Opinion
Case No. 5:21-cv-01556-JWH-SHKx
2023-05-23
PENSMORE REINFORCEMENT TECHNOLOGIES, LLC d/b/a Helix Steel, Plaintiff, v. CORNERSTONE MANUFACTURING AND DISTRIBUTION, INC., Defendant.
Mark A. Finkelstein, Umberg Zipser LLP, Irvine, CA, Christopher J. Ryan, Pro Hac Vice, James Cleland, Pro Hac Vice, Yafeez S. Fatabhoy, Pro Hac Vice, Dickinson Wright PLLC, Ann Arbor, MI, for Plaintiff. Scott R. Brown, Matthew B. Walters, Pro Hac Vice, Todd A. Gangel, Pro Hac Vice, Hovey Williams LLP, Overland Park, KS, Timothy R. Plewe, Chandra L. Winter, Michael J. DeSantis, Lobb and Plewe LLP, Corona, CA, Kevin James Abbott, Fennemore Craig, P.C., San Bernardino, CA, for Defendant.
Mark A. Finkelstein, Umberg Zipser LLP, Irvine, CA, Christopher J. Ryan, Pro Hac Vice, James Cleland, Pro Hac Vice, Yafeez S. Fatabhoy, Pro Hac Vice, Dickinson Wright PLLC, Ann Arbor, MI, for Plaintiff. Scott R. Brown, Matthew B. Walters, Pro Hac Vice, Todd A. Gangel, Pro Hac Vice, Hovey Williams LLP, Overland Park, KS, Timothy R. Plewe, Chandra L. Winter, Michael J. DeSantis, Lobb and Plewe LLP, Corona, CA, Kevin James Abbott, Fennemore Craig, P.C., San Bernardino, CA, for Defendant. MEMORANDUM OPINION AND ORDER REGARDING PLAINTIFF'S MOTION TO STRIKE [ECF No. 126], DEFENDANT'S MOTION TO STRIKE [ECF No. 131], AND DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT RE INVALIDITY [ECF No. 108] John W. Holcomb, UNITED STATES DISTRICT JUDGE
I. SUMMARY OF DECISION
Before the Court are three motions.
• Plaintiff Pensmore Reinforcement Technologies, LLC d/b/a/ Helix Steel moves to strike the Supplemental Invalidity Contentions of Defendant Cornerstone Manufacturing and Distributing, Inc. and the Supplemental Expert Report of Fred P. Smith. The Court GRANTS the motion.
• Cornerstone moves to strike the untimely expert disclosure of Luke Pinkerton and portions of the expert declaration of Kevin MacDonald. The Court GRANTS the motion with respect to Pinkerton and DENIES the motion with respect to MacDonald.
• Cornerstone moves for partial summary judgment of invalidity based
upon obviousness in view of prior art. The Court DENIES the motion.The Court finds this matter appropriate for resolution without a hearing. See Fed. R. Civ. P. 78; L.R. 7-15. After considering the extensive briefs and related filings, the Court provides its detailed ruling below.
See Mot. to Strike Supp. Invalidity Contentions (the "Contentions Motion") [ECF No. 126]; see also Opp'n to the Contentions Motion (the "Contentions Opposition") [ECF No. 134]; Reply to the Contentions Motion (the "Contentions Reply") [ECF No. 135].
See Mot. to Strike Untimely Expert Disclosure (the "Expert Motion") [ECF No. 131]; see also Response in Opposition to the Expert Motion (the "Expert Opposition") [ECF No. 133]; Reply in Support of the Expert Motion (the "Expert Reply") [ECF No. 136].
See Renewed Mot. for Partial Summ. Judgment of Invalidity (the "SJ Motion") [ECF No. 108]; see also Response to the SJ Motion (the "SJ Opposition") [ECF No. 127]; Reply in Support of the SJ Motion (the "SJ Reply") [ECF No. 137].
II. BACKGROUND
In this action, Pensmore asserts claims for relief for direct and indirect infringement of two patents: U.S. Patent No. 9,440,881 (the "'881 Patent"), entitled "Micro-Rebar Concrete Reinforcement System"; and U.S. Patent No. 10,266,970 (the "'970 Patent"), entitled "Concrete Reinforcing Fibers" (jointly, the "Asserted Patents").
See generally First Am. Compl. [ECF No. 29].
The '970 Patent "relates to concrete reinforcing fibers." Because concrete has low tensile strength and low fracture toughness, it generally needs to be reinforced. The inventions of the '970 Patent sought to improve on the standard process of reinforcing concrete with rebar "by incorporating short, randomly distributed fibers in concrete such that the reinforcing fibers are distributed throughout the matrix and thus a new composite material . . . is obtained." This method is desirable because "[f]iber reinforced concrete has significantly improved energy-absorption capability (often called toughness), impact resistance, and fatigue endurance, with greater resistance to cracking."
See '970 Patent [ECF No. 29-2] 1:14.
Id. at 1:18-30.
Id. at 1:30-34.
Relatedly, the '881 Patent discloses a micro-rebar concrete reinforcement system, including "[a] method for designing and manufacturing micro reinforced concrete that produces a composite material that shares physical properties with both the reinforcing material and the concrete." The micro reinforced concrete comprises "a two-part system that [is] made of micro reinforcements, which are twisted steel fibers, and a concrete matrix."
See '881 Patent [ECF No. 29-3] Abstract.
Id.
In January 2023, the Court issued its Claim Construction Order, in which it construed various disputed claim limitations from the '970 and '881 Patents. The Court found Claim 3 of the '881 Patent indefinite. Thus, Pensmore asserts only Claim 7 of the '881 Patent. In March 2023, discovery closed. This matter is set for trial in October 2023.
