Opinion
Case No. 01-CV-71925
July 16, 2002
OPINION AND ORDER DENYING DEFENDANTS' MOTION TO BIFURCATE DISCOVERY AND TRIAL ON THE ISSUES OF LIABILITY AND DAMAGES
Defendants Bing-Lear Manufacturing Group, L.L.C. and SLI, Inc. (collectively "Bing-Lear") move to bifurcate discovery and trial as to liability and damages in this patent infringement lawsuit. Pursuant to E.D. Mich. Local R. 7.1(e)(2), it is ORDERED that the motion be resolved without oral argument. For the reasons set forth below, defendants' motion to bifurcate discovery will be DENIED. Defendant's motion to bifurcate trial will be DENIED without prejudice.
I. Background A. Claims, Counterclaims, Affirmative Defenses
Plaintiffs K.W. Muth Company, Inc. and Muth Mirror Systems, L.L.C. (collectively "Muth") initiated this patent lawsuit on May 18, 2001. On February 21, 2002, Muth filed a Third Amended Complaint alleging it has developed motor vehicle mirrors incorporating "LED-based supplemental signal devices positioned inside the housings of vehicular outside or side view (SIGNAL) mirrors." February 21, 2002 Third Amended Complaint, ¶ 8, at 3. Muth alleges Bing-Lear is infringing U.S. Patent No. 6,005,724 ("`724 Patent"), U.S. Patent No. 6,257,746 ("`746 Patent"), and U.S. Design Patents D426,507, ("`D507 Patent"), D428,373 ("`D373 Patent"), and D430,088 ("`D088 Patent") by manufacturing side-view mirrors equipped with LED modules, and supplying these mirrors to the Ford Motor Company for installation in Ford Windstar vans. Muth alleges defendant SLI supplies LED modules to defendant Bing-Lear Manufacturing Group, L.L.C.
LED stands for "Light Emitting Diodes."
Muth continues by alleging that Bing-Lear officials have represented that the alleged infringing mirrors are based upon technology developed by non-party United Technologies Automotive ("UTA"). Muth alleges it enjoyed a working relationship with UTA before UTA sold its mirror business to Bing-Lear's predecessor the Lear Corporation. Counts I-V of the Third Amended Complaint allege, respectively, infringement of the `724 Patent, `746 Patent, `D507 Patent, `D373 Patent, and `D088 Patent. Count VI alleges contributory patent infringement against defendant SLI relative to the `724 Patent. Count VII alleges breach of a June 21, 2000 Letter of Understanding creating a contractual relationship between Muth and Bing-Lear.
The Third Amended Complaint actually contains two Count IVs. The court refers to the Counts as if they were corrected i.e. the second Count IV is referred to as Count V, Count V is referred to as Count VI, and so on.
Defendants Bing-Lear Manufacturing Group and SLI filed separate "Answers, Defenses and Counterclaims" on March 18, 2002. Bing-Lear alleges as affirmative defenses that inter alia the patents are invalid and/or unenforceable by operation of estoppel, that the infringement claims are barred by license, waiver and/or estoppel, that the alleged contract claim is barred by the Uniform Commercial Code and the Statute of Frauds, and that the alleged contract fails for lack of consideration, indefiniteness, and lack of a meeting of the minds. Bing-Lear also alleges as counterclaims that the patents are invalid and unenforceable, and that this case is exceptional within the meaning of 35 U.S.C. § 285 (permitting a court to award attorney fees to the prevailing party in "exceptional" cases).
B. Scheduling Orders
An initial Scheduling Order issued on October 18, 2001. As part of the Scheduling Order, the parties were instructed that the court generally allows 3-6 months from the date of the answer for discovery, and that the court will not order discovery to take place subsequent to the discovery cutoff date. Witness lists were ordered to be exchanged by April 19, 2002, and the discovery cutoff date was scheduled for July 19, 2002. Muth was ordered to submit a Proposed Claim Construction Statement by January 18, 2002, with Bing-Lear ordered to file a Response by April 18, 2002. The parties were further ordered to meet and confer by May 9, 2002, and to file a Joint Claim Construction Statement by May 24, 2002. A claim construction hearing date was scheduled for August 26, 2002, dispositive motions were ordered to be filed by October 25, 2002, and trial was set for February 11, 2003.
Muth filed its Proposed Claim Construction Statement on January 18, 2002. By order dated April 17, 2002, the court denied Bing-Lear's motion to restrict Muth's claim construction position or to compel Muth to file a complete claim construction statement, and granted Bing-Lear's request for an extension of certain dates set forth in the October 18, 2001 Scheduling Order. Witness lists were ordered to be exchanged by April 26, 2002, and the discovery cutoff date was extended to July 26, 2002. Bing-Lear was granted a one week extension to file its Response to Muth's Proposed Chim Construction Statement, to April 25, 2002. The parties were ordered to meet and confer by May 16, 2002, and to file a Joint Claim Construction Statement by May 31, 2002. The claim construction hearing date remained scheduled for August 26, 2002, the dispositive motion cutoff date was moved to November 1, 2002, and the trial date was extended to February 18, 2003.
