Opinion
Civil Action 17-cv-00944-WJM-NYW
12-05-2018
XY, LLC, BECKMAN COULTER, INC., and INGURAN, LLC, d/b/a STGENETICS, Plaintiffs, v. TRANS OVA GENETICS, LC, Defendant.
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
Nina Y. Wang, United States Magistrate Judge.
This matter comes before the court on the Motion to Strike Trans Ova's Opposed Partial Withdrawal and Substitute Stipulation Regarding Infringement (“Motion” or “Motion to Strike Substitute Stipulation”), filed by Plaintiff XY, LLC (“XY”) and Inguran, LLC d/b/a STGenetics (“Inguran”) (collectively, “Plaintiffs”) on September 12, 2018. [#315]. The Motion to Strike Substitute Stipulation was referred to the undersigned Magistrate Judge pursuant to 28 U.S.C. § 636(b), the Order Referring Case dated April 19, 2017 [#17], and the Memorandum dated September 13, 2018 [#316]. This court has reviewed the Parties' respective briefs, the applicable case law, and has determined that oral argument would not materially assist in the disposition of the Motion. Being fully advised of the premises, this court respectfully RECOMMENDS that the Motion to Strike Substitute Stipulation be DENIED.
This court found no authority as to whether to construe the instant motion as dispositive thus requiring a recommendation. The particular relief sought is not dispositive of any claim or defense.
BACKGROUND
The background of this action has been discussed in detail in prior orders of the court, see e.g., [#164], and therefore will be discussed only briefly here. Plaintiff XY initiated this action against Trans Ova Genetics, LC (“Trans Ova” or “Defendant”) on December 6, 2016, in the United States District Court for the Western District of Texas, asserting a variety of causes of action, including trade secret misappropriation, unfair competition, and infringement of four patents: United States Patent Nos. 9, 145, 590 (“'590 Patent”); 7, 723, 116 (“'116 Patent”); 9, 365, 822 (“'822 Patent”); and 7, 208, 265 (“'265 Patent”). [#5]. Over the next year, XY amended or sought to amend its operative pleading numerous times, to assert additional patents and include additional plaintiffs while Defendant moved to dismiss the action or for judgment on the pleadings on various grounds. Ultimately, the rulings of the presiding judge, the Honorable William J. Martinez, have resulted in the Fourth Amended Complaint as operative complaint with asserted claims of the '590 and the '822 Patents remaining (collectively, “Remaining Patents-in-Suit”). [#74; #120; #262].
Pertinent to the dispute at hand, on November 27, 2017, the Parties stipulated to Trans Ova's infringement of the asserted claims of the Remaining Patents-in-Suit. See [#88 at ¶ 3]. In light of the Stipulation, the Parties agreed that they would not seek any fact discovery solely related to infringement of any of the asserted Claims of the Remaining Patents-in-Suit. [Id. at ¶ 4]. On August 31, 2018, Defendant filed an “Opposed Partial Withdrawal and Substitute Stipulation Regarding Infringement” (“Opposed Substitute Stipulation”). [#292]. In the Opposed Substitute Stipulation, Defendant purports to alter the Stipulation by limiting it as to the infringement of the
Nevertheless, because the sought relief is inextricably intertwined with one of the arguments raised in Defendant's concurrently filed Motion for Summary Judgment [#293], this court proceeds by Recommendation. '590 Patent “only up until May 6, 2018” based on a purported change to “all of the PMTs in Trans Ova's commercial sperm-sorters . . . [which] have been operating above 400 volts” as of May 7, 2018. [Id. at 1-2]. Put another way, Defendant seeks to withdraw the stipulation of infringement and contest infringement as to the claims of the '590 Patent as of May 7, 2018 forward. See [id].
On September 12, 2018, Plaintiffs filed this instant Motion to Strike Substitute Stipulation, arguing that Trans Ova should not be permitted to unilaterally change the stipulation to which the Parties agreed and Plaintiffs relied upon in not pursuing certain discovery from Defendant. [#315]. Defendant argues that Plaintiffs had notice at least as early as May 30, 2018, when Cole Wagner, a Trans Ova technician, testified that there had been a voltage adjustment of its sperm sorter PMTs, and so Trans Ova should not be held to a Stipulation that is now factually inaccurate. [#339 at 2]. Trans Ova indicates that it has repeatedly offered XY further discovery, including a facilities inspection by XY's counsel, technical expert, and/or Mr. Evans; production of relevant pre- and post-adjustment sorting records; and a Rule 30(b)(6) deposition on the topic. [Id. at 2]. Defendant also argues that the Stipulation contains no stipulation with respect to any future infringement, but that it only provides that as of the date of the Stipulation-November 27, 2017-it “has infringed and continues to infringe.” [Id. at 3].