See generally Claim Construction Order [ECF No. 96].
See id.
See Order on Stipulation to Continue Discovery Deadlines (the "Scheduling Order") [ECF No. 94].
Id.
III. LEGAL STANDARD
A. Motion to Strike
1. Updating Contentions
When the Scheduling Order imposes deadlines for exchanging patent infringement and invalidity contentions, a request for leave to provide modified or amended contentions constitutes a request to modify that Order. Such a request is governed by the "good cause" standard. See, e.g., O2 Micro Int'l Ltd. v. Monolithic Power Sys., Inc., 467 F.3d 1355, 1363 (Fed. Cir. 2006). "[T]he good cause requirement . . . require[s] a showing that the party seeking leave to amend acted with diligence in promptly moving to amend when new evidence is revealed in discovery." Id.
"To demonstrate it acted diligently, a party must show '(1) diligence in discovering the basis for amendment; and (2) diligence in seeking amendment once the basis for amendment has been discovered.' " Amgen Inc. v. Sandoz Inc., 2017 WL 1399077, at *2 (N.D. Cal. Apr. 18, 2017) (quoting Advanced Micro Devices, Inc. v. LG Elecs., Inc., 2017 WL 732896, at *3 (N.D. Cal. Feb. 24, 2017)). "The burden is on the moving party to show diligence." Apple Inc. v. Samsung Elecs. Co., 2012 WL 5632618, at *2 (N.D. Cal. Nov. 15, 2012). If the Court finds that the moving party acted diligently, it "then considers whether there would be undue prejudice to the non-moving party." Id.
2. Updating Expert Reports
"Rule 26(e)(1) of the Federal Rules of Civil Procedure requires all parties to supplement or correct, among other things, responses to discovery requests 'in a timely manner if the party learns that in some material respect the disclosure or response is incomplete or incorrect, and if the additional or corrective information has not otherwise been made known to the other parties during the discovery process or in writing.' " Jones v. Travelers Cas. Ins. Co. of Am., 304 F.R.D. 677, 678-79 (N.D. Cal. 2015) (quoting Fed. R. Civ. P. 26(e)(1)(A)). "The parties are expected to supplement and/or correct their disclosures promptly when required under that Rule, without the need for a request from opposing counsel or an order from the Court." Id.
"In addition, Rule 37 mandates that a party's failure to comply with the obligations under Rule 26(e)(1) results in that party being precluded from 'use [of] that information . . . to supply evidence on a motion, at a hearing or at trial, unless the failure was substantially justified or is harmless.' " Id. (quoting Fed. R. Civ. P. 37(c)(1)). "Rule 37(c)(1) is 'self-executing' and 'automatic.' " Id. (quoting Yeti by Molly Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 1106 (9th Cir. 2001)).
Although appellate courts "review every discovery sanction for an abuse of discretion," those courts "give particularly wide latitude to the district court's discretion to issue sanctions under Rule 37(c)(1)." Yeti by Molly, 259 F.3d at 1106; see also Hoffman v. Constr. Prot. Servs., Inc., 541 F.3d 1175, 1179 (9th Cir. 2008) (affirming a district court's order excluding undisclosed damages evidence).
B. Motion for Summary Judgment
Summary judgment is appropriate when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(a). When deciding a motion for summary judgment, the Court construes the evidence in the light most favorable to the non-moving party. See Barlow v. Ground, 943 F.2d 1132, 1135 (9th Cir. 1991). "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (emphasis in original). The substantive law determines the facts that are material. See id. at 248, 106 S.Ct. 2505. "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Id. Factual disputes that are "irrelevant or unnecessary" are not counted. Id. A dispute about a material fact is "genuine" "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id.
Under this standard, the moving party bears the initial burden of informing the district court of the basis for its motion and identifying the portions of the pleadings and record that it believes demonstrate the absence of an issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). When the non-moving party bears the burden of proof at trial, the moving party need not produce evidence negating or disproving every essential element of the non-moving party's case. See id. at 325, 106 S.Ct. 2548. Instead, the moving party need only prove there is an absence of evidence to support the non-moving party's case. See id.; In re Oracle Corp. Sec. Litig., 627 F.3d 376, 387 (9th Cir. 2010). The party seeking summary judgment must show that "under the governing law, there can be but one reasonable conclusion as to the verdict." Anderson, 477 U.S. at 250, 106 S.Ct. 2505.
If the moving party sustains its burden, the non-moving party must then show that there is a genuine issue of material fact that must be resolved at trial. See Celotex, 477 U.S. at 324, 106 S.Ct. 2548. A genuine issue of material fact exists "if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson, 477 U.S. at 248, 106 S.Ct. 2505. "This burden is not a light one. The non-moving party must show more than the mere existence of a scintilla of evidence." Oracle, 627 F.3d at 387 (citing Anderson, 477 U.S. at 252, 106 S.Ct. 2505). The non-moving party must make this showing on all matters placed at issue by the motion as to which it has the burden of proof at trial. See Celotex, 477 U.S. at 322, 106 S.Ct. 2548; Anderson, 477 U.S. at 252, 106 S.Ct. 2505.
IV. DISCUSSION
The Contentions Motion and the Expert Motion overlap in several material respects. Considering the chronology of disclosures leading to these disputes, the Court will resolve the Expert Motion first.
