Opinion
03 Civ. 7369 (RWS).
December 23, 2004
FISH NEAVE, Attorneys for Plaintiff, New York, NY, By: HERBERT F. SCHWARTZ, ESQ., LAURENCE S. ROGERS, ESQ., FRANCES M. LYNCH, ESQ., A. PETER ADLER, ESQ., Of Counsel.
KENYON KENYON, Attorneys for Defendant, New York, NY, By: JAMES E. ROSINI, ESQ., BENJAMIN HERSHKOWITZ, ESQ., ANITA PAMINTUAN FUSCO, ESQ., LARISSA A. SOCCOLI, ESQ., Of Counsel.
OPINION
Defendant The Knot, Inc. (the "Knot") has moved pursuant to Rule 26(c)(2), Fed.R.Civ.P., to stay discovery, and pursuant to Rule 42(b), Fed.R.Civ.P., for separate trials on the issues of liability and damages relating to its alleged patent infringement. Plaintiff WeddingChannel.Com ("WeddingChannel") has moved to compel discovery concerning the Knot's allegedly willful infringement of its patent. For the reasons set forth below, the Knot's motion is denied. As set forth below and in open court, the WeddingChannel's motion is granted.
Prior Proceedings
WeddingChannel filed its complaint against the Knot alleging patent infringement on September 19, 2003. Discovery has proceeded and a Markman hearing has been held.
The Knot's motion to bifurcate and stay was marked fully submitted without oral argument on September 1, 2004. Issues relating to WeddingChannel's motion to compel discovery concerning willful infringement were heard and decided in open court on October 7, October 27, November 17, and December 8 of 2004.
Bifurcation Is Denied
Rule 42(b) provides as follows:
The court, in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition and economy, may order a separate trial of any claim, cross-claim, counterclaim, or third-party claim, or of any separate issue or of any number of claims, cross-claims, counterclaims, third-party claims, or issues, always preserving inviolate the right of trial by jury as declared by the Seventh Amendment to the Constitution or as given by a statute of the United States.
Fed.R.Civ.P. 42(b). "[W]hether to bifurcate a trial into liability and damages phases is a matter within the sound discretion of the trial court." Getty Petroleum Corp. v. Island Transp. Corp., 862 F.2d 10, 15 (2d Cir. 1988). To determine whether bifurcation is warranted, courts generally consider the following three factors: "1) whether significant resources would be saved by bifurcation, 2) whether bifurcation will increase juror comprehension, and 3) whether bifurcation will lead to repeat presentations of the same evidence and witnesses." Gaus v. Conair Corp., No. 94 Civ. 5693 (KTD), 2000 WL 1277365 at *3 (S.D.N.Y. Sept. 7, 2000). "Bifurcation in patent cases, as in others, is the exception, not the rule." Real v. Bunn-O-Matic Corp., 195 F.R.D. 618, 620 (N.D. Ill. 2000). Furthermore, the moving party bears the burden of establishing that bifurcation is warranted. Dallas v. Goldberg, 143 F. Supp. 2d 312, 315 (S.D.N.Y. 2001).
It is not unusual in patent infringement cases to try all issues in a single trial. See, e.g., Gaus, 2000 WL 1277365 at *3; Caterpillar, Inc. v. Deere Co., No. 96 C 5355, 1997 WL 17798 at *1 (N.D. Ill. Jan. 13, 1997) at *1; Home Elevators, Inc. v. Millar Elevator Serv. Co., 933 F. Supp. 1090, 1091-92 (N.D. Ga. 1996).
1. Efficiency
As discussed below, the issues of liability and willfulness overlap in this case. Therefore, bifurcation would result in unnecessary expense, inconvenience, and delay. See, e.g., Calmar, Inc. v. Emson Research, Inc., 850 F. Supp. 861, 866 (C.D. Cal. 1994). Furthermore, with bifurcation, disputes would inevitably arise about whether a particular interrogatory, deposition question, or document request is relevant to infringement, validity, willfulness, or all of those issues, further complicating and protracting the discovery process. This factor militates against the Knot's motion to bifurcate and stay.See, e.g., Willemijn Houdstermaatschaapij BV v. Apollo Computer, 707 F. Supp. 1429, 1435 (D. Del. 1989) ("[I]t appears inevitable that, if the motion to bifurcate were granted, both the discovery process and the liability trial would be repeatedly delayed by disputes regarding the discoverability or admissibility of evidence.").
2. Juror Comprehension
The issues in this case are not so complex as to necessitate bifurcation for the purpose of juror comprehension. See Elec. Trading Sys. Corp. v. N.Y. Mercantile Exch., No. 00 Civ. 7431 (KMW) at 3-4 (S.D.N.Y. Apr. 16, 2002) (summary order). There is one patent at issue, one defendant, and one system which is alleged to be infringing. There is no basis upon which to conclude that discovery, documentary evidence, and testimony regarding damages in this case will be more voluminous than that typically presented in other patent litigations. 3. Evidentiary Overlap
There is likely to be substantial overlap between the evidence that will be offered on the issue of liability and that which will be offered on the issue of damages in this case.
