OPTOLUM INC. v. CREE INC.
Filing
178
MEMORANDUM OPINION AND ORDER, signed by JUDGE WILLIAM L. OSTEEN, JR on 07/11/2019, that Defendant's Motion to Strike, (Doc. 172 ), is DENIED. FURTHER that the parties shall meet and confer and submit to this court an Amended Joint Rule 26(f) Report by July 17, 2019.(Taylor, Abby)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
OPTOLUM, INC.,
Plaintiff,
v.
CREE, INC.,
Defendant.
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1:17CV687
MEMORANDUM OPINION AND ORDER
OSTEEN, JR., District Judge
Presently before this court is Defendant Cree, Inc.’s
(“Cree”) Motion to Strike Plaintiff OptoLum, Inc.’s (“OptoLum”)
Second Amended Infringement Contentions (“SAICs”). (Doc. 172.)
Cree has filed a brief in support of its motion, (Doc. 173),
OptoLum has responded, (Doc. 174), and Cree has replied, (Doc.
175). On July 8, 2019, this court heard argument from counsel.
(See Minute Entry 07/08/19.) For the reasons set forth herein
and discussed at argument, Cree’s motion will be denied.
I.
BACKGROUND
On August 22, 2018, this court entered its Claim
Construction Memorandum Opinion and Order (“Claim Construction
Order”). (See Doc. 152.) On the same day, this court approved
the parties’ Joint Rule 26(f) Report. (See Doc. 151.) The Joint
Rule 26(f) Report was submitted with both parties’ consent and
set forth various deadlines, including, for the first time in a
scheduling order in this case, a deadline for final contention
responses. (See Doc. 149.)
On September 21, 2018, OptoLum served its First Amended
Infringement Contentions (“FAICs”) pursuant to Local Rule for
Patent Cases (“Patent Rules”) 103.6(a). (See Declaration of
Lynne A. Borchers (“Borchers Decl.”) ¶ 1 (Doc. 173-1); Tab 1 to
Borchers Decl. (FAICs) (Doc. 173-2) at 2, 9.)1 On October 11,
2018, Cree served its Non-Infringement and Invalidity
Contentions pursuant to Patent Rule 103.6(c)(1). (Mem. in Supp.
of Def.’s Mot. to Strike (“Def.’s Mem.”) (Doc. 173) at 2.) On
March 5, 2019, this court amended the scheduling order,
providing the currently operative deadlines: final contention
responses were due on March 29, 2019; fact discovery closed on
April 5, 2019; opening expert reports were due on May 6, 2019;
responsive expert reports were due on June 3, 2019; rebuttal
expert reports were due on June 19, 2019; expert discovery
OptoLum served its Initial Infringement Contentions before
this case was transferred to this court from the District of
Arizona. (See Tab 2 to Borchers Decl. (SAICs) (Doc. 173-3) at 2
n.1.) The Northern District of California’s Patent Local Rules
governed the case prior to its transfer to this court. (See id.)
This district’s Patent Rules now apply to this case. LR 101.2(b)
(“These rules apply to all civil actions filed in or transferred
to this Court which allege infringement of a utility
patent . . . .”).
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closes on July 22, 2019; and dispositive motions are due by
August 21, 2019. (See Doc. 171 at 1-2.) Trial is set for
December 10, 2019. (Id. at 2.)
On March 29, 2019, OptoLum served its SAICs without seeking
leave to amend from this court. (See Def.’s Mem. (Doc. 173) at
2.) In the interim between OptoLum’s FAICs and SAICs, Cree made
several document productions. (See OptoLum’s Opp’n to Cree’s
Mot. to Strike (“Pl.’s Opp’n”) (Doc. 174) at 2 n.2.) Some of
those productions were in response to OptoLum’s requests for
files containing the requisite metadata to enable OptoLum to
efficiently utilize them. (See id.) OptoLum learned that these
files existed during its deposition of Cree’s employee, Dr. Curt
Progl. (See Pl.’s Opp’n, Ex. A, Declaration of Leah R. McCoy
(“McCoy Decl.”) (Doc. 174-1) ¶ 10.) OptoLum asserts that Cree
did not produce many of the files with the correct metadata
until October 5, 2018, others until March 25, 2019, and that
some production deficiencies continued through the end of April
2019. (See id. ¶¶ 5, 10, 12-16.)
On April 11, 2019, Cree filed its Motion to Strike, arguing
that OptoLum’s SAICs do not comply with Patent Rules 103.6 and
103.7. (See Doc. 172.)
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II.