A. Expert Motion
Cornerstone moves to strike as untimely the April 5, 2023, expert disclosure of Luke Pinkerton, Pensmore's president and CTO. Cornerstone argues that Pinkerton was an undisclosed expert who Pensmore now attempts to use to convert attorney argument into expert testimony concerning reasonable royalty and non-infringing alternatives—topics on which Pinkerton is not qualified to opine. Cornerstone asserts that Pinkerton's testimony is not rebuttal to the testimony of Hans Hausfeld, Pensmore's CEO, because Pensmore bears the burden of proof on the issues that Pinkerton purports to "rebut," so Pinkerton should have been disclosed before the initial expert deadline.
See Expert Motion 15:13-18 & 16:3-11.
Hausfeld was the VP of Sales and an investor in Pensmore when the application that matured into the '970 Patent was filed.
Id. at 16:12-25.
Cornerstone also moves to strike portions of the January 27, 2023, expert declaration of Kevin MacDonald because MacDonald purports to offer "expansive" new infringement theories by identifying accused instrumentalities and/or places where Claim 7 of the '881 Patent can be found, which were not identified in the preliminary infringement contentions. Cornerstone states that the preliminary infringement contentions disclosed the theory that Cornerstone's design class system for using the accused twisted steel fibers to make micro-reinforced concrete infringes Claim 7, as illustrated by Cornerstone's SteelX design brochure. In contrast, Cornerstone avers that MacDonald's expert declaration expands this theory by also identifying "Cornerstone's SteelX Design Method for Twisted Steel Reinforcement (SteelX 5:25)," three design classes found in the brochure, and the International Association of Plumbing and Mechanical Officials ("IAPMO") ES EC-015 industry standard as new accused instrumentalities (or at least as additional places that the elements of Claim 7 are found). MacDonald also opines that the "strain limits" in the SteelX Design Method correspond with the claimed "maximum allowable tensile strain."
See generally Expert Motion.
Id. at 12:9-15.
Id. at 12:27-13:4.
Id. at 13:6-12, 20-23.
Pensmore responds that the Expert Motion should be denied because Cornerstone filed it in retaliation for Pensmore filing the Contentions Motion. Pensmore argues that Pinkerton will not testify as an expert, but, rather, as a percipient witness relating his own knowledge from working in the industry. To the extent that Pinkerton offers any expert testimony, Pensmore argues that it is proper to rebut testimony from Cornerstone's CEO, who Cornerstone did not disclose as an expert until March 7, 2023. In any event, Pensmore contends any late disclosure was harmless because it provided the same information in an interrogatory answer. With respect to MacDonald's expert declaration, Pensmore argues that its infringement contentions "have always been based on [Cornerstone's] same Design Class System for Micro Reinforced Concrete," and MacDonald's "opinions on the IAPMO industry standard were included to support [Pensmore's] damages report," and they did not "contain any new theories of infringement." Rather, Pensmore argues that MacDonald cited additional evidence—some of which Cornerstone produced after the close of fact discovery—in support of the same theory. Further, Pensmore explains that MacDonald's reference to industry standards does not state a theory of infringement, but, instead, it relates to industry barriers to entry that are relevant to damages.
Expert Opposition 1:4-10.
Id. at 3:27-4:3.
Id. at 1:11-15.
Id. at 4:16-5:2.
Id. at 2:2-6.
Id. at 7:16-26.
Id. at 8:6-14.
Cornerstone replies that since Pensmore bears the burden of proof on damages, Pinkerton's reasonable royalty and non-infringing alternatives opinions were untimely served on the rebuttal deadline. In contrast, Cornerstone avers that the declaration from its CEO was timely served as a rebuttal report because Cornerstone was rebutting Pensmore's opening opinions on damages. Cornerstone maintains that the late Pinkerton disclosure was not harmless because depositions had already begun and no additional time was allowed to depose Pinkerton as an expert. With respect to MacDonald, Cornerstone argues that Pensmore is trying to slip in a theory that Cornerstone infringes by complying with industry standards. Further, Cornerstone argues that the SteelX Design Method is a new infringement contention because it gives rise to new invalidity theories.
Expert Reply 4:4-26.
Id. at 5:8-24.
Id. at 6:22-7:3.
Id. at 7:19-23.
Id. at 9:10-28.
1. Legal Framework
Rule 37(c)(1) "excludes untimely expert witness testimony, unless the 'parties' failure to disclose the required information is substantially justified or harmless.' " Beatbox Music Pty, Ltd. v. Labrador Entertainment, Inc., 2023 WL 2922828, at *3 (C.D. Cal. Feb. 16, 2023) (quoting Yeti by Molly, 259 F.3d at 1106.) "The burden is on the party facing sanctions to prove harmlessness." Yeti by Molly, 259 F.3d at 1106-07.
" 'Given the purpose behind [the Standing Patent Rules'] disclosure requirements, a party may not use an expert report to introduce new infringement theories [or] new invalidity theories . . . not disclosed in the [party's] infringement contentions or invalidity contentions.' " Finjan, Inc. v. Sophos, Inc., 2016 WL 2988834, at *5 (N.D. Cal. May 24, 2016) (quoting Verinata Health, Inc. v. Sequenom, Inc., 2014 WL 4100638, at *3 (N.D. Cal. Aug. 20, 2014) (internal quotation marks omitted)). "The scope of contentions and expert reports are not, however, coextensive." Golden Bridge Tech. Inc. v. Apple, Inc., 2014 WL 1928977, at *3 (N.D. Cal. May 14, 2014) (internal quotation marks omitted). "In patent litigation, expert reports are expected to provide more information than . . . contentions." Digital Reg of Texas, LLC v. Adobe Sys. Inc., 2014 WL 1653131, at *5 (N.D. Cal. Apr. 24, 2014). "Thus, '[t]he threshold question in deciding whether to strike an expert report is whether the expert has permissibly specified the application of a disclosed theory or impermissibly substituted a new theory altogether.' " Finjan, 2016 WL 2988834, at *5 (quoting Digital Reg of Texas, 2014 WL 1653131, at *5).
