Water Technology, LLC et al v. Kokido Development Limited et al

Filing 259

MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that Water Tech's motion to compel is GRANTED in part. ECF No. 192 . Menard shall respond to requests for production 13, 15, 31, 32, 35, 40, and 41 and interrogatories 2 and 5, to the extent the in formation sought relates to the remaining patents-in-suit and does not duplicate data already produced by Kokido. IT IS FURTHER ORDERED that Water Tech's motion to compel is DENIED with respect to request for production 33 and Interrogatory 2 to the extent they seek sales data per month, per customer, and per location. Menard need only produce annual gross and net sales figures per accused product. IT IS FURTHER ORDERED that the parties shall cooperate in good faith to schedule Menard's 30(b)(6) deposition as expeditiously as possible. Signed by District Judge Audrey G. Fleissig on 1/3/2020. (AFC)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
WATER TECHNOLOGY, LLC
and WATER TECH. CORP.,

)
)
)
Plaintiffs/Counterclaim Defendants, )
)
)
v.
)
)
KOKIDO DEVELOPMENT LIMITED
)
and MENARD, INC.,
)
)
Defendants/Counterclaim Plaintiffs. )

Case No. 4:17-cv-01906-AGF

MEMORANDUM AND ORDER
This matter is before the Court on Plaintiff’s motion to compel discovery from
Defendant Menard. EFC No. 192. For the reasons set forth below, the motion will be
granted in part and denied in part.
BACKGROUND
This is a patent infringement case primarily between two manufacturers of
swimming pool vacuum cleaners, Plaintiff Water Tech and Defendant Kokido.
Defendant Menard, a retailer and the subject of the present motion to compel, was one of
Water Tech’s largest buyers until it switched to Kokido products in 2017. 1 Menard is
named as a defendant in this lawsuit by virtue of its status as a Kokido customer and a
vendor of the accused products.

1

According to Water Tech’s complaint, Menard purchased approximately $2.4 million in
Water Tech products between 2012 and 2016.
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On December 13, 2017, Water Tech served Menard with 73 requests for
production and nine interrogatories. ECF No. 193, Ex. 2 & 5. As relevant here, Water
Tech’s request included the following (paraphrased):
Requests for Production (Doc. 193-2):
13.

Communications between Menard and third parties (other than Kokido)
referring to Water Tech or the asserted patents;

15.

Communications between Menard and any distributor of Kokido products
relating to Water Tech, the asserted patents, or the accused products;

31.

Documents related to Menard’s sale and distribution of accused products;

32.

Documents sufficient to determine Menard’s gross revenue from accused
products;

33.

Documents sufficient to determine Menard’s monthly sales from accused
products, per customer or per product, with quantity and dollar value;

35.

Documents sufficient to show gross and net selling price and annual sales
per accused product;

40.

Documents reflecting Menard’s advertising and promotion of the accused
products;

41.

Sales projections and pricing policies for the accused products;

67.

Documents related to Menard’s decision to start buying Kokido products.

Interrogatories (Doc. 193-5):
2.

For each accused product, on annual, monthly, per product, and per
customer bases since date of first sale: (1) location where sold, (2) delivery
location, (3) gross and net sales in dollars, (4) cost of goods sold, (5) gross
profit margin, (6) any other direct or indirect costs allocated to those sales
on gross and per-unit bases;

5.

Communications, both internal and with Kokido, including date, time, and
substance, relating to Menard’s decision to buy Kokido products.

In response on January 19, 2018, Menard asserted a general objection that the
requests were premature, asserted boilerplate objections to the majority of specific
requests, produced a total of seven documents, and agreed to provide some others in the
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future. The Court issued its Markman order March 18, 2019. The parties moved for
entry of a case management order on May 2, 2019, and that order issued June 9, 2019,
setting a discovery deadline of September 9, 2019. On June 28, 2019, Water Tech
contacted Menard to obtain responses to the aforementioned RFPs and interrogatories.
Menard has refused to respond.
In its motion to compel, 2 Water Tech asserts that its requests are narrowly tailored
to Menard’s role as a defendant customer/retailer and are relevant to questions of
damages, indirect infringement based on instructions for use, and the rationale behind
Menard’s decision to switch products. Menard objects to the motion on numerous
grounds: (1) the motion is untimely because Water Tech waited over a year after
Menard’s initial responses to demand additional discovery; (2) Water Tech’s claims
against Menard involve only one product, the Telsa 30, so, if Kokido prevails on
summary judgment with respect to the ‘460 patent, then Menard should be dismissed
from the lawsuit entirely; (3) Water Tech’s requests are disproportionate and intended to
harass a competitor’s customer; and (4) Kokido has already provided data of its sales to
Menard such that Water Tech’s damages expert does not need further data to form his
opinions.
In reply, Water Tech explains that the reason it waited until June 2019 to pursue
its discovery requests is because Menard had initially promised to produce the