On May 16, 2002, Bing-Lear filed its instant motion to bifurcate discovery and trial on the issues of liability and damages. On June 18, 2002, two additional counsel filed appearances on behalf of Muth. On that same date, the parties filed a stipulation to amend the scheduling dates. On June 19, 2002, the court entered an Amended Scheduling Order consistent with the parties' stipulation. Discovery cutoff is now set for December 12, 2002. The Joint Claim Construction Statement is due July 12, 2002, with the claim construction hearing date set for October 21, 2002. The dispositive motion cutoff date is currently scheduled for January 15, 2003, with trial scheduled for May 5, 2003.
II. Motion to Bifurcate
In moving to bifurcate discovery and trial on the issues of liability and damages, Bing-Lear initially argues that the complexity of this lawsuit, involving five patents and the construction of nearly 40 claims, warrants extensive discovery. Bing-Lear maintains that focusing upon an initial bifurcated liability phase would promote judicial efficiency, avoid the potential confusion of liability and damages issues, defer or eliminate further discovery disputes relative to damages, and eliminate the undue prejudice resulting from Muth's repeated refusal to cooperate with discovery regarding damages. Bing-Lear proffers orders issued by Magistrate Judge Pepe to support its position that Muth has been repeatedly sanctioned for failing to provide discovery regarding damages. Bing-Lear asserts that Muth would not be prejudiced by a bifurcated trial in that an immediate appeal may be taken in a patent suit on a liability determination, before issues of willfulness and damages have been tried. Bing-Lear continues that, if the issues of liability and damages are not bifurcated in discovery, Bing-Lear may be forced to prematurely decide whether to waive the attorney-client privilege as to its opinions of counsel. Bing-Lear also argues that delaying discovery on liability issues could save the considerable costs of hiring damages experts. Bing-Lear further asserts that bifurcation will promote settlement because the parties will be concentrating on the strengths and weaknesses of their liability positions.
A. Standard of Review
Federal Rule of Civil Procedure 42(b) authorizes a district court to bifurcate trial on separate issues in furtherance of convenience, to avoid prejudice, or when separate trials will be conducive to expedition and economy. Whether to try issues separately under Rule 42(b) is within the district court's discretion. Yung v. Raymark Industries, Inc., 789 F.2d 397, 400 (6th Cir. 1986); Moss v. Associated Transport, Inc., 344 F.2d 23, 25 (6th Cir. 1965). "The party seeking bifurcation has the burden of demonstrating judicial economy would be promoted and that no party would be prejudiced by separate trials." Princeton Biochemicals, Inc. v. Beckman Instruments, Inc., 180 F.R.D. 254, 256 (D.N.J. 1997).
Factors to be considered include (1) convenience; (2) prejudice; (3) expedition; (4) economy; (5) whether the issues sought to be tried separately are significantly different; (6) whether they are triable by jury or the court; (7) whether discovery has been directed to a single trial of all issues; (8) whether the evidence required for each issue is substantially different; (9) whether one party would gain some unfair advantage from separate trials; (10) whether a single trial of all issues would create the potential for jury bias or confusion; and (11) whether bifurcation would enhance or reduce the possibility of a pretrial settlement.
THK America, Inc. v. NSK Co., Ltd., 151 F.R.D. 625, 632 (N.D. Ill. 1993). "Ultimately, the decision whether to bifurcate is a practical one." Id at 633. Whether to bifurcate issues must be decided by the trial court on a case-by-case basis. Yung, 789 F.2d at 400; Moss, 344 F.2d at 25; Princeton Biochemicals, 180 F.R.D. at 256.
B. Analysis
Bing-Lear's instant May 16, 2002 motion to bifurcate was filed well after the court's initial October 18, 2001 Scheduling Order set the discovery cutoff date at July 19, 2002, and after Bing-Lear's request to extend the discovery cutoff date to July 26, 2002 was granted on April 17, 2002. Bing-Lear's argument that "Muth's refusal to participate in discovery has prejudiced Bing-Lear's ability to conduct adequate damages discovery in the discovery time remaining", Bing-Lear's June 13, 2002 Reply Brief, at 4, is undercut by the parties' June 18, 2002 stipulation to extend the discovery cutoff date by 5 additional months, to December 12, 2002. Bing-Lear's proffered evidence going to Muth's refusal to engage in meaningful discovery regarding damages indicates that Bing-Lear did not initially support bifurcation of discovery; Bing-Lear actively sought discovery related to damages as late as May 10, 2002, 6 days before filing its motion to bifurcate. See Bing-Lear's June 13, 2002 Exhibit 11.
