Blue Gentian, LLC v. Tristar Products, Inc.
OPINION. Signed by Judge Noel L. Hillman on 11/14/2017. (dmr)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
BLUE GENTIAN, LLC, NATIONAL
EXPRESS, INC., and TELEBRANDS
No. 1:13-cv-1758 (NLH/AMD)
TRISTAR PRODUCTS, INC. and
WAL-MART STORES, INC. d/b/a
SAM’S CLUB and SAM’S
THOMAS R. CURTIN
GEORGE C. JONES
A PROFESSIONAL CORPORATION
4 HEADQUARTERS PLAZA
P.O. BOX 1991
MORRISTOWN, NEW JERSEY 07962-1991
On behalf of Plaintiffs
EDWARD F. MCHALE
BRIAN M. TAILLON
KENNETH W. COHEN
ANDREW D. LOCKTON
MCHALE & SLAVIN, P.A.
2855 PGA BOULEVARD
PALM BEACH GARDENS, FLORIDA 33410
Appearing pro hac vice on behalf of Plaintiffs
EDWARD P. BAKOS
NOAM J. KRITZER
BAKOS & KRITZER
By a June 19, 2017 Order, Telebrands Corp. (“Telebrands”)
was added as a party plaintiff and counterclaim defendant.
147 COLUMBIA TURNPIKE, SUITE 102
FLORHAM PARK, NEW JERSEY 07932
On behalf of Defendants
HILLMAN, District Judge
This is an appeal from United States Magistrate Judge Ann
Marie Donio’s March 21, 2017 Order requiring Plaintiffs Blue
Gentian, LLC and National Express, Inc. (“Plaintiffs”) to
produce an unredacted version of a September 1, 2015 Settlement
and License Agreement (“the Agreement”) between Plaintiffs and
Plaintiffs appealed the Order before this Court,
arguing the Magistrate Judge committed clear error.
reasons that follow, this Court will affirm the decision.
The Court takes its brief recitation of the facts from the
Magistrate Judge’s March 21, 2017 Order.
This case is a patent-
infringement action relating to an expandable hose product.
Plaintiffs allege Blue Gentian, LCC is the owner of U.S. Patent
No. 8,757,213, which is a continuation of several other patents.
Additionally, Plaintiffs allege Blue Gentian, LLC is the owner
of U.S. Design Patent D722,681, which is a continuation in part
of an earlier design patent.
Plaintiffs assert claims of direct
infringement of these patents pursuant to 35 U.S.C. § 271(a) and
indirect infringement of these patents pursuant to 35 U.S.C. §
271(b) and (c).
Defendants contest these claims and assert
counterclaims of noninfringement and invalidity against
On March 25, 2016, Defendants filed a Motion to Compel the
production of an unredacted copy of the Agreement.
Agreement concerned litigation between Plaintiffs and
The litigation involved claims by Telebrands
against Plaintiffs seeking declaratory relief that certain
patents were invalid or not enforceable and that Telebrands was
not infringing certain patents, and claims by Plaintiffs for
infringement of certain patents.
The Agreement originally
produced by Plaintiffs was redacted.
redacted Paragraphs 1.5, 1.6, 1.7, 5.4, 6.1, 6.2, and 6.3 in
full, as well as Paragraph 3.1, in part.
After conducting oral argument and an in camera review of
the Agreement, the Magistrate Judge granted Defendants’ Motion
In making that decision, the Magistrate Judge
ordered Plaintiffs to produce the Agreement “with Paragraphs
1.5, 1.6, 1.7, 3.1, 5.4, 6.1, 6.2, and 6.3 in their unredacted
She further ordered “that counsel for Defendants shall
maintain the unredacted Agreement on an Attorneys’ Eyes Only
basis and shall not share any portion with in-house counsel for
Telebrands was a non-party at the time the Magistrate Judge
rendered her decision on the Motion to Compel. By a June 19,
2017 Order, Telebrands is now a party plaintiff to this action.
The Magistrate Judge found the complete Agreement was
discoverable upon consideration of the factors set forth in
Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116
(S.D.N.Y. May 28, 1970).