2. Analysis
a. Pinkerton Disclosure
The Court will strike the untimely expert declaration of Luke Pinkerton. Pensmore bears the burden of proving damages. Thus, Pensmore's initial designations of experts on this issue were due on January 27, 2023. Indeed, by that date Pensmore had disclosed one damages expert, David R. Duski. Only after Cornerstone provided its rebuttal materials, including the Hausfeld declaration, did Pensmore designate Pinkerton as an expert—five days before his April 11, 2023, deposition. This designation comes far too late, and it is an improper sur-rebuttal by Pinkerton where no initial disclosure was made concerning reasonable royalty and non-infringing alternatives.
See Scheduling Order [ECF No. 94] 2.
In contrast, because Hausfeld was a rebuttal witness, Cornerstone's designation was not due until March 3, 2023—a deadline that the parties apparently stipulated to extend to March 6, 2023; i.e., when Hausfeld was disclosed.
Exclusion under Rule 37(c)(1) is automatic unless Pensmore can show that the late disclosure was substantially justified or harmless. Pensmore has shown neither. By the time that Pensmore disclosed Pinkerton as an expert, depositions were well underway and Cornerstone was not able to take the disclosure into account in connection with its overall deposition preparation. Additionally, the fact that the Pinkerton deposition was apparently treated as a fact witness deposition does not cure the prejudice that arises from the late expert disclosure. Pensmore cannot have it both ways—either Pinkerton is a fact witness offering lay testimony or an expert witness offering opinions concerning reasonable royalty and non-infringing alternatives. Pensmore's argument, that no prejudice arises because the substance of Pinkerton's opinions was otherwise disclosed in an interrogatory answer, is not well taken. Adopting this exemption would allow end-runs around the Scheduling Order and would thwart the purpose of Rule 26 expert disclosures. The Court will not approve that approach.
Accordingly, the Expert Motion is GRANTED with respect to Pinkerton. This ruling does not preclude Pinkerton from testifying as a fact witness (where he has personal knowledge and where appropriate fact disclosures were made), but the Court will not allow him to be transformed into an untimely expert witness.
b. MacDonald Disclosure
The Court will allow the MacDonald Disclosure because MacDonald has "permissibly specified the application of a disclosed theory" rather than "impermissibly substituted a new theory altogether." Finjan, 2016 WL 2988834, at *5.
Claim 7 of the '881 Patent discloses "[a] design class system for micro reinforced concrete, the design class system comprising a series of design classes, the design classes being based on maximum allowable tensile strain and the presence or absence of at least one of soil support, lateral support or arch geometry." In its initial infringement contentions, Pensmore disclosed that Cornerstone's "design class system for use of the Accused Products to create micro-reinforced concrete" contains all of the elements of this claim. Pensmore supported this contention by averring that Cornerstone's "SteelX design brochure" illustrates the presence of the claim elements.
'881 Patent, Claim 7.
See Declaration of James K. Cleland, Ex. A [ECF No. 126-2] 65.
Id. at 66.
MacDonald's declaration does not divert from this theory. Rather, MacDonald relies on "Cornerstone's available brochures, guides, and methods" to determine that "Cornerstone's design class system for micro reinforced concrete is covered by Claim 7 of the '881 patent." As do the infringement contentions, MacDonald theorizes that Cornerstone's design class system is the accused instrumentality, the use of which is illustrated in the same SteelX design brochure. MacDonald also relies on a new document describing the SteelX Design Method—a document produced after the close of fact discovery—as further evidence that Cornerstone's design class system practices the claim. The new document highlights the same three design categories as the brochure. The Court finds that MacDonald may permissibly cite newly produced evidence that supports the already-disclosed infringement contention. Citing new evidence in support of an existing theory is not the same as disclosing a new theory altogether.
See Declaration of James K. Cleland, Ex. C (the "MacDonald Declaration") [ECF No. 126-4] 45.
See id. at 46-48.
Id. at 46-47.
The Court will also allow Pensmore to rely on MacDonald's opinions concerning whether compliance with industry standards requires practicing Claim 7. This information is relevant to damages because it relates to barriers to entry in the industry. Pensmore avers that it does not assert industry standards as a new theory of infringement, and the Court will hold Pensmore to that representation. The Court is not persuaded by Cornerstone's argument that referencing industry standards is a hidden theory of infringement because Pensmore's proposed Second Amended Complaint contained allegations to that effect. The Court denied the motion to amend, however, so those allegations are not part of the case, and they will not become part of the case.
See id. at 49 ("In my experience, obtaining an evaluation report demonstrating compliance with IAPMO EC-015 is timing consuming and expensive.").
Expert Opposition 8:6-14.
See Hearing Minutes Re: Pl.'s Mot. for Leave to File Second Am. Compl. [ECF No. 130].
Accordingly, the Expert Motion is DENIED with respect to MacDonald.
B. Contentions Motion
Pensmore moves to strike Cornerstone's Supplemental Invalidity Contentions (and corresponding opinions in the March 3, 2023, Rebuttal Report of Fred P. Smith), as well as the Second Supplemental Report of Fred P. Smith, dated March 31, 2023 (the "Second Supplement"). First, Pensmore contends that the invalidity contentions should be stricken because they disclose untimely new invalidity theories concerning Claim 7 of the '881 Patent, including that it lacks written description, that it lacks enablement, and that the term "maximum allowable tensile strain" is indefinite. Because Cornerstone did not seek leave of court, nor demonstrate good cause, to amend, Pensmore argues that there is no basis for an 11-month-late, prejudicial amendment. Second, Pensmore contends that the Second Supplement, which Cornerstone served on the last day of discovery, should be stricken because it contains new invalidity theories concerning a previously undisclosed 14-year-old concrete slab in Australia, which is purportedly relevant to validity of the '970 Patent.
