement, and antitrust
issues will cause jury confusion. The antitrust claim involves the analysis of anticompetitive and

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monopolistic behavior on the part of a party, while patent infringement focuses on “the products

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of a patentee and the alleged infringer.” Masimo Corp., 742 F. Supp. 2d at 498. The antitrust

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claim restricts monopolistic behavior, while a patent grants its owner certain monopolistic powers.

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Id. at 499. A jury presented with evidence alleging “the lawful exercise of patent rights” and “the

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unlawful exercise of anticompetitive behavior,” could easily “blur the distinction between

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legitimate patent enforcement” and the exercise of “unlawful” monopolistic powers. Id. Allowing

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Defendants to introduce evidence related to antitrust issues would increase the likelihood of just

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such confusion among the jury, and interfere with their ability to address the more pertinent issue

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United States District Court
Northern District of California

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of patent infringement. As such, a bifurcation of the antitrust claim is warranted.

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7. Defendants contend that even if the court bifurcates Defendant’s counterclaim,

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discovery associated with the antitrust counterclaim should continue because there is significant

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evidentiary overlap between patent and antitrust issues. The court rejects this argument for the

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reasons stated above, and finds that allowing discovery to proceed with respect to the antitrust

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counterclaim would be unnecessary and burdensome.

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On balance, the court finds that the antitrust counterclaim should be bifurcated and stayed

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in the interests of conserving judicial economy and reducing jury confusion. As such, the court

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GRANTS Plaintiff’s motion to bifurcate and stay Defendants’ antitrust counterclaim and stays

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discovery with respect to the same. The hearing scheduled for June 2, 2016 is VACATED.

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IT IS SO ORDERED.

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Dated: May 27, 2016

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______________________________________
EDWARD J. DAVILA
United States District Judge

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Case No.: 5:15-cv-04073-EJD
ORDER GRANTING PLAINTIFF’S MOTION TO BIFURCATE AND STAY DEFENDANTS’
ANTITRUST COUNTERCLAIM