LEGAL STANDARD
The interpretation of local patent rules is governed by
Federal Circuit law, which dictates that local patent rules must
be consistent with the Federal Rules of Civil Procedure. See O2
Micro Int’l Ltd. v. Monolithic Power Sys., Inc., 467 F.3d 1355,
1364-65 (Fed. Cir. 2006) (citing 28 U.S.C. § 2071(a) (2000);
Fed. R. Civ. P. 83(a)(1)). Local patent rules seek to balance
“the right to develop new information in discovery with the need
for certainty as to the legal theories” of infringement, noninfringement, and invalidity. O2 Micro, 467 F.3d at 1366
(citation and footnote omitted).
There is little caselaw interpreting this district’s Patent
Rules or the Eastern District of North Carolina’s Local Patent
Rules, which are substantively similar. And the Federal Circuit
has not addressed the Patent Rules relevant here. Much of the
caselaw interpreting local patent rules involves the Northern
District of California’s Patent Local Rules. See, e.g., O2
Micro, 467 F.3d at 1355; Volumetrics Med. Imaging, L.L.C. v.
Toshiba Am. Med. Sys., Inc., No. 1:05CV955, 2011 WL 2359061, at
*1 (M.D.N.C. June 9, 2011). The Northern District of
California’s Patent Local Rules, however, provide that a party
may amend its infringement contentions only by order of the
court upon a timely showing of good cause. See Patent L.R. 1-3,
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3-6.2 The cases are therefore instructive but not particularly
persuasive, as only amendment under the final sentence of Patent
Rule 103.7 explicitly requires a showing of good cause. See Simo
Holdings Inc. v. H.K. uCloudlink Network Tech. Ltd., 354 F.
Supp. 3d 508, 510 (S.D.N.Y. 2019) (“[P]laintiff's citations to
various decisions from other courts imposing a ‘good cause’
standard for supplementing invalidity contentions are
inapposite. Those cases rely on local rules which, unlike this
Court's, expressly impose such a requirement.”).
When interpreting a Patent Rule, the court begins with the
plain language of the rule’s text. See Veolia Water Sols. &
Techs. Support v. Siemens Indus., Inc., 63 F. Supp. 3d 558, 563
(E.D.N.C. 2014) (citing Dodd v. United States, 545 U.S. 353, 359
(2005)). As the court told counsel during oral argument, the
court finds the plain language of Patent Rules 103.6 and 103.7
confusing and difficult to apply. The parties’ interpretations
of the rules are reasonable, but the court interprets portions
of them differently.
The Northern District of California Patent Local Rules
previously permitted amendment based on the court’s claim
construction ruling without a showing of good cause. See O2
Micro, 467 F.3d at 1359 & n.5 (citing previous version of N.D.
Cal. Patent L.R. 3-6). The Northern District of California
amended its Patent Local Rules in 2009. See Patent L.R. 1-4.
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The plain language of Patent Rule 103.6 does not require a
party amending its contentions to show good cause or obtain a
court order. Rather, a party has the authority to amend when
specific circumstances exist. Patent Rule 103.6(a) permits a
party claiming patent infringement to amend its infringement
contentions within thirty days of a claim construction ruling
and with respect to the information required by Patent Rules
103.1(c)-(d), but only if required by the claim construction
ruling or by documents produced pursuant to Patent Rule 103.4.
See LR 103.6(a). Patent Rule 103.6(b) allows a party to amend
its infringement or non-infringement contentions when
“[d]iscovery has revealed information requiring modification of
the contentions.” LR 103.6(b). This court finds that Patent Rule
103.6(b) permits amendment when the information “requiring
modification” relates to the information required to be
disclosed pursuant to Patent Rules 103.1 or 103.3, which set
forth the information a party must include in its preliminary
contentions. There is no time frame associated with amendment
under Patent Rule 103.6(b). This rule can operate unfairly and
to the disadvantage of a party where, as here, the other party
amends its contentions on the eve of the close of fact
discovery. Patent Rule 103.7 allows a party to amend its
infringement or non-infringement contentions in three
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circumstances: (i) “as expressly permitted by [Patent] Rule
103.6”; (ii) “within thirty (30) days of the discovery of new
information relevant to the issues of infringement,
noninfringement, or invalidity”; or (iii) by order of the court
based upon good cause. LR 103.7.
Notwithstanding Patent Rules 103.6 and 103.7, this court
has broad discretion in managing the patent cases before it. See
LR 101.2(c) (“The Court may . . . modify the obligations or
deadlines set forth in the[] Local Patent Rules based on the
circumstances of any particular case . . . .”); see also Doe v.
Montgomery Cty. Bd. of Educ., No. 1:15CV940, 2016 WL 5415760, at
*3 (M.D.N.C. Sept. 28, 2016) (internal quotation marks omitted)
(quoting Holtz v. Rockefeller & Co., 258 F.3d 62, 73 (2d Cir.
