Solutran, Inc. v. U.S. Bancorp et al

Filing 299

MEMORANDUM OPINION AND ORDER granting in part and deferring in part Plaintiff's Motion in Limine No. 2, to exclude evidence of testimony, exhibits, and arguments related to BankServ, part of 228 MOTION in Limine filed by Solutran, Inc. (Written Opinion). Signed by Judge Susan Richard Nelson on 2/28/2018. (SMD)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

Solutran, Inc.,

Case No. 13-cv-02637 (SRN/BRT)

Plaintiff,
v.
U.S. Bancorp and Elavon, Inc.,
Defendants.
MEMORANDUM OPINION
AND ORDER
U.S. Bancorp and Elavon, Inc.,
Counter-claimants,
v.
Solutran, Inc.,
Counter-defendant.

Robert J. Gilbertson, David J. Wallace-Jackson, and Sybil Dunlop, Greene Espel PLLP,
222 South Ninth Street, Suite 2200, Minneapolis, Minnesota, for Plaintiff and Counterdefendant.
Peter M. Lancaster, Ben D. Kappelman, and Kenneth E. Levitt, Dorsey & Whitney LLP,
50 South Sixth Street, Suite 1500, Minneapolis, Minnesota 55402, and J. Thomas Vitt,
Jones Day, 90 South Seventh Street, Suite 4950, Minneapolis, Minnesota 55402, for
Defendants and Counter-claimants.

SUSAN RICHARD NELSON, United States District Judge
I.

INTRODUCTION
The Court now addresses Plaintiff’s Motion in Limine No. 2 to exclude evidence,

testimony, exhibits, and argument related to BankServ [Doc. No. 228]. For the reasons
stated below, the Court grants the motion in part and defers ruling in part.
II.

BACKGROUND
On September 25, 2013, Plaintiff filed a Complaint against Defendants, alleging

infringement of its United States Patent No. 8,311,945 (“’945 patent”). (Compl. [Doc.
No. 1].) Patent ‘945 was issued to Plaintiff on November 13, 2012. (Id., Ex. A [Doc.
No. 1-1].)

As required by the Pretrial Schedule, Defendants served their invalidity

contentions on August 15, 2014. (See Ernstene Aff. [Doc. No. 105] ¶ 2-3.) The case was
subsequently stayed while Defendants pursued a Covered Business Method review with the
Patent Trial and Appeal Board. (See generally Order dated Sept. 18, 2014 [Doc. No. 50].)
After the stay was lifted, Magistrate Judge Thorson issued an amended pretrial scheduling
order that allowed Defendants to amend their invalidity contentions by April 15, 2016,
provided that they could demonstrate good cause to do so. (Am. Pretrial Scheduling Order
[Doc. No. 69], at 4.)
Defendants moved to amend their invalidity contentions to include, among other
things, a system called BankServ.

(See Mot. for Leave to Amend Invalidity and

Noninfringement Contentions [Doc. No. 98].)

Defendants describe BankServ as “an

electronic check conversion product offered by BankServ Check Services between 1999
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and at least 2002.” (U.S. Bank’s Opp’n to Solutran’s Mots. in Lim. [Doc. No. 265]
(“Defs.’ Mem. in Opp’n”), at 11.) The Magistrate Judge denied Defendants’ motion,
finding that Defendants had not met their burden to show diligence and that allowing
amendment would be prejudicial to Plaintiff. (Minute Entry dated Oct. 3, 2016 [Doc.
No. 114].) Defendants objected, and this Court affirmed the Magistrate Judge’s decision.
(See Order dated Dec. 20, 2016 [Doc. No. 151].) Defendants concede that, because of the
Magistrate Judge’s order, they cannot offer evidence of BankServ’s process to support their
claims of patent invalidity. (Tr. of Final Pretrial Conference [Doc. No. 284] (“Tr.”), at 43.)
Defendants seek to admit evidence relating to BankServ for other purposes, however,
and Plaintiff has moved to exclude that evidence. (Solutran’s Mots. in Lim. [Doc. No. 228],
¶ 2.) Plaintiff has also expressed concern that some of Defendants’ exhibits appear to
reference other prior art that was not disclosed in Defendants’ invalidity contentions, which
Defendants plan to use for other purposes at trial.1 (See Tr., at 35-37.)
Defendants respond that even though BankServ was excluded for invalidity
purposes, it is still relevant and admissible for other purposes at trial, such as to rebut
allegations of copying and to counter Plaintiff’s damages claims. (Defs.’ Mem. in Opp’n, at
10-16.)

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The Court’s ruling in this Order will apply to any attempt by Defendants to present
evidence of nondisclosed or previously excluded prior art. The Court will expect the
parties to raise timely objections to such evidence.
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III.