In Reply, Plaintiffs argue that Trans Ova was required to change its litigation position during the discovery period, and failed to do so in a procedurally correct manner. [#352 at 4]. They contend that Mr. Wagner's deposition testimony was insufficient to put XY on notice that Trans Ova was changing its litigation position, and allowing Defendant to do so now would be improper-particularly because Plaintiffs do not agree with Trans Ova's new non-infringement position. [Id. at 11-12]. Defendant has also raised this issue in its Motion for Summary Judgment seeking to bar XY from obtaining injunctive relief. [#293 at 22].
The deadline for designating affirmative experts was March 2, 2018, with a deadline for rebuttal experts set for April 13, 2018. [#132]. Fact and expert discovery then closed on June 15, 2018, with dispositive motions and Rule 702 motions due on July 20, 2018. [Id.]. The Parties proceeded to a Final Pretrial Conference on September 20, 2018 [#325], and this issue was identified in the Final Pretrial Order entered that same day. [#326 at 18, 21]. Judge Martinez then set a five-day jury trial to commence on July 29, 2019 at 8:30 a.m. and a Final Trial Preparation Conference on July 12, 2019 at 2:00 p.m. [#335].
ANALYSIS
I. Standard of Review
As both sides acknowledge, a stipulation is a binding agreement between parties that “cannot simply be disregarded or set aside by will.” [#315 at 2 citing Wheeler v. John Deere Co., 935 F.2d 1090, 1097-98 (10th Cir. 1991); #339 at 3 (same)]. By its very essence, therefore, Defendant cannot unilaterally rewrite and substitute a stipulation agreed to by the Parties and filed with the court. [#88]. Nor can Defendant rely upon Plaintiffs' notice of the testimony by Trans Ova's Rule 30(b)(6) deponent to suggest that Plaintiffs should have known that Trans Ova intended to seek to withdraw from the Stipulation, or agreed that Trans Ova was now not infringing the claims of the '590 Patent. Instead, the proper framework for the court to consider the issue before it is whether Trans Ova should be permitted to withdraw from its stipulation of infringement of the asserted claims of the '590 Patent. Accordingly, the burden is on Trans Ova to establish that, in this case, partial withdrawal of the Stipulation is appropriate.
“The stage at which a party requests relief from a stipulation bears heavily on whether the court should grant the relief, and a court must determine whether there are other overriding rules or policy considerations that compel granting or denying such relief.” In re Durability Inc., 212 F.3d 551, 556 (10th Cir. 2000). In Durability, the United States Court of Appeals for the Tenth Circuit explained that if a party waits until trial to withdraw a Stipulation, then the standard is manifest injustice. Id. When the request comes before significant prejudice to the other parties would result, then the standard is “good reason.” Id. The Durability court applied this more lenient standard in the context of attempts to withdraw a factual stipulation in the context summary judgment. Id.
Here, Defendant sought, albeit through an incorrect mechanism, to withdraw partially from the Stipulation on August 31, 2018-the same date it filed for summary judgment. [#292; #293]. Plaintiffs contend that significant prejudice would result because Plaintiffs relied upon the Stipulation to forego discovery that was solely related to infringement, and that Defendant has failed to establish manifest injustice. [#315]. In particular, Plaintiffs argue that even if they were permitted to take some discovery at this stage of the case, they have been deprived of “the ability to plan and prepare its case in an efficient manner and with appropriate notice of Trans Ova's infringement defenses” and extensive discovery, including potential additional expert reports, might be required. [Id. at 7-8].
While this court in no way condones Defendant's delay in seeking to withdraw from the Stipulation until after the June 15 discovery deadline, it also notes that the prejudice Plaintiffs identify does not seem as broad as Plaintiffs suggest. Determining infringement is a two-step process, which requires the court to first construe the meaning and scope of the asserted patent claim, and then compare the properly construed claims to the device accused of infringing. Markman v. Westview Instruments, Inc., 52 F.3d 967, 976 (Fed. Cir. 1995), aff'd, 517 U.S. 370 (1996). Neither side argues, and this court confirms through reviewing the Joint Disputed Claim Terms Chart [#78], that there is no issue with respect to Defendant's position with respect to the operating voltage of the accused device that would necessitate claim construction. Nor does the Defendant's position implicate a breadth of functionality or involve the entire period of alleged infringement. Instead, there is a discrete factual issue involving the operating voltage of the PMTs after May 7, 2018, and whether the accused device still falls within the scope of the asserted patent claims of a single patent (the '590 patent”), either literally or under the doctrine of equivalents, after that time period.
Accordingly, this court respectfully disagrees that significant prejudice is necessarily at hand and concludes that it is required to consider whether Defendant has “good reason” to seek to partially withdraw from the Stipulation of infringement of the asserted claims of the '590 Patent.