2001)) (noting the court’s discretion “to overlook a party’s
failure to comply with local court rules”). Relatedly, as this
court noted at oral argument, there is a “strong policy” in the
Fourth Circuit to decide cases on the merits. See, e.g., United
States v. Shaffer Equip. Co., 11 F.3d 450, 462 (4th Cir. 1993).
III. DISCUSSION
This court issued its Claim Construction Order on
August 22, 2018, meaning that OptoLum could amend its
infringement contentions pursuant to Local Rule 103.6(a) until
September 21, 2018, when OptoLum served its FAICs. OptoLum’s
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SAICs followed over six months later. Because OptoLum did not
serve the SAICs within thirty days of the Claim Construction
Order, Patent Rule 103.6(a) is not applicable. The court must
address three main issues to rule on Cree’s motion. First,
whether the SAICs were “required” based upon information
revealed during discovery, as allowed under Patent Rule
103.6(b). Second, if not, whether the court should allow the
SAICs under Patent Rule 103.7. And third, if the court allows
the SAICs, whether Cree will be prejudiced and, if so, whether
that prejudice can be remediated.3
Turning first to whether OptoLum’s SAICs were proper under
Patent Rule 103.6(b), Cree asserts that OptoLum reads Patent
Rule 103.6(b) to allow amendment at will. (Def.’s Mem. (Doc.
There is a minor issue to resolve as well. The court
disagrees with OptoLum’s argument that the SAICs conform to the
scheduling order, which required final contention responses to
be served by March 29, 2019. (See Pl.’s Opp’n (Doc. 174) at 7.)
Candidly, the court does not know what the parties contemplated
when inserting a deadline for final contention responses into
their Joint Rule 26(f) Report. The parties submitted their Joint
Rule 26(f) Report, (Doc. 149), and subsequent joint motions to
extend the deadline for final contention responses, (see, e.g.,
Doc. 170), by consent. Yet the parties now disagree as to what
that deadline concerns. The Patent Rules do not contemplate
“responsive” infringement contentions unless they relate to
amendments “responding” to a claim construction ruling. See LR
103.6(a). Further, “contentions” and “responses” are different
things. That is, infringement contentions are not responses.
Rather, they set forth a party’s theories of infringement. While
OptoLum’s argument is not persuasive, it is not unreasonable,
and the court therefore gives little weight to what was likely a
misreading of a scheduling order.
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173) at 13-14.) Such a reading, Cree concludes, renders as
superfluous Patent Rule 103.7’s thirty-day window to amend based
on the discovery of information relevant to infringement, noninfringement, or invalidity. (Id.) OptoLum contends – somewhat
conclusively and without much specificity – that the SAICs are
proper under Patent Rule 103.6(b) because the modifications were
required by information learned from Cree’s document productions
since the FAICs. (Pl.’s Opp’n (Doc. 174) at 2 n.2, 4, 6.) As an
example, OptoLum asserts that Cree did not produce many files
with the requisite metadata until October 5, 2018, and others
until March 25, 2019. These productions included documents
detailing for the first time the thermal imaging, modeling, and
assembly of the accused products. (Pl.’s Opp’n (Doc. 174) at 2 &
n.2.) But it is not immediately clear from OptoLum’s brief what
specific information Cree produced between the FAICs and SAICs
that required modification relating to the information OptoLum
is obligated to disclose under Patent Rule 103.1. Cree argues
vehemently that any belatedly-produced documents could not have
been the source of the amendments because OptoLum neither cites
any new document in the SAICs produced after the FAICs nor
demonstrates that any information not contained in the bill of
materials (“BOM”) – which OptoLum had by September 5, 2018 – is
necessary to the amendments. (See Def.’s Mem. (Doc. 173) at 2;
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see also Borchers Decl. (Doc. 173-1) ¶ 7; Tab 4 to Borchers
Decl. (Doc. 173-5).)
During oral argument, OptoLum fleshed out that it needed
the files with the correct metadata to run thermal simulations
and piece together mechanical assembly drawings. (See McCoy
Decl. & App’x 1 to McCoy Decl. (Doc. 174-1).) OptoLum’s counsel
contended that the modifications in the SAICs are required based
on information revealed from discovery after the FAICs because
the modifications relate to the information required to be
disclosed under Patent Rule 103.1. This information includes
clarifications to previously-asserted claims, new infringement
theories, and even anticipated infringement theories based on
incomplete simulations as of March 29, 2019. Despite Cree’s
compelling argument, this court was persuaded by oral argument
that Cree’s interrogatory responses after OptoLum’s FAICs led,
at least to some degree, to OptoLum’s contentions being amended
to comply with Patent Rule 103.1 and thus were proper under
Patent Rule 103.6(b).