The Magistrate Judge found the
“confidentiality concerns . . . do not outweigh the relevance of
the discovery to the determination of a reasonable royalty rate
in this case.”
Specifically, the Magistrate Judge found
“Paragraphs 1.5, 1.6, and 1.7 concern Plaintiffs’ and
Telebrands’ ability to license the Patents-in-Suit,” making them
“relevant to the reasonable royalty analysis.”
Judge further found “Paragraphs 5.4, 6.1, 6.2, and 6.3 are also
relevant to the determination of a reasonable royalty rate,” as
they “concern the ongoing business relationship between
Plaintiffs and Telebrands.”
Finally, the Magistrate Judge found
“Paragraph 3.1 . . . is relevant to a determination of whether
the [lump sum settlement amount] constitutes a front end
On April 4, 2017, Plaintiffs appealed the Magistrate
Judge’s decision to this Court. 3
On April 19, 2017, Plaintiffs moved to stay the Order to
produce the unredacted Agreement. On May 8, 2017, the
Magistrate Judge granted the stay. Accordingly, the unredacted
Agreement has not yet been produced for Defendants.
Federal Rule of Civil Procedure 72(a) provides:
When a pretrial matter not dispositive of a party’s claim
or defense is referred to a magistrate judge to hear and
decide, the magistrate judge must promptly conduct the
required proceedings and, when appropriate, issue a
written order stating the decision. A party may serve
and file objections to the order within 14 days after
being served with a copy.
A party may not assign as
error a defect in the order not timely objected to. The
district judge in the case must consider timely
objections and modify or set aside any part of the order
that is clearly erroneous or is contrary to law. 4
Thus, Rule 72(a) requires this Court adhere to a “clearly
erroneous” or “contrary to law” standard of review.
standard requires the Court accord the Magistrate Judge “wide
United States v. Sensient Colors, Inc., 649 F.
Supp. 2d 309, 314-15 (D.N.J. 2009) (quoting Miller v.
Beneficiary Mgmt. Corp., 844 F. Supp. 990, 997 (D.N.J. 1993)).
“A magistrate judge’s decision is clearly erroneous ‘when,
although there may be some evidence to support it, the reviewing
court, after considering the entirety of the evidence, is “left
with the definite and firm conviction that a mistake has been
Local Civil Rule 72.1(c) provides similarly:
Any party may appeal from a Magistrate Judge’s
determination of a non-dispositive matter within 14 days
after the party has been served with a copy of the
Magistrate Judge’s order . . . . A Judge shall consider
the appeal . . . and set aside any portion of the
Magistrate Judge’s order found to be clearly erroneous
or contrary to law.
Id. at 315 (quoting Kounelis v. Sherrer, 529 F.
Supp. 2d 503, 518 (D.N.J. 2008)).
“A magistrate judge’s
decision is contrary to law when he or she has ‘misinterpreted
or misapplied applicable law.’”
Supp. 2d at 518).
Id. (quoting Kounelis, 529 F.
“Particular deference is accorded to
magistrate judges on discovery issues.”
Costa v. County of
Burlington, 584 F. Supp. 2d 681, 684 n.2 (D.N.J. 2008).
“The burden of demonstrating clear error rests with the
Sensient Colors, 649 F. Supp. 2d at 315
(citing Kounelis, 529 F. Supp. 2d at 518).
The Court now considers whether the Magistrate Judge
committed clear error in deciding the unredacted Agreement was
discoverable or whether such decision was contrary to law. 5
with the Magistrate Judge, this Court also conducted an in
camera review of the unredacted Agreement in making its
Federal Rule of Civil Procedure 26(b)(1) states, in
pertinent part, that “[p]arties may obtain discovery regarding
any nonprivileged matter that is relevant to any party’s claim
or defense and proportional to the needs of the case.”