II. Good Cause
A trial court is vested with broad discretion in determining whether a stipulation be set aside. Wheeler v. John Deere Co., 935 F.2d 1090, 1098 (10th Cir. 1991). The Durability court did not define “good reason, ” but noted that it accords with “the principle that summary judgment should not be employed to deprive litigants of their right to a full hearing on the merits, if any real issue of fact is tendered.” Durability, 212 F.3d at 556. Here, the Parties do not appear to dispute that there is a real issue of fact, i.e., the voltage used by the accused commercial sperm sorters, and that there is a dispute as to whether an accused product operating at a voltage over 400 volts would still fall within the asserted claims of the '590 Patent. In reviewing the record before it, this court concludes that Defendant has good cause to seek withdrawal from the Stipulation on the basis of changed circumstances, and to prohibit Defendant from withdrawing from the Stipulation as to infringement occurring after May 6, 2018 would deprive Defendant of the opportunity to have issues related to infringement, willful infringement, damages, and injunctive relief decided on the merits. And as implicitly acknowledged by Plaintiffs, the reopening of limited discovery will likely cure or materially remediate the prejudice. [#315 at 10-12].
In reaching this conclusion, this court notes that both sides had a role in delaying the adjudication of this issue. Defendant's failure to seek amendment of the Stipulation in May, prior to the close of discovery on June 15, unnecessarily slowed its consideration. But the court also observes that even if Trans Ova had promptly moved to withdraw in part from the Stipulation in May, expert witness deadlines had already elapsed and the remaining time in discovery would not have been sufficient to accommodate the document production and depositions contemplated by Plaintiffs. And had Plaintiffs simply agreed to proceed with discovery regarding the change in voltage and preserved their objection and the ability to seek costs and expenses associated with the additional discovery, the Parties and the court could have utilized the last three months to accomplish some of the discovery that Plaintiffs now require. Nevertheless, the Parties now must move expeditiously so that the requisite discovery can be completed so that it does not jeopardize the timely consideration of Defendant's pending Motion for Summary Judgment or trial in this matter. To that end, the court will direct the Parties to engage in a robust meet and confer with respect to the specific discovery requested by Plaintiffs, and the court has set a Status Conference forthwith to discuss the scope and timing of such discovery.
CONCLUSION
For the reasons set forth herein, it is respectfully RECOMMENDED that: (1) Plaintiffs' Motion to Strike Trans Ova's Opposed Partial Withdrawal and Substitute Stipulation Regarding Infringement [#315] be DENIED;
Within fourteen days after service of a copy of the Recommendation, any party may serve and file written objections to the Magistrate Judge's proposed findings and recommendations with the Clerk of the United States District Court for the District of Colorado. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b); In re Griego, 64 F.3d 580, 583 (10th Cir. 1995). A general objection that does not put the District Court on notice of the basis for the objection will not preserve the objection for de novo review. “[A] party's objections to the magistrate judge's report and recommendation must be both timely and specific to preserve an issue for de novo review by the district court or for appellate review.” United States v. One Parcel of Real Property Known As 2121 East 30th Street, Tulsa, Oklahoma, 73 F.3d 1057, 1060 (10th Cir. 1996). Failure to make timely objections may bar de novo review by the District Judge of the Magistrate Judge's proposed findings and recommendations and will result in a waiver of the right to appeal from a judgment of the district court based on the proposed findings and recommendations of the magistrate judge. See Vega v. Suthers, 195 F.3d 573, 579-80 (10th Cir. 1999) (District Court's decision to review a Magistrate Judge's recommendation de novo despite the lack of an objection does not preclude application of the “firm waiver rule”); International Surplus Lines Insurance Co. v. Wyoming Coal Refining Systems, Inc., 52 F.3d 901, 904 (10th Cir. 1995) (by failing to object to certain portions of the Magistrate Judge's order, cross-claimant had waived its right to appeal those portions of the ruling); Ayala v. United States, 980 F.2d 1342, 1352 (10th Cir. 1992) (by their failure to file objections, plaintiffs waived their right to appeal the Magistrate Judge's ruling). But see Morales-Fernandez v. INS, 418 F.3d 1116, 1122 (10th Cir. 2005) (firm waiver rule does not apply when the interests of justice require review).
For the reasons set forth herein, IT IS ORDERED that:
(1) The Parties will SUBMIT a Joint Status Report no later than December 10, 2018, detailing the discovery they seek; any disputes as to that discovery; and the date(s) that any witness sought by Plaintiffs is available for testimony in January 2019. A Status Conference is SET for December 12, 2018 at 11:30 a.m. to resolve any outstanding discovery issues and to set a schedule and deadline for this additional discovery. Trans Ova should anticipate truncated deadlines to respond to discovery; and
(2) The deadline for supplementation of financial information and damages pursuant to Fed.R.Civ.P. 26(e) is due no later than May 31, 2019.