The court has examined Muth's January 18, 2002 Proposed Claim Construction Statement, and Bing-Lear's April 25, 2002 Response To Proposed Claim Construction Statement. Muth asserts that Bing-Lear's accused device infringes 21 of the 22 claims in the `724 Patent, all 13 claims of the `746 Patent, and the single claim contained in each of the three design patents: the `D507 Patent, the `D373 Patent, and the `D088 Patent. Muth's claim interpretations are based solely on references to the patents' specification language, and do not rely upon prosecution history or extrinsic evidence, although Muth states it reserves a right to later support its proposed claim constructions with expert or inventor testimony. In response, Bing-Lear identifies 87 claim terms for the `746 Patent that may be disputed, and 45 claim terms that may be disputed with respect to the `724 Patent. For the `746 Patent, Bing-Lear lists 5 documents as prosecution history that will support Bing-Lear's claims interpretations, 3 patents that constitute relevant prior art, 4 potential witnesses, and 2 specific dictionaries and treatises. For the `724 Patent, Bing-Lear lists 3 documents as relevant prosecution history, 14 patents that constitute relevant prior art, 4 potential witnesses, and again, 2 specific dictionaries and treatises. Bing-Lear disputes three features as described by Muth for the design patents, and cites prior and contemporaneous patents, advertisements and photographs as support for Bing-Lear's position with respect to the design patents.
Muth's January 18, 2002 Proposed Claim Construction Statement also contains an allegation that the alleged infringing device infringes U.S. Design Patent 429,202. The claim has been dropped from the February 21, 2002 Third Amended Complaint.
While the number of claims and claim terms to be construed suggests a rather involved claim construction process, the parties have identified only 4 potential expert witnesses and possibly an inventor that may testify regarding claim construction. The claim construction hearing is currently scheduled for October 21, 2001. In the interim, and indeed until the discovery cutoff date of December 12, 2002, it would be a more efficient use of the court's resources to permit discovery on the issues of both liability and damages.
Likewise, in the time remaining for discovery, it would be a more efficient use of court resources to resolve, rather than defer, discovery issues related to damages. Muth's alleged refusal to cooperate with discovery relative to damages weighs in favor of continuing the entire discovery process in light of the discovery sanctions available to the Magistrate Judge. Deferring discovery on the issues of willfulness and damages will only lengthen these proceedings. Any prejudice suffered by Bing-Lear may be remedied during the remaining discovery period.
There are, of course, difficulties raised by not bifurcating discovery, including the issue of whether Bing-Lear must now choose whether to pursue a good faith defense to Muth's claims of wilful infringement and waive the attorney-client privilege as to opinions of counsel.
Proper resolution of the dilemma of an accused infringer who must choose between the lawful assertion of the attorney-client privilege and avoidance of a willfulness finding if infringement is found, is of great importance not only to the parties but to the fundamental values sought to be preserved by the attorney-client privilege. An accused infringer, therefore, should not, without the trial court's careful consideration, be forced to choose between waiving the privilege in order to protect itself from a willfulness finding, in which case it may risk prejudicing itself on the question of liability, and maintaining the privilege, in which case it may risk being found to be a willful infringer if liability is found. Trial courts thus should give serious consideration to a separate trial on willfulness whenever the particular attorney-client communications, once inspected by the court in camera, reveal that the defendant is indeed confronted with this dilemma. While our court has recognized that refusal of a separate trial will not require reversal in every case involving attorney client communications bearing on willfulness, we have suggested the advisability of separate trials in appropriate cases. See Fromson v. Western Litho Plate Supply Co., 853 F.2d 1568, 1572, 7 USPQ2d 1606, 1611 (Fed. Cir. 1988) ("That approach may be useful in meeting the attorney-client privilege problem.").
Quantum Corp. v. Tandon Corp., 940 F.2d 642, 643-644 (Fed. Cir. 1991). Given that the discovery period will not conclude until December 12, 2002, however, there is ample time for the court to conduct in camera reviews to reveal if Bing-Lear is in fact faced with such a dilemma.
The court is not persuaded that delaying discovery on the issue of damages will promote settlement negotiations in this matter. The parties to date have not, to this court's knowledge, engaged in serious settlement negotiations. Discovery of the economics involved in this case could actually promote settlement negotiations. The costs involved in hiring damages experts could likewise stimulate meaningful settlement discussions.
Trial of this matter raises additional issues, such as the potential for confusing the fact-finder. There is also the potential benefit in a bifurcated trial of an immediate appeal by Muth should there be a finding of non-liability. At this stage of these proceedings, however, the court is not persuaded that these potential benefits outweigh the benefits of proceeding to trial on all issues in an expedited manner. Bing-Lear's motion to bifurcate trial will be denied without prejudice, permitting Bing-Lear to again move for a bifurcated trial if warranted by later developments.
Bing-Lear has failed to demonstrate that discovery or trial should be bifurcated at this time. Yung, 789 F.2d at 400; Moss, 344 F.2d at 25; Princeton Biochemicals, 180 F.R.D. at 256; THK America, 151 F.R.D. at 632. Consistent with the analysis herein,
Bing-Lear's motion to bifurcate discovery is hereby DENIED. Bing-Lear's motion to bifurcate trial is hereby DENIED without prejudice.
SO ORDERED.