2

Water Tech’s motion to compel originally also sought production of specific ESI
searches and the deposition of a corporate representative. The parties have since resolved
those issues. ECF Nos. 205, 208-1, 211.
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information, and both sides had delayed discovery enforcement pending the Court’s
Markman ruling; Menard refused to comply only recently. Water Tech further asserts
that its damages include “pull-through” sales of non-accused products attributable to
Telsa 30 sales as well as price erosion as a result of Kokido’s cheaper products. Finally,
Water Tech argues that the information in Menard’s possession is relevant to reinforce
the expert’s opinion, prove Water Tech’s theories of the case, and rebut Kokido’s
defenses.
DISCUSSION
Timeliness
The Court finds unpersuasive Menard’s blanket objection based on timeliness. In
its initial response, Menard objected to the entirety of Water Tech’s requests as premature
pending claim construction and a CMO, and Menard indicated that it would provide
additional information in the future. ECF No. 193, Ex. 3, pp. 2, 31. The record
chronicles the parties’ extensive motion practice on a variety of issues since the date of
Water Tech’s initial request. The Court does not find it unreasonable that the parties
suspended enforcement of their discovery demands pending claim construction and entry
of the CMO. Given the evolution of this case, Menard’s reliance on timing is misplaced.
Relevance and Proportionality
More centrally, regarding Menard’s objections as to relevance and proportionality,
Rule 26 provides that a party may generally obtain discovery regarding any nonprivileged matter relevant to a party’s claim and proportional to the needs of the case,
considering the importance of the issues, the amount in controversy, the parties’ relative
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access to information, their resources, and the importance of the information in resolving
the case, and whether the burden or expense of the proposed discovery likely outweighs
the benefit. Fed. R. Civ. P. 26(b)(1). The court must limit discovery to the extent that:
“(i) the discovery sought is unreasonably cumulative or duplicative, or can be obtained
from some other source that is more convenient, less burdensome, or less expensive; (ii)
the party seeking discovery has had ample opportunity to obtain the information by
discovery in the action; or (iii) the proposed discovery is outside the scope permitted by
Rule 26(b)(1).” Fed. R. Civ. P. 26(b)(2)(C). “The party resisting production bears the
burden of establishing lack of relevancy or undue burden.” Mallak v. Aitkin County, 13CV-2119 (DWF/LIB), 2016 WL 9088760, at *5 (D. Minn. Dec. 22, 2016)
Generally speaking, damages for patent infringement are governed by 35 U.S.C.
§284, providing that the court shall award a claimant damages adequate to compensate
for the infringement. To recover lost profits, a patentee must show that, “but for” the
infringement, it would have made the additional profits enjoyed by the infringer. Micro
Chem., Inc. v. Lextron, Inc., 318 F.3d 1119, 1122 (Fed. Cir. 2003). “A patentee may
resort to any method showing, with reasonable probability, entitlement to lost profits ‘but
for’ the infringement.” Id. “Once the patentee establishes the reasonableness of this
inference, the burden shifts to the infringer to show that the inference is unreasonable for
some or all of the lost profits.” Id. To prove price erosion damages, a patentee must
show that, but for infringement, it would have sold its product at higher prices. Crystal
Semiconductor Corp. v. TriTech Microelectronics Int'l, Inc., 246 F.3d 1336, 1357 (Fed.
Cir. 2001). A patentee may recover lost profits on “convoyed sales” (unpatented
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products sold with the patented product) only when both together constitute a functional
unit. Am. Seating Co. v. USSC Group, Inc., 514 F.3d 1262, 1268 (Fed. Cir. 2008). It is
not enough that the products are sold together for convenience or business advantage. Id.
The parties do not offer the Court an analysis of relevance and proportionality as
to each request. Absent closer examination by the parties, it appears to the Court that
Water Tech’s various requests fall into three categories: (1) communications illuminating
Menard’s position on Water Tech’s products and its decision to switch to Kokido
products (RFP 13, 15, 67, Int. 5); (2) documents reflecting Menard’s marketing strategies
regarding the products (RFP 31, 40, 41); and (3) financial data on Menard’s actual sales
