BASF Catalysts LLC v. Aristo Inc

Filing 334

OPINION AND ORDER: Court GRANTS IN PART AND DENIES IN PART 284 Motion for Bifurcation (Phased) of the Trial on Infringement from Willfulness and Damages. Signed by Chief Judge Philip P Simon on 6/29/2012. cc: Gregory L Diskant PHV, Lynde F Lintemuth PHV (tc)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
BASF CORP.,
Plaintiff,
v.
ARISTO, INC. and VICTOR ROSYNSKY,

Defendants.

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2:07 CV 222 PPS

OPINION and ORDER
Before the Court is Defendant Aristo, Inc.’s Motion for Bifurcation (Phased) of the Trial
on Infringement from Willfulness and Damages. [DE 284.]
This is a patent infringement case in which BASF claims that Aristo infringed its “‘210
patent,” which teaches a method of coating ceramic substrates with a “uniform coating profile”
that then become a core component of catalytic converters. Trial is scheduled to begin in a little
more than two weeks, and, pursuant to Federal Rule of Civil Procedure 42, Aristo has asked that
the trial be bifurcated into two phases: a first phase limited strictly to addressing whether the
allegedly infringing substrates it has produced contain a “uniform coating profile” and a second
phase of the trial (if necessary) that would address questions of willfulness and damages.
Plaintiff BASF is amenable to bifurcating the case more broadly, with phase one addressing
liability (including willfulness) and phase two addressing damages. As explained below,
Aristo’s motion for bifurcation will be granted in part and denied in part.
Rule 42(b) states that “[f]or convenience, to avoid prejudice, or to expedite and
economize, the court may order a separate trial of one or more separate issues, claims,

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crossclaims, counterclaims, or third-party claims.” Fed. R. Civ. P. 42(b). “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.” Gardco Mfg., Inc. v. Herst Lighting Co., 820 F.2d 1209, 1212
(Fed. Cir. 1987).
As noted, both sides here are amenable to bifurcation, they just disagree as to the exact
contours of the split. The central disagreement comes down to BASF’s ability to make its case
that Aristo willfully infringed its patent. BASF hopes to make this case because if willfulness is
found the Court is authorized to treble the damages. See 35 U.S.C. § 284. Aristo argues that any
discussion of willfulness will be unduly prejudicial and cloud the central infringement issue of
this case. Aristo would prefer that the liability phase be severely limited – basically just the
question of whether its substrates have a uniform coating profile and thus infringe the ‘210
patent.
Aristo seems to believe that this entire trial could be decided simply by holding up an
Aristo substrate and asking the jury if it has a “uniform coating profile.” See DE 284 (“It is
either a ‘uniform coating profile’ or it isn’t.”). That position is too reductionist. BASF has to be
able to explain its case to the jury, which includes setting up the factual background and context
of its direct claim against BASF and its inducement claim against Victor Rosynsky. This means
allowing BASF to present “evidence about the patented technology, the products, and the
industry.” [DE 299 at 8.] That is all necessary and relevant background to understanding what
the ‘210 patent is, what a catalytic converter is, what a substrate is, what the uniform coating
profile is, whether Aristo has performed a process by which a substrate with uniform coating
profile has been produced, and whether Rosynsky encouraged or aided in that infringement.