See Contentions Motion 9:1-9.
Id. at 12:20-27.
Id. at 9:10-19.
Cornerstone responds that it had to serve amended invalidity contentions and further supplemental expert reports because Pensmore's opening expert declaration on infringement contained new theories that Pensmore did not disclose in its infringement contentions. Specifically, as stated, Cornerstone avers that MacDonald identified additional locations where the limitations of Claim 7 can be found, and he has now introduced five potential definitions of "maximum allowable tensile strain." Cornerstone argues that the new disclosure of five potential definitions provides a new ground for indefiniteness and lack of enablement and written description, thereby justifying the amendment. With respect to the Second Supplement, Cornerstone contends that Smith properly responded to MacDonald's attacks to the chain-of-custody facts and methodology underlying Smith's invalidity opinions. In any event, Cornerstone argues that the supplemental report was justified and harmless and that Pensmore cannot show prejudice because Pensmore was able to depose the relevant underlying fact witness, Rueben Ramsay, as well as Smith.
Contentions Opposition 4:3-10.
Id. at 8:1-20 (e.g., Cornerstone's SteelX Design Method for Twisted Steel Reinforcement, the International Association of Plumbing and Mechanical Officials ES EC-105 industry standard); see also id. at 15:13-19.
Id. at 15:20-23.
Id. at 4:20-22; see also id. at 18:6-15.
Id. at 4:22-25.
In its Reply, Pensmore argues that allowing the amendments would be highly prejudicial because they will require a new claim construction, a supplemental rebuttal expert report, and the reopening a number of fact and expert witness depositions. Pensmore also asserts that MacDonald disclosed no new infringement opinions; rather, "[a]s to Claim 7 of '881 patent, the Accused Instrumentality is and always has been [Cornerstone's] SteelX Design Class System for Micro Reinforced Concrete." Pensmore contends that the documents that Cornerstone now challenges are not themselves Accused Instrumentalities, but, rather, they are "documents describing the Accused Instrumentality (i.e., the design class system) of [Cornerstone]." With respect to the Second Supplement, Pensmore argues that Cornerstone has not shown why it could not have tested the new sample earlier rather than waiting until the last day of discovery to disclose the sample and new testing, thereby effectively preventing rebuttal.
Contentions Reply 4:12-20.
Id. at 7:12-14.
Id. at 7:14-18.
Id. at 10:24-11:5.
1. Legal Framework
The Standing Patent Rules to which the parties agreed to be bound require the parties "to provide early notice of their infringement and invalidity contentions, and to proceed with diligence in amending those contentions when new information comes to light in the course of discovery." O2 Micro, 467 F.3d at 1365-66. The Standing Patent Rules "seek to balance the right to develop new information in discovery with the need for certainty as to the legal theories." Id. Invalidity and infringement contentions may be amended by order of the court upon a timely showing of good cause. See Kandypens, Inc. v. Puff Corp., 2020 WL 11629210 (C.D. Cal. Sept. 24, 2020). "District courts have 'wide discretion' in enforcing the patent local rules." Slot Speaker Techs., Inc. v. Apple, Inc., 2017 WL 235049, at *2 (N.D.Cal. 2017) (quoting Finjan, Inc. v. Proofpoint, Inc., 2015 WL 9460295, at *1 (N.D. Cal. Dec. 23, 2015)).
2. Analysis
a. Supplemental Invalidity Contentions
As an initial matter, the Court finds Cornerstone's supplemental invalidity contentions procedurally improper. Pensmore served MacDonald's infringement declaration on Cornerstone on January 27, 2023, which was the deadline set by the Court. Cornerstone does not explain why it did not move to amend its invalidity contentions after receiving the declaration that purportedly contains new opinions. Instead, 11 months after the deadline set by the Court, Cornerstone served its supplemental contentions without seeking leave and without showing good cause. The Court could grant the motion to strike on that basis alone.
Compare Scheduling Order 2 with MacDonald Declaration 53.
Instead, because the issues presented in the Contentions Motion and Expert Motion overlap significantly, the Court will exercise its discretion to resolve both motions on the merits. Thus, deeming Cornerstone's service of updated contentions as an implied motion for leave to amend based upon asserted good cause, the Court will deny the motion on the merits.
Cornerstone has not shown diligence. Cornerstone argues that the MacDonald declaration disclosed new infringement theories, and, thus, there exists good cause to allow responsive updated invalidity theories. But the Court has already rejected that argument. As explained with respect to the Expert Motion, MacDonald cited additional evidence (that was untimely produced by Cornerstone) in support of the existing infringement theory. Thus, the Court will grant the motion to strike the invalidity contentions.
The Court is mindful of Cornerstone's concerns that MacDonald's opinions concerning multiple definitions of "maximum allowable tensile strain" could present claim construction issues at this stage. But "[g]iven that the time for claim construction has passed, all unconstrued claims shall have their plain and ordinary meanings." Broadcom Corp. v. Emulex Corp., 2011 WL 13130705, at *4 (C.D. Cal. Aug. 10, 2011). If Cornerstone contends that MacDonald's opinions fail to apply plain and ordinary meaning, then Cornerstone may make a Daubert challenge to exclude the relevant "maximum allowable tensile strain" opinions. See, e.g., Liquid Dynamics Corp. v. Vaughan Co., Inc., 449 F.3d 1209, 1224 n.2 (Fed. Cir. 2006) (district courts have discretion to exclude expert testimony "as irrelevant because it [is] based on an impermissible claim construction").