of the products (RFP 32, 33, 35, Int. 2).
Water Tech asserts that the communications are relevant to its damages theories
and to Defendants’ claims that Menard switched brands due to quality rather than price.
It asserts that marketing and instructional documents may be relevant to its claim of
indirect infringement and Menard’s knowledge of which features drive sales. It further
explains that the financial data provided by Kokido does not fully inform its theory of
price erosion and whether Menard passed its cost savings onto customers.
Menard responds that the requested information is irrelevant and disproportionate
to the needs of the case and therefore should be prohibited. In support of its position,
Menard relies on precedent involving requests for discovery from third-party customers.
See e.g., Mallak v. Aitkin County, 13-CV-2119 (DWF/LIB), 2016 WL 9088760, at *11
(D. Minn. Dec. 22, 2016) (citing Micro Motion, Inc. v. Kane Steel Co., Inc., 894 F.2d
1318, 1327 (Fed. Cir. 1990) (quashing subpoenas on non-parties); Peter Kiewit Sons',
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Inc. v. Wall St. Equity Group, Inc., 8:10CV365, 2012 WL 1852048, at *14 (D. Neb. May
18, 2012) (permitting discovery from a defendant’s clients); Murata Mfg. Co., Ltd. v. Bel
Fuse, Inc., 234 F.R.D. 175, 182 (N.D. Ill. 2006) (enforcing protective order as to
defendant’s customers). The Court is not persuaded that these cases support Menard’s
wholesale objection to Water Tech’s requests. Menard is not simply a non-party
customer but rather a named defendant in this litigation.
Menard further responds by asserting that Water Tech’s damages expert, Mr.
Dalhart, conceded in deposition that he needed no further information from Menard in
order to complete his opinion. The Court has read the excerpt of Mr. Dalhart’s
deposition filed in support of this theory and does not share Menard’s interpretation.
Rather, Mr. Dalhart testified that he had to make assumptions with respect to Menard’s
sales and thus the accuracy of Kokido’s records. While the Court has no reason to doubt
the latter, the fact remains that Mr. Dalhart had to make assumptions due to the absence
of information from a party defendant. Menard fails to convince the Court that the
information requested is irrelevant and also fails to articulate whether or how that
production would be unduly burdensome. Whether Menard’s sales data actually changes
the expert’s evaluation is beside the point; Water Tech is entitled to relevant discovery on
damages.
The Court finds much of the information sought by Water Tech relevant to the
extent it may show the alleged cause and amount of Water Tech’s damages from lost
profits. However, the Court will limit discovery in some respects. First, except with
respect to RFP 67, Menard need only produce documents related to the patents-in-suit;
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Water Tech supplies no authority for its entitlement to discovery with respect to “pull
through” sales. Menard must produce the documents in RFP 67 with respect to its
decision to purchase Kokido products more generally. Second, Menard need not produce
cumulative data to the extent that Kokido has already produced the same information.
Third, Water Tech has not justified its need for Menard’s sales data per month, per
customer, and per location as requested in RFP 33 and Interrogatory 2. The Court finds
Water Tech’s request for these granular details excessive. Menard need only produce the
requested discovery in terms of annual gross and net sales per accused product. Finally,
RFPs 13 and 15 are overbroad and not limited in scope.
CONCLUSION
IT IS HEREBY ORDERED that Water Tech’s motion to compel is GRANTED
in part. ECF No. 192. Menard shall respond to requests for production 13, 15, 31, 32, 35,
40, and 41 and interrogatories 2 and 5, to the extent the information sought relates to the
remaining patents-in-suit and does not duplicate data already produced by Kokido.
IT IS FURTHER ORDERED that Water Tech’s motion to compel is DENIED
with respect to request for production 33 and Interrogatory 2 to the extent they seek sales
data per month, per customer, and per location. Menard need only produce annual gross
and net sales figures per accused product.

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IT IS FURTHER ORDERED that the parties shall cooperate in good faith to
schedule Menard’s 30(b)(6) deposition as expeditiously as possible.

AUDREY G. FLEISSIG
UNITED STATES DISTRICT JUDGE
Dated this 3rd day of January, 2020.

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