The Court makes no determination as to the admissibility of
the Agreement. This Opinion and its accompanying Order relate
solely to the discoverability of the Agreement.
U.S.C. § 284 provides: “Upon finding for the claimant the court
shall award the claimant damages adequate to compensate for the
infringement, but in no event less than a reasonable royalty for
the use made of the invention by the infringer . . . .”
an established royalty does not exist, a court may determine a
reasonable royalty based on ‘hypothetical negotiations between
willing licensor and willing licensee.’”
Wang Labs., Inc. v.
Toshiba Corp., 993 F.2d 858, 870 (Fed. Cir. 1993) (quoting
Fromson v. W. Litho Plate & Supply Co., 853 F.2d 1568, 1574
(Fed. Cir. 1988)).
Defendants assert the Agreement “may be
relevant to the hypothetical negotiation analysis for
calculating a reasonable royalty.”
Further, Defendants assert
the redacted terms “may be relevant to the calculation of the
reasonable royalty by the Parties[‘] experts.”
In considering whether the redacted paragraphs were
relevant to what constitutes a reasonable royalty rate, the
Magistrate Judge was guided by the factors set forth in GeorgiaPacific.
While Plaintiffs note this “analysis . . . was not
propounded by any of the parties in their briefing on the motion
to compel,” Plaintiffs do not appear to argue the GeorgiaPacific factors were applied in error; rather, Plaintiffs take
issue with the way the Agreement was analyzed under that test.
Like the Magistrate Judge, this Court applies “Federal
Circuit law . . . when deciding whether particular written or
other materials are discoverable in a patent case, if those
materials relate to an issue of substantive patent law.”
Advanced Cardiovascular Sys. v. Medtronic, 265 F.3d 1294, 1307
(Fed. Cir. 2001).
The Federal Circuit “has sanctioned the use
of the Georgia-Pacific factors to frame the reasonable royalty
inquiry,” finding “[t]hose factors properly tie the reasonable
royalty calculation to the facts of the hypothetical negotiation
Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292,
1317 (Fed. Cir. 2011).
Accordingly, the Court finds the
Georgia-Pacific factors applicable here.
The Georgia-Pacific factors are as follows:
The royalties received by the patentee for the
licensing of the patent in suit, proving or tending
to prove an established royalty.
The rates paid by the licensee for the use of other
patents comparable to the patent in suit.
The nature and scope of the license, as exclusive
or non-exclusive; or as restricted or nonrestricted in terms of territory or with respect to
whom the manufactured product may be sold.
The licensor’s established policy and marketing
program to maintain his patent monopoly by not
licensing others to use the invention or by
granting licenses under special conditions designed
to preserve that monopoly.
The commercial relationship between the licensor
and licensee, such as, whether they are competitors
in the same territory in the same line of business;
or whether they are inventor and promotor.
The effect of selling the patented specialty in
promoting sales of other products of the licensee;
the existing value of the invention to the licensor
as a generator of sales of his non-patented items;
and the extent of such derivative or convoyed
The duration of the patent and the term of the
The established profitability of the product made
under the patent; its commercial success; and its
The utility and advantages of the patent property
over the old modes or devices, if any, that had
been used for working out similar results.
The nature of the patented invention; the character
of the commercial embodiment of it as owned and
produced by the licensor; and the benefits to those
who have used the invention.
The extent to which the infringer has made use of
the invention; and any evidence probative of the
value of that use.
The portion of the profit or of the selling price
that may be customary in the particular business or
in comparable businesses to allow for the use of
the invention or analogous inventions.
The portion of the realizable profit that should be
credited to the invention as distinguished from
non-patented elements, the manufacturing process,
improvements added by the infringer.
The opinion testimony of qualified experts.
The amount that a licensor (such as the patentee)
and a licensee (such as the infringer) would have
agreed upon (at the time infringement began) if
both had been reasonably and voluntarily trying to
reach an agreement; that is, the amount which a
prudent licensee – who desired, as a business
proposition, to obtain a license to manufacture and
sell a particular article embodying the patented
invention – would have been willing to pay as a
royalty and yet be able to make a reasonable profit
and which amount would have been acceptable by a
prudent patentee ho was willing to grant a license.