Accordingly, the Contentions Motion is GRANTED with respect to striking the supplemental invalidity contentions.
b. Second Supplement
The Court will exclude the Second Supplement as it relates to the 14-year-old Australian slab of concrete proffered as invalidating prior art. There is no reason that Cornerstone could not have obtained a sample from the slab earlier in this litigation, conducted its testing, and provided disclosures in time for Pensmore to rebut them. The Court finds unpersuasive Cornerstone's arguments that the new testing falls within the scope of permissible rebuttal. Cornerstone is not rebutting Pensmore's chain-of-custody challenge to Cornerstone's other prior art examples. Rather, unhappy with Pensmore's rebuttal concerning the other prior art examples, Cornerstone identified a new piece of prior art to use instead. Cornerstone has not demonstrated that the untimely disclosure was substantially justified or harmless. Thus, the Second Supplement must be excluded under Rule 37(c)(1).
Accordingly, the Contentions Motion is GRANTED with respect to striking the Second Supplement.
C. Invalidity MSJ
Cornerstone seeks judgment that all asserted claims of the '970 Patent are invalid as obvious under the on-sale bar, in view of the twisted steel fibers with a generally rectangular, bilateral truncated circle cross-section with only "miniscule modifications" to the dimensions and aspect ratios (the "2008 Helix 5-25 Fibers"), which Pensmore began selling three years before the '970 Patent's critical date. Cornerstone argues that the 2008 Helix 5-25 Fibers meet all but two of the claim limitations found in Claims 1-22 in the '970 Patent. Cornerstone acknowledges that (1) "Claims 1, 10, and 16 recite a 'thickness (t) of between 0.01375 and 0.0159 inches,' " and (2) "[C]laims 1, 3-4, 10, 16, and 18-19, recite aspect ratios ranging from 1.53:1 (thickest) to 1:93:1 (flattest)." But Cornerstone argues that these thickness and aspect ratio measurements would have been obvious to a person of ordinary skill in the art (a "POSA") in view of U.S. Patent No. 5,989,713 (the "University of Michigan Patent") because it "expressly suggests modifying the dimensions of the fibers to arrive at all claimed ranges in the '970 patent." Cornerstone avers that "[n]othing suggests that the claimed ranges perform any better in degree—much less in kind—than the 2:1 ratio and 0.0123" thickness of the generally rectangular Helix 5-25 fibers that went on sale in 2008."
SJ Motion 1:21-25 & 2:2-9; see also id. at 10 (the critical date for the '970 Patent is April 3, 2011, which is one year before the priority date of the provisional application underlying the application that matured into the '970 Patent).
Id. at 12:6-13:8.
Id. at 13:10-11 & 14-15.
Id. at 13:20-21; see also id. at 15:24-16:5.
Id. at 16:23-26.
In connection with its inequitable conduct counterclaim alleging that the '970 Patent is unenforceable, Cornerstone also seeks a ruling that the 2008 Helix 5-25 Fibers and the University of Michigan Patent were material to patentability.
Id. at 2:15-20; see also id. at 19:3-12 & 20:1-15.
Pensmore responds that the SJ Motion ignores the '970 Patent's teaching about problems with prior art fibers, about the solutions achieved by modifying the 2008 Helix 5-25 Fibers, and about the corresponding manufacturing and performance benefits achieved. Further, Pensmore contends that "significant innovation" contributed to the disclosed invention, and Pensmore criticizes the witnesses on whom Cornerstone relies (Bill Orabone and expert Fred Smith) for "fall[ing] into the classic trap of using hindsight reconstruction." Pensmore argues that the claimed invention "differs from [the 2008] product in every key claimed element: (1) geometry and cross sectional shape (rectangle to bilateral truncated circle), (2) aspect ratio (2:1 to a range of 1.53-1.93) and (3) thickness (0.0125" to a range of 0.01375"-0.0159")." Because there are disputed facts concerning, inter alia, the characteristics of the prior art, the teachings of earlier patents, the alleged motivation to combine, and likelihood of success that the new invention would work, including disputes supported by Pensmore's expert, Dr. Kevin MacDonald, as well as secondary considerations of non-obviousness, Pensmore argues the motion must be denied.
SJ Opposition 1:12-16.
Id. at 1:17-27 & 17:8-10.
Id. at 17:20-24.
Id. at 2:6-8.
With respect to the materiality portion of the SJ Motion, Pensmore argues that the '970 Patent already distinguished "the rectangular twisted steel fibers with an aspect ratio of 2:1," which is "the same fiber configuration and aspect ratio" found in the 2008 Helix 5-25 Fibers and the University of Michigan Patent.
Id. at 2:15-18; see also id. at 24:11-21 (neither renders the '970 Patent anticipated or obvious).
1. Legal Framework
A patent is presumed valid, and it must be proved invalid by clear and convincing evidence. See Microsoft Corp. v. i4i Ltd. Partnership, 564 U.S. 91, 95, 131 S.Ct. 2238, 180 L.Ed.2d 131 (2011). A patent is invalid for obviousness only "if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains." 35 U.S.C. § 103(a). The party asserting obviousness must identify some motivation for one of ordinary skill would have had to combine the prior art references to achieve the claimed invention. See Innogenetics, N.V. v. Abbott Labs., 512 F.3d 1363, 1373 (Fed. Cir. 2008). Whether a patent is invalid as obvious is a question of law based upon underlying facts. See TriMed, Inc. v. Stryker Corp., 608 F.3d 1333, 1341 (Fed. Cir. 2010) (citations omitted). In determining whether a genuine issue of material fact exists about invalidity, the court views the evidence in the light most favorable to the nonmoving party and resolves all doubts in its favor. See Anderson, 477 U.S. at 255, 106 S.Ct. 2505.