DISCUSSION
Defendants contend that they should be permitted to introduce evidence of the

BankServ system for four purposes: (1) to rebut Plaintiff’s argument that Defendants’
infringement was willful because they copied Plaintiff’s patent ‘945; (2) to rebut Plaintiff’s
argument that Defendants’ copying of patent ‘945 shows that the patent is nonobvious; (3)
to counter Plaintiff’s claim of lost profits by showing that BankServ was an available
noninfringing alternative; and (4) in the reasonable royalty analysis, to show that patent
‘945 lacked utility or advantages over old modes or devices.2 (Defs.’ Mem. in Opp’n, at 1113; Tr., at 45-48.)
These first two purposes relate to copying. The first is moot, because the Court has
granted Defendant U.S. Bank’s Motion in Limine to Exclude Argument that Defendants’
Infringement was Willful [Doc. No. 235]. (See Order dated Feb. 26, 2018 [Doc. No. 297].)
The second purpose is too closely related to Defendants’ invalidity claims. If Plaintiff
offers evidence of copying to show nonobviousness, it will be to counter Defendants’ claim
that patent ‘945 is invalid because it is obvious under 35 U.S.C. § 103. Thus, if Defendants
use BankServ to rebut that evidence and show that they did not copy Plaintiff’s patent, they
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The Court notes a fundamental inconsistency between these purposes. To introduce
BankServ evidence to rebut Plaintiff’s argument of copying as a secondary factor showing
nonobviousness, Defendants would be asserting they modified the BankServ process
instead of copying patent ‘945. That argument depends upon a fundamental similarity
between the BankServ process and Plaintiff’s patented process. But to offer BankServ as an
available noninfringing alternative, Defendants must differentiate the two processes enough
to argue that BankServ’s process is noninfringing. Stated another way, Defendants propose
to argue that BankServ’s process is both the same as, and different from, Plaintiff’s patented
process. This could easily confuse the jury.
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would essentially be using it to show that patent ‘945 is invalid for obviousness. This
purpose undermines the Magistrate Judge’s order denying Defendants’ motion to amend
their invalidity contentions. The Court will not permit Defendants to introduce evidence of
the BankServ process or other nondisclosed prior art to rebut accusations of copying.
Defendants make a stronger argument for admitting evidence related to BankServ to
counter Plaintiff’s damages claims. Plaintiff seeks to recover lost profits. Under the
Panduit standard, this requires Plaintiff to show the lack of an available, noninfringing
alternative process that Defendants might have used instead of infringing the patent. See
Grain Processing Corp. v. Am. Maize-Products Co., 185 F.3d 1341, 1351 (Fed. Cir. 1999);
SmithKline Diagnostics, Inc. v. Helena Labs. Corp., 926 F.3d 1161, 1165 (Fed. Cir. 1991).
Defendants claim that BankServ’s process was an acceptable alternative to the process that
infringed upon Plaintiff’s patent ‘945. (Defs.’ Mem. in Opp’n, at 13.) Plaintiff responds
that BankServ was not “on the market” while Defendants were infringing patent ‘945, so it
cannot be offered as an “available” alternative. (Tr., at 41.)
“When an alleged alternative is not on the market during the accounting period, a
trial court may reasonably infer that it was not available as a noninfringing substitute at that
time.” Grain Processing, 185 F.3d at 1353. However, the infringing party may overcome
that inference by showing that the substitute was available during the lost-profits accounting
period based on “alternative actions” that the infringing party “reasonably could have taken
to avoid infringement.” DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 567 F.3d
1314, 1331 (Fed. Cir. 2009). Defendants have stated that the BankServ process, though not
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in use during infringement period here, could easily have been put into use to substitute for
the infringing process. (Tr., at 48.) The Court has not seen evidence to this effect, so the
Court will defer ruling on the question of whether Defendants may submit the BankServ
process or other nondisclosed prior art as an available noninfringing alternative to Plaintiff’s
patented process. The Court will permit a proffer made by Defendants’ experts, in advance
of their testimony and out of the hearing of the jury, as to the availability of the BankServ
process during the accounting period and whether it was noninfringing. The Court will then
evaluate whether the evidence relating to BankServ is admissible to counter Plaintiff’s
claims for lost profits.
Defendants also argue that BankServ’s process is admissible to counter Plaintiff’s
claim for reasonable royalties, because one of the factors to consider in determining a
reasonable royalty is “[t]he utility and advantages of the patent property over the old modes
or devices, if any, that had been used for working out similar results.” Georgia-Pacific
Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970). Again, the Court
will defer ruling on this issue, and will invite Defendants to proffer evidence from their
experts that the BankServ process is an “old mode or device” that should inform the
reasonable royalty determination.
Should the Court determine that such evidence will be admissible for contesting
damages, it will be for a limited purpose and Defendants are admonished not to attempt to
use evidence of the BankServ process or other nondisclosed prior art to argue invalidity to
the jury. For instance, no element-by-element comparison will be permitted. Even if
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probative, such a comparison would result in unfair prejudice to Plaintiff outweighing that
probative value. See Fed. R. Civ. P. 403. Any introduction of evidence relating to
BankServ or other nondisclosed prior art will result in a limiting instruction.

That

instruction should be anticipated and agreed upon, if possible, by the parties.

If no

agreement can be reached on a limiting instruction, the parties are directed to submit their
proposals to the Court by 12:00 pm on March 2, 2018.
To guard against the possibility that jurors may misapply evidence or argument
relating to nondisclosed prior art, the Special Verdict Form will direct the jury, if it finds
invalidity, to identify the invalidating prior art. If the jury lists prior art that was not
properly admissible for that purpose, such as the BankServ process, that verdict will not be
accepted by the Court.
IV.

CONCLUSION
Based on the submissions and the entire file and proceedings herein, IT IS

HEREBY ORDERED that Plaintiff’s Motion in Limine No. 2 to exclude evidence
testimony, exhibits, and argument related to BankServ [Doc. No. 228] is GRANTED IN
PART AND DEFERRED IN PART as described herein.

Dated: February 28, 2018

s/Susan Richard Nelson
SUSAN RICHARD NELSON
United States District Judge

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