First, in making a determination of willful infringement, the fact-finder must weight evidence regarding the "totality of the circumstances." WMS Gaming, Inc. v. Int'l Game Tech., 184 F.3d 1339, 1354 (Fed. Cir. 1999); see also In re Hayes Microcomputer Prods., Inc. Pat. Litig., 982 F.2d 1527, 1543 (Fed. Cir. 1992) ("To determine whether a finding of willfulness is warranted, a jury looks to the totality of the circumstances to see whether `a reasonable person would prudently conduct himself with any confidence that a court might hold the patent invalid or not infringed.'") (quoting Ryco, Inc. v. Ag-Bag Corp., 857 F.2d 1418, 1428 (Fed. Cir. 1988)); Keyes Fibre Co. v. Packaging Corp. of Am., 763 F. Supp. 374, 375 (N.D. Ill. 1991) (stating that "evidence relating to [defendant's] state of mind when it committed the infringement, which is clearly relevant to damages, cannot be neatly separated from the underlying liability issue of whether the patent was infringed upon"); Real, 195 F.R.D. at 625. Accordingly, "[a] willful determination . . . is a finding of fact inextricably bound to the facts underlying the alleged infringement." THK America, Inc. v. NSK Co. Ltd., 151 F.R.D. 625, 629 (N.D. Ill. 1993).
Under the "totality of circumstances" test, factors for consideration include the Knot's deliberate infringement of WeddingChannel's patents, the Knot's knowledge of WeddingChannel's patent rights, the Knot's good faith belief of invalidity or infringement after investigation of WeddingChannel's patent rights, and the Knot's behavior as a litigant. See WMS Gaming, 184 F.3d at 1354; THK America, Inc. v. NSK Co. Ltd., 151 F.R.D. 625, 630 (N.D. Ill. 1993).
Second, the evidence relating to the alleged willful infringement of the patent is also relevant to the Knot's implied license and estoppel defenses. (The Knot's answer and counterclaims ¶ 93). The state of mind with respect to infringement of the patent is directly relevant to a claim of an implied license. See Bandag, Inc. v. Al Bolser's Tire Stores, Inc., 750 F.2d 903, 925 (Fed. Cir. 1984). Likewise the infringer's state of mind can support a finding of egregious conduct, thereby defeating equitable defenses such as laches.See A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1033 (Fed. Cir. 1992) (en banc).
Third, the commercial success issue that is part of the Knot's obviousness defense (i.e., liability) also overlaps with damages issues, as the Knot acknowledges. See Willemijn 707 F. Supp. at 1434.
Fourth, WeddingChannel's second through fifth claims for relief seek damages related to the Knot's unlawful access to the WeddingChannel's computers and internet website. WeddingChannel seeks damages for all profits, gains, and advantages that were derived by the Knot. To calculate these damages, a jury may have to determine whether the Knot accessed WeddingChannel's computers and Internet website, and to what extent WeddingChannel's system has been damaged by any diverted sales.
A single discovery period and a single trial will obviate the problems that might arise from the above-described overlap between liability and damage issues in this case. See, e.g., Dallas, 143 F. Supp. at 316 (denying motion for bifurcation where movant failed to "dispute the overlapping nature of the relevant evidence"); Johns Hopkins University v. Cellpro, 160 F.R.D. 30, 35 (D. Del. 1995).
4. Equitable Considerations
In addition to considering the interests of judicial economy, the Court must also balance the overall equities in ruling on a motion to bifurcate. Real, 195 F.R.D. at 620. If bifurcation were to take place, a first trial would resolve only the issues of the Knot's infringement of the '753 patent and the validity of that patent. In all likelihood, an appeal to the Court of Appeals for the Federal Circuit would follow. If WeddingChannel were to prevail at trial and then on appeal, the case would then return to this Court for discovery and a second jury trial on the willfulness and damages issues, thereby giving rise to substantial delays in resolving WeddingChannel's claim of infringement. Therefore, equitable considerations do not support the Knot's motion to bifurcate and stay. Discovery Relating To Willfulness Is Appropriate
Notice of the '753 patent to the Knot gave rise to an affirmative duty of care requiring the Knot to obtain competent legal advice before engaging (or continuing to engage) in conduct that might potentially infringe on the '753 patent. See Comark Communications, Inc. v. Harris Corp., 156 F.3d 1182, 1190 (Fed. Cir. 1998).
WeddingChannel is entitled to take discovery with respect to any legal opinion upon which the Knot intends to rely. Multiform Dessicants v. Stanhope Prods. Co., 930 F. Supp. 45, 47 (S.D.N.Y., 1996) (stating that in the context of a patent infringement action, "the deliberate injection of the advice of counsel into a case waives the attorney-client privilege as to communications and documents relating to the advice"); Garfinkle v. Arcata Nat'l Corp., 64 F.R.D. 688, 689-90 (S.D.N.Y. 1974) (holding that where a defendant raises the existence of an attorney opinion letter as a defense to plaintiff's claim, plaintiff is entitled to discovery of documents that formed the basis of such letter).
Conclusion
The Knot's motion for a stay of discovery and for separate trials on the issues of liability and damages is denied. The WeddingChannel's motion for discovery concerning willful infringement is granted.
It is so ordered.