A patent is invalid if the " "in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States." 35 U.S.C. § 102(b) (pre-AIA). "Whether the on-sale bar applies is a question of law based on underlying factual findings." Medicines Co. v. Hospira, Inc., 827 F.3d 1363, 1371 (Fed. Cir. 2016). The Supreme Court has "clarified that the on-sale bar under 35 U.S.C. § 102(b) applies when, before the critical date, the claimed invention (1) was the subject of a commercial offer for sale; and (2) was ready for patenting." Id. at 1372 (citing Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 67-68, 119 S.Ct. 304, 142 L.Ed.2d 261 (1998)). The first prong should " 'be analyzed under the law of contracts as generally understood.' " Id. at 1373 (quoting Group One, Ltd. v. Hallmark Cards, Inc., 254 F.3d 1041, 1047 (Fed. Cir. 2001)). The second prong should be analyzed with reference to whether the challenger can show "(1) proof of a reduction to practice; or (2) drawings or other descriptions sufficiently specific to enable a person of ordinary skill to practice the invention." Id. at 1373.
2. Analysis
a. MSJ Filing Procedure
As the parties are aware, the Court's Standing Order prescribes the required procedures for filing a summary judgment motion. Cornerstone summarizes its unsuccessful efforts to meet and confer with Pensmore to comply with the Court's procedures. Based upon these efforts, Cornerstone avers that, "given [Pensmore's] months-long refusal to participate in the summary-judgment procedures outlined in the Revised Standing Order, the Court should decide Cornerstone's renewed motion under the standard procedures set forth in Federal Rule 56 and Local Rules 56-1, 56-2, and 56-3."
See Revised Standing Order [ECF No 91].
SJ Motion iv:11-viii:26.
Id. at ix:1-4.
In response, Pensmore asks the Court to strike the SJ Motion because Cornerstone did not comply with the Court's procedures, and Cornerstone never sent the filed "Joint Statement" to Pensmore for consideration. Pensmore asserts that it was in regular communication with Cornerstone and told Cornerstone it needed missing discovery to fill in citations in the proposed Joint Statement.
SJ Opposition 1:2-9.
Id. at 13:14-21.
Since the Court instituted its revised summary judgment procedures, numerous parties have complied with those procedures and have collaborated successfully to file the required Joint Statement and Joint Appendix. The Court is disappointed that the parties in this case apparently would rather spend time finger-pointing across many pages of briefs and exhibits rather than use that time to collaborate productively so that resolving the pending motions could be accomplished efficiently. The Court finds that each party could have made a better effort to comply with the Revised Standing Order. Pensmore could have been more responsive earlier in the process and could have made its timing expectations clear to Cornerstone, whereas Cornerstone could have proposed a filing schedule that met the dispositive motion cutoff considering the relevant discovery and deposition deadlines, rather than filing the motion five weeks before that motions deadline under the assumption that Pensmore would never cooperate. The Court admonishes the parties to read the Central District's Civility Guidelines and urges the parties to use the meet-and-confer process more effectively in the future, especially where it is required under the Revised Standing Order.
b. Obviousness
The Court has reviewed the Joint Statement of Undisputed Facts in connection with the parties' briefs and supporting evidence and concludes that genuine issues of material fact preclude a ruling at this stage that the '970 Patent is obvious as a matter of law.
The Court relies on the [Proposed] Joint Statement of Undisputed Facts (the "Joint Statement" or "JS") [ECF No. 137-1], filed with the SJ Reply because it most closely resembles the Joint Statement required under the Revised Standing Order.
Although "[i]t is well settled that a patent can be obvious in light of a single reference if it would have been obvious to modify that reference in a way that results in the patented invention," the Court cannot conclude as a matter of law that the proposed modifications were obvious. Kroy IP Holdings, LLC v. Safeway, Inc., 107 F. Supp. 3d 656, 672 (E.D. Tex. 2015).
Cornerstone's position is that, to obtain the '970 Patent, Pensmore merely made obvious, slight modifications to thickness and aspect ratio found in the 2008 Helix 5-25 Fibers that Pensmore had been selling for years. In support, Cornerstone offers the testimony of William Orabone, who was an investor and advisor to Pensmore's predecessor company and who later became Pensmore's CEO until 2011. In May 2008, Pensmore changed the cross-sectional shape of the Helix 5-25 product to "generally rectangular," which was "easier to manufacture than triangular wire." During his deposition, Orabone testified that, from 2008 to 2011, Pensmore conducted no further research and development to change the 2008 Helix 5-25 Fibers.
JS ¶¶ 1 & 2.
Id. at ¶¶ 23 & 28.
Id. at ¶ 46.
Luke Pinkerton, Pensmore's President and CTO, offers contrary testimony. Specifically, during his deposition Pinkerton testified that, to conceive the invention claimed in the '970 Patent, the inventors "had to change a number of things," including fixing "a problem with the bearings in the form unit," determining that "the body [of the wire] has a thickness between 0.01375 inches and 0.0159 inches," and determining that "a lot of change in the amount of force which is proportional to how much energy is going into that and reshaping."