Second, as to Patent Rule 103.7, the court is unable to
determine if OptoLum discovered new information relevant to
infringement within thirty days of the SAICs. On this issue,
OptoLum likely bears the burden of showing that the
modifications were within thirty days of OptoLum’s discovery of
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the new information relating to the modifications. See Mortg.
Grader, Inc. v. First Choice Loan Servs. Inc., 811 F.3d 1314,
1321 (Fed. Cir. 2016) (citing O2 Micro, 467 F.3d at 1366) (“The
party seeking to amend its contentions [by showing good cause]
bears the burden of proving it acted with diligence.”). The
court cannot find that OptoLum demonstrates the SAICs timeliness
under Patent Rule 103.7. See Veolia Water Sols. & Techs. Support
v. Siemens Indus., Inc., No. 5:11-CV-00296-FL, 2013 WL 2149209,
at *4-5 (E.D.N.C. May 16, 2013) (finding that amendments to noninfringement contentions were timely where defendant cited new
deposition testimony within thirty days of amending).
Patent Rule 103.7 also permits amendment by order of the
court based upon good cause. OptoLum did not seek a court order
prior to amending its contentions. And this court declines to
engage in an ex post facto analysis of OptoLum’s ability to show
good cause on March 29, 2019, or to more fully analyze the
difference between “good cause” under Patent Rule 103.7 and
“requiring modification” under Patent Rule 103.6(b). The court
is satisfied that OptoLum’s amendments are permissible under
Patent Rule 103.6(b).
Third, Cree is likely prejudiced by OptoLum’s last minute
amendments, occurring one week before the close of fact
discovery, six months after OptoLum’s FAICs, and seven months
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after the Claim Construction Order. Cree might have to amend
portions of its expert reports, amend its non-infringement and
invalidity contentions, reconsult with employees, and possibly
depose additional fact witnesses. Any prejudice, however, is
lessened to some degree by Cree’s own argument that “OptoLum’s
amendments in the [SAICs] are simply a re-characterization of
the contentions served on September 21, 2018.” (Def.’s Mem.
(Doc. 173) at 15.) The court also understands from oral argument
that Cree already addressed in its expert reports some of
OptoLum’s modifications.
“The imposition of sanctions for violation of a local rule
is discretionary with the Court.” LR 83.4(b); see also O2 Micro,
467 F.3d at 1363 (quoting Fed. R. Civ. P. 16(f), 37(b)(2)(A))
(“The court may impose any ‘just’ sanction for the failure to
obey a scheduling order . . . .”). The court is generally
opposed to striking infringement contentions for procedural
reasons, especially absent bad faith by the amending party,
significant prejudice to a party, or a party’s repeated
disregard of the court’s orders. See Biogenex Labs., Inc. v.
Ventana Med. Sys., Inc., No. C 05–860 JF (PVT), 2006 WL 2228940,
at *4 (N.D. Cal. Aug. 3, 2006) (“[T]he Court is extremely
reluctant to dispose of substantive infringement claims based
upon procedural defects, particularly given that [the plaintiff]
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has offered at least articulable reasons for its conduct and
that there is no evidence of bad faith.”); cf. Canvs Corp. v.
United States, 107 Fed. Cl. 100, 110-11 (2012) (quoting Kadin
Corp. v. United States, 782 F.2d 175, 177 (Fed. Cir. 1986))
(dismissing certain claims as a sanction for plaintiff’s
repeated failure to comply with the court’s rules and previous
orders).
Striking the SAICs is an inappropriate sanction. This court
will allow OptoLum’s SAICs because any prejudice to Cree can be
addressed. The court leaves it to the parties to make an initial
proposal, but this court is inclined to do any one or a
combination of the following: restructure the deadlines for
expert reports; deem OptoLum’s SAICs to be its final
infringement contentions; permit Cree to conduct additional fact
discovery; or allow Cree to amend its non-infringement and
invalidity contentions, particularly as to OptoLum’s amendments
regarding the structure corresponding to the two plane claim
limitation, the description of the Heatsink structure
corresponding to the elongated thermal conduction member claim
limitation, and the newly identified “globe” of the LED Bulb
through which heat is dissipated, (see, e.g., Tab 3 to Borchers
Decl. (Doc. 172-6) at 19-24 (comparing the FAICs and SAICs)). At
the hearing on July 8, 2019, the court directed the parties to
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consult with each other and respond to the court by July 17,
2019, with an amended Joint Rule 26(f) Report that accounts for
any prejudice to Cree.
IV.
CONCLUSION
IT IS THEREFORE ORDERED that Defendant’s Motion to Strike,
(Doc. 172), is DENIED.
IT IS FURTHER ORDERED that the parties shall meet and
confer and submit to this court an Amended Joint Rule 26(f)
Report by July 17, 2019.
This the 11th day of July, 2019.
____________________________________
United States District Judge
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