Ga.-Pac. Corp., 318 F. Supp. at 1120.
The Court first addresses Paragraphs 1.5, 1.6, and 1.7,
which concern the scope of the license granted to Telebrands.
The Magistrate Judge found “these Paragraphs relevant to the
reasonable royalty analysis,” guided by the Georgia-Pacific
factors, relying in part on Georgia-Pacific factor four, which
concerns “[t]he licensor’s established policy and marketing
program to maintain his patent monopoly by not licensing others
to use the invention or by granting licenses under special
conditions designed to preserve that monopoly.”
argue disclosing these paragraphs is not supported by GeorgiaPacific factor four, arguing that “[a]ny such established policy
. . . cannot be determined on the basis of any particular
license agreement such as the one at issue here or even based on
any single license agreement.”
Rather, Plaintiffs argue, “the
granting of a license itself indicates that there was no
established policy of not licensing others or limiting the grant
Evidence of an established policy regarding
license agreements comes from outside a specific license
agreement, such as directly from the patentee itself.”
This Court finds the Magistrate Judge did not commit clear
error in requiring Plaintiffs to produce Paragraphs 1.5, 1.6,
and 1.7 of the Agreement.
First, this Court agrees that factor
four supports disclosure as the Agreement itself could represent
the “granting [of a] license under special conditions designed
to preserve that monopoly,” a standalone part of factor four.
Moreover, the Georgia-Pacific factors, as a whole, clearly
support the production of these provisions.
Georgia-Pacific factor three, which concerns “[t]he nature and
scope of the license, as exclusive or non-exclusive; or as
restricted or non-restricted in terms of territory or with
respect to whom the manufactured product may be sold,” also
supports their production.
Pursuant to Georgia-Pacific factor
three, whether a license is exclusive or non-exclusive and any
restrictions placed on the licensee is relevant to the
determination of a reasonable royalty rate.
This is precisely
what is detailed in Paragraphs 1.5, 1.6, and 1.7.
The scope of
the license granted under the Agreement is certainly relevant in
analyzing the royalty rate agreed to between Plaintiffs and
Telebrands, which makes it relevant in determining a reasonable
royalty rate in this case.
Accordingly, the Court does not find
the Magistrate Judge committed clear error in ordering
Paragraphs 1.5, 1.6, and 1.7 be produced.
The Court next turns to the redacted portion of Paragraph
3.1, which provides the total amount to be paid by Telebrands
for its sales of the product up to the time of the September 1,
The Magistrate Judge found “Defendants are
entitled to this information as the upfront payment is relevant
to a determination of whether the amount constitutes a front end
Plaintiffs contend “[t]he redacted lump sum is
undoubtedly a settlement amount related to past sales, not
future sales,” and that “[t]he concept of a front end royalty,
however, relates to royalties to be paid on future sales.”
Thus, Plaintiffs argue this settlement amount “does not relate
to the Georgia-Pacific factors or determining a reasonable
This Court agrees Paragraph 3.1 must be produced
in its entirety.
This Court recognizes that lump sum awards for past
infringement and forward looking reasonable royalty rates are
See Lucent Techs., Inc. v. Gateway, Inc., 580
F.3d 1301, 1330 (Fed. Cir. 2009) (noting “certain fundamental
differences . . . between lump-sum agreements and runningroyalty agreements”); Novo Indus. L.P. v. Micro Molds Corp., 239
F. Supp. 2d 1282, 1288-89 (S.D. Fla. 2002) (rejecting as
speculative a royalty based on the $675,000 lump sum payment for
past infringement), rev’d on other grounds, 350 F.3d 1348 (Fed.
Cir. 2003); Wang Labs., Inc. v. Oki Elec. Indus. Co., 15 F.