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Evidence about the design, construction, and operation of Aristo’s MISO Coater machine is also
fair game as helpful background for the jury to understand the process of producing the allegedly
infringing products.
Moreover, Aristo’s position is somewhat confusing because it’s not clear exactly what
evidence goes directly to the willfulness issue that could be easily separated from the ultimate
question of infringement. I think this is as close as Aristo gets to identifying what it believes
would be willfulness-specific evidence that could be saved for a second phase of trial:
The hiring of Rosynsky, his former status, BASF’s internal machine, BASF’s
actual commercial process, damages, the use of MPT to build the MISO, whether
or not the MISO machine looks similar to BASF’s commercial machine, whether
or not Aristo, MPT and/or Rosynsky did or did not show the MISO to BASF,
Aristo’s, Vange and Andy Proimos’s plans or intent, etc., do not actually answer
the only relevant question, which is whether or not Aristo’s profiles fit the Court’s
definition of the claims of the ‘210 patent.
[DE 303 at 3.] I disagree, as I believe that, except for damages, that list identifies factual
elements that are fair game for BASF to use to make its case either against Aristo on direct
infringement or against Rosynsky on induced infringement (or both).
I do agree, however, that any evidence as to the damages that flow from the alleged
infringement will be reserved for a second phase of the trial after the jury has reached a verdict
on liability. Let me be as clear as possible about what this delineation will look like. In
establishing the potential damages in this case, both sides have hired experts to engage in the
hypothetical exercise of attempting “to ascertain the royalty upon which the parties would have
agreed had they successfully negotiated an agreement just before infringement began.” Lucent
Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir. 2009). Those damages experts will
not testify until the second phase of trial (if that phase is necessary). All other factual issues,

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including issues that may have a bearing on the factual backdrop that enabled the expert’s to
arrive at their royalty conclusion, will be proffered in the first phase of the trial. For example,
one major dispute between the damages experts is the extent to which Aristo’s intent to enter the
Original Equipment Manufacturer (“OEM”) market effects the calculation of the hypothetical
royalty rate. Evidence from Aristo’s owners and employees about that intent will be permitted in
the first phase of the trial.
One further note on the issue of willfulness. The Federal Circuit established the test for
willful infringement in In re Seagate Tech., 497 F.3d 1360 (Fed. Cir. 2007). In Seagate, the
Federal Circuit held that to establish willful infringement, “a patentee must show by clear and
convincing evidence that the infringer acted despite an objectively high likelihood that its actions
constituted infringement of a valid patent.” Id. at 1371. If that threshold hurdle is met, then the
patentee must also prove “that this objectively-defined risk . . . was either known or so obvious
that it should have been known to the accused infringer.” Id. So under Seagate there is both an
objective and subjective component to proving willfulness.
Earlier this month, however, the Federal Circuit further clarified the willfulness standard
in Bard Peripheral Vascular, Inc. v. W.L. Gore & Associates, Inc., __ F.3d __, 2012 WL
2149495 (Fed. Cir. 2012). According to Bard, a willfulness determination should be sent to the
jury only when a judge has decided, as a matter of law, that there is clear and convincing
evidence that a defendant’s conduct in using an allegedly patented process was objectively
reckless. Id. at *3. In other words, the first prong of the Seagate willfulness standard – the one
dealing with objective recklessness – is a matter for the court to decide. As a result, in order to
send the issue of willfulness to the jury, I would have to find that Aristo’s defenses to its conduct

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– its arguments, for example, that its substrates don’t infringe the ‘210 patent or that the ‘210
patent was invalid or that its construction of the ‘210 patent’s claims were valid – are all
“objectively baseless.” Id.
Aristo never moved for summary judgment on the issue of willfulness, so I will have to
wait and see what BASF comes up with at trial to prove the issue. The proof will be in the
pudding. But I am mindful of what Bard now mandates. Pursuant to Federal Rule of Civil
Procedure 50, I will reserve ruling on the issue of willfulness until BASF has had an opportunity
to present its evidence at trial. At that time – with the benefit of having seen and heard the
evidence – I can then decide the willfulness issue by revisiting the defenses raised by Aristo both
at the claims construction hearing and in summary judgment in order to determine whether
Aristo acted in an objectively reckless way.
Therefore, Defendant Aristo, Inc.’s Motion for Bifurcation (Phased) of the Trial on
Infringement from Willfulness and Damages [DE 284] is GRANTED in part and DENIED in
part, consistent with this Opinion.
SO ORDERED.
ENTERED: June 29, 2012
s/ Philip P. Simon
PHILIP P. SIMON, CHIEF JUDGE
UNITED STATES DISTRICT COURT

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