Joint Exhibit ("JE") [ECF No. 127-2] 813 (Dep. Tr. at 85:25-86:8), 815 (Dep. Tr. at 91:8-23), & 818 (Dep. Tr. at 106:6-11).
Cornerstone asserts that the rough draft of the Pinkerton deposition transcript cannot create a genuine issue of material fact because it is inadmissible hearsay. But this objection puts form over substance. The transcript will not be admitted at trial to prove the facts discussed therein. Rather, the transcript reflects fact testimony that Pinkerton could give at trial in support of how he developed the invention claimed in the '970 Patent. See Fraser v. Goodale, 342 F.3d 1032, 1036-37 (9th Cir. 2003) ("At the summary judgment stage, we do not focus on the admissibility of the evidence's form. We instead focus on the admissibility of its contents."); Block v. City of Los Angeles, 253 F.3d 410, 418-19 (9th Cir. 2001) ("To survive summary judgment, a party does not necessarily have to produce evidence in a form that would be admissible at trial, as long as the party satisfies the requirements of Federal Rules of Civil Procedure 56."). Accordingly, the 55 instances of this objection raised in the Joint Statement are OVERRULED.
In addition to Pinkerton's testimony, Pensmore offers the rebuttal declaration of Dr. MacDonald. In rebuttal to Cornerstone's invalidity expert, Fred Smith, MacDonald explains his view on the evolution of the Helix 5-25 products: "[a]fter further research, development, manufacturing optimization, and product optimization from 2008-2012," Pensmore modified the 2008 Helix 5-25 Fibers into a third-generation product." MacDonald opines that the third generation fibers, along with "new ways to design with and characterize the properties of twisted steel fibers, led to and are subject to the asserted '970 and '881 patents." In MacDonald's view, the third generation fibers "included a new shape, product dimensions including thickness and aspect ratio, and characteristics; to achieve these improvements Pensmore:
Id. at 726, 19:17-24.
Id.
• switched to a raw material wire with a diameter of 0.51 mm with a different grade of steel, and manufactured the fibers to a target thickness of 0.0140 inches (or sometimes above 0.0140 inches); and
• to address significant manufacturing issues, "made changes to its manufacturing process to modify the dimensions and shape of its twisted steel fiber products, including adjusting the space between rollers.
Id. at 19:24-20:4; see also id. at 728-733 (analyzing '970 Patent and observing its benefits over prior art).
MacDonald disagrees that the University of Michigan Patent renders the '970 Patent obvious. MacDonald also opines that Smith is wrong to conclude that "a POSA could take the teachings of Naaman [i.e., the University of Michigan Patent] along with the 2008 Helix 5-25 [Fibers] sample to arrive at the teachings of the '970 patent without any undue experimentation."
See generally id. at 767-771.
Id. at 771, 64:13-16; see also id. at 64:20-26 ("Mr. Smith's conclusion that a POSA could use Naaaman and the 2008 fiber to create the ranges in the 2012 fiber suffer from a failure to appreciate the intricacy in designing a fiber. While a lower aspect ratio fiber forms air pockets in the concrete, decreasing the bond as Naaman has indicated, a lower aspect ratio also increases the torsional rigidity of the fiber, thereby increasing the performance to a certain point. A POSA must balance these effects in formulating an ideal range.").
MacDonald also opines that various secondary considerations of non-obviousness undermine Smith's conclusions. For example, MacDonald summarizes commercial success (over $81 million of third-generation product sold, with a dramatic increase in number of projects completed); long felt but unresolved needs (finally a twisted steel fiber product that could be viably manufactured and sold); failure of others (including Naaman); praise by others; and copying by others, including Cornerstone.
See generally id. at 773-775.
Pinkerton's and MacDonald's testimony is sufficient to defeat the SJ Motion on obviousness. Although Cornerstone disagrees with MacDonald's conclusions, the dispute boils down to a classic battle of the experts that cannot be resolved on summary judgment. Further, the Court finds factual disputes regarding the nexus between the proposed secondary considerations and the invention claimed in the '970 Patent. These matters must be resolved at trial. See, e.g., WBIP, LLC v. Kohler Co., 829 F.3d 1317, 1332 (Fed. Cir. 2016) ("Commercial success, for example, may be linked to an individual element or, in other circumstances, it could be linked to the inventive combination of known elements," but "these are fact questions to which we must give deference on appeal.").
To reach this conclusion, the Court has reviewed the MacDonald rebuttal declaration in its entirety. But the Court admonishes Pensmore to include pin cites to expert testimony in the future rather than citing a page range as it did throughout the Joint Statement. See, e.g., JS ¶ 121 (citing MacDonald Decl. at JE 768-773).
The Court will also deny the motion with respect to materiality. Cornerstone summarizes its materiality argument as follows: "Because the '970 patent is obvious in view of the second-generation [2008] Helix 5-25 product and the [University of Michigan Patent], the Court should find that these two prior art references were material to the '970 patent's patentability." Where genuine disputes of material fact preclude a ruling of obviousness a matter of law, however, the same factual issues are relevant to determining the materiality of the prior art references for the purposes of the inequitable conduct counterclaim.
SJ Reply 25:22-25.
Accordingly, the SJ Motion is DENIED.
V. DISPOSITION
For the foregoing reasons, the Court hereby ORDERS as follows:
1. The Expert Motion is GRANTED with respect to Pinkerton and DENIED with respect to MacDonald.
2. The Contentions Motion is GRANTED with respect to the supplemental invalidity contentions and GRANTED with respect to the Second Supplement.
3. The SJ Motion is DENIED with respect to obviousness and with respect to materiality.
IT IS SO ORDERED.