Supp. 2d 166, 171 (D. Mass. 1998) (noting that “[m]onies
received as a settlement for past tortious use of patents are
not the equivalent of royalties”).
That having been said, the
issue before the Magistrate Judge and the issue now before this
Court is not admissibility but one of discoverability.
particular piece of evidence may not be ultimately persuasive on
a contested issue is not the same as concluding that it is
irrelevant or that it cannot be of some evidential or persuasive
value on that same contested point.
Here, factor eleven of the
Georgia-Pacific factors – the extent to which the infringer has
made use of the invention and any evidence probative of the
value of that use – appears to allow for consideration of
In sum, the Court finds this information is discoverable
because it is some evidence of the value of the patent and may
be one data point useful to experts or others in offering a
reasonable calculation of a reasonable royalty rate.
this evidence has the potential to uncover a link to a prior
determination of a reasonable royalty rate.
entitled to the opportunity to view this lump sum amount and
determine whether a running royalty analysis influenced the
calculation of the lump sum amount, as it is possible a
determination of past royalties weighed in on the calculation of
that amount, which would be relevant in determining a reasonable
royalty rate in this case.
Accordingly, the Court does not find
it was clear error for the Magistrate Judge to require
production of Paragraph 3.1 in full.
The Court next turns to Paragraphs 5.4, 6.1, 6.2, and 6.3,
which concern potential future litigation between the parties
and the potential sale of Telebrands’ expandable and
contractible flexible hose business.
The Magistrate Judge found
these paragraphs “relevant to the determination of a reasonable
royalty rate,” as they “concern the ongoing business
relationship between Plaintiffs and Telebrands.”
Judge relied in part on Georgia-Pacific factor five, which
concerns “[t]he commercial relationship between the licensor and
licensee, such as, whether they are competitors in the same
territory in the same line of business; or whether they are
investor and promotor.”
Plaintiffs argue these paragraphs
concern “separate business dealings of the ongoing business
relationship between Plaintiffs and Telebrands” that “do not
relate to the ‘commercial relationship’ Georgia-Pacific factor.”
The Court finds Paragraph 5.4, relating to potential future
litigation the parties may be involved in, can be considered to
weigh in on the commercial relationship between Plaintiffs and
In discussing rights to bring future litigation
against Telebrands, the parties are stipulating to the terms of
their commercial relationship moving forward.
Court finds the Magistrate Judge’s Order requiring production of
Paragraph 5.4 was not in error.
Turning to the final paragraphs at issue, in conjunction
with the discoverability of Paragraphs 1.5, 1.6, and 1.7, the
Court finds Paragraphs 6.1, 6.2, and 6.3 also must be produced
in order to fully comprehend Paragraphs 1.5, 1.6, and 1.7.
Paragraph 1.6 directly references Paragraph 6.1.
in turn, is expanded upon and given relevance through Paragraphs
6.2 and 6.3.
Thus, it was not clear error for the Magistrate
Judge to require production of Paragraphs 6.1, 6.2, and 6.3.
As the Magistrate Judge stated, and as Plaintiffs do not
appear to contest, “[a] litigation-based settlement agreement
for the patent in suit . . . falls within the universe of
information . . . [and] is relevant to determining a reasonable
royalty for purposes of Fed. R. Civ. P. 26(b)(1).”
Nobel Biocare USA, LLC, 808 F. Supp. 2d 584, 590 (S.D.N.Y.
Upon consideration of the Georgia-Pacific factors, the
settlement agreement, as a whole, is relevant to determining a
reasonable royalty rate here.
In sum, the Court finds it was
not clear error for the Magistrate Judge to require production
of Paragraphs 1.5, 1.6, 1.7, 3.1, 5.4, 6.1, 6.2, and 6.3.
Court keeps the Magistrate Judge’s “Attorneys Eyes Only”
designation for the unredacted Agreement.
An appropriate Order will be entered.
Date: November 14, 2017
At Camden, New Jersey
s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.
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