NetFuel, Inc. v. Cisco Systems Inc., No. 5:2018cv02352 - Document 331 (N.D. Cal. 2020)
Court Description: Order granting 309 Motion to Strike. Signed by Judge Edward J. Davila on July 31, 2020.(ejdlc2S, COURT STAFF) (Filed on 7/31/2020)
Download PDF
<![CDATA[
NetFuel, Inc. v. Cisco Systems Inc. Doc. 331 1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 SAN JOSE DIVISION 7 8 NETFUEL, INC., Plaintiff, 9 v. 10 11 CISCO SYSTEMS INC., Case No. 5:18-cv-02352-EJD ORDER GRANTING DEFENDANT’S MOTION TO STRIKE Re: Dkt. No. 309 United States District Court Northern District of California Defendant. 12 Before the Court is Defendant Cisco Systems’ motion to strike Plaintiff Netfuel, Inc.’s 13 14 supplemental damages contentions and interrogatory responses. Having considered the Parties’ 15 papers and having had the benefit of oral argument on July 16, 2020, the Court GRANTS 16 Defendant’s motion to strike. 17 I. BACKGROUND 18 On April 18, 2018, Plaintiff filed this patent infringement action against Defendant. Dkt. 19 1. Plaintiff alleges that Defendant infringed two of its patents. The Patents-in-Suit—U.S. Patent 20 Nos. 7,747,730 (the “’730 Patent”) and 9,663,659 (the “’659 Patent”)—disclose the use of 21 software programs called “agents” to monitor and manage computer networks and the devices 22 (such as routers and switches) that run those networks. Plaintiff accuses four features of 23 Defendant’s operating systems—IOS, IOS XE, IOS XR, or NX-OS (“the Accused Operating 24 Systems”)—of infringing the Patents-in-Suit. Those features (“the Accused Features”) are the 25 Embedded Event Manager (“EEM”), Control Plane Policing (“CoPP”), Local Packet Transport 26 Services (“LPTS”), and Excessive Punt Flow Trap (“EPFT”). EEM is included in all four Cisco 27 network operating systems, CoPP is included in three (IOS, IOS XE, and NX-OS), and LPTS and 28 Case No.: 5:18-cv-02352-EJD ORDER GRANTING DEFENDANT’S MOTION TO STRIKE 1 Dockets.Justia.com 1 EPFT are included in one (IOS XR). Plaintiff stated during discovery that it “first licensed software embodying the inventions 2 3 (called PlexOS) for use to Bank of America in or about August 2003” and “first commercially 4 licensed PlexOS for money to BNP Paribas in March 2008.” Dkt. 307-6 (response to 5 Interrogatory No. 2). To better understand the scope of Plaintiff’s contention that its PlexOS 6 product practiced the patents-in-suit, Defendant served Interrogatory No. 10, which asked Plaintiff 7 to: 8 9 United States District Court Northern District of California 10 Identify, for each asserted claim limitation, as numbered in NetFuel’s Amended Disclosure of Asserted Claims and Infringement Contentions served on September 4, 2018, that you contend was practiced by PlexOS, the specific functionality in PlexOS you contend satisfies the limitation and all documents supporting your contention. 11 Dkt. 309-7. Defendant contends that, despite multiple meet and confers by phone and in writing, 12 Plaintiff refused to substantively respond to this interrogatory. See id. at 7 (“Plaintiff will meet 13 and confer with Cisco concerning the purpose and relevance of this Interrogatory to determine 14 whether it could be limited to seek relevant, proportionate, and not unduly burdensome 15 discovery.”). After Plaintiff disavowed use of PlexOS, Defendant did not pursue this 16 Interrogatory any further. See Dkt. 309-6 (email from Plaintiff’s counsel, which confirmed that 17 Plaintiff “is not relying in this litigation on any contention that PlexOS or any other NetFuel 18 product practiced or practices the asserted claims of either the ’730 Patent or ’659 Patent”). 19 On November 6, 2018, Plaintiff served its Preliminary Damages Contentions. See Dkt. 20 310-6. In these preliminary contentions, Plaintiff anticipated that “its claim for reasonable royalty 21 damages will be based, in part, on the terms of licenses to comparable patented technology and/or 22 the portion of Cisco’s sales and/or incremental profits that are attributable to the patented 23 invention.” Id. ¶ 31. The Contentions, however, did not include a damages estimate or any 24 underlying facts supporting apportionment. Plaintiff maintained—even though much of the 25 material supporting its claim for damages was within its control—that it could not compute 26 damages because Defendant failed to produce certain damages-related documents. Id. ¶ 32. 27 28 Case No.: 5:18-cv-02352-EJD ORDER GRANTING DEFENDANT’S MOTION TO STRIKE 2 1 2 information not provided in Plaintiff’s damages contentions. Interrogatory No. 15 asked for the 3 bases of Plaintiff’s contentions regarding comparable licenses: 4 5 6 7 If You contend You are entitled to a reasonable royalty as a result of Cisco’s alleged infringement of any of the Asserted Patents, for each such patent, identify any and all licenses You contend are comparable licenses or relate to comparable technology, or are licenses that otherwise are relevant in any way to your calculation of a royalty rate and/or royalty base in this Action, including identifying such licenses by Bates number or by date and title or identifying information. 8 Dkt. 307-8. In its response, Plaintiff only identified six documents, by bates number, and 9 provided no narrative response. Id. at 6. Interrogatory No. 20 asks for more information as to 10 11 United States District Court Northern District of California On July 24, 2019, Defendant served Interrogatory No. 15 and 20 to discover damages Plaintiff’s apportionment theories: 13 Identify and explain all factual and legal bases for any contentions by NetFuel regarding apportionment of damages in this Action, including how NetFuel’s contentions regarding entitlement to damages in the form of a reasonable royalty allegedly satisfy all applicable requirements related to apportionment. 14 Id. at 14. In response, Plaintiff referred Defendant to the Preliminary Damages Contentions and to 15 the forthcoming expert reports. Id. at 15. 12 16 Subsequently, the Court (over Plaintiff’s opposition) extended the fact-discovery cutoff to 17 October 3, 2019. Dkt. 152. On the last day of fact discovery, Plaintiff served its First 18 Supplemental Damages Contentions and Supplemental Responses to Defendant’s Interrogatories. 19 Dkt. 312-7. Again, Plaintiff noted that it was unable to compute damages because Defendant had 20 not completed its production of documents. Id. Defendant later produced the damages data that 21 Plaintiff was requesting. 22 By December 5, 2019, the Parties had served their three rounds of technical and damages 23 expert reports. Expert discovery closed on December 20, 2019. Dkt. 34. Thereafter, Defendant 24 filed a motion to exclude some of Plaintiff’s experts’ testimony. This motion was granted and the 25 Court struck portions of Plaintiff’s expert reports. 26 On May 1, 2020, Plaintiff served its second supplemental damages contentions and second 27 supplemental responses to Cisco’s Interrogatory Nos. 10, 15, and 20. Plaintiff incorporated its 28 Case No.: 5:18-cv-02352-EJD ORDER GRANTING DEFENDANT’S MOTION TO STRIKE 3 1 Second Supplemental Damages Contention in each interrogatory response. Dkt. 312-12. These 2 disclosures contain fourteen pages of new damages theories and factual allegations. In 3 Defendant’s view, Plaintiff is attempting to avoid the Court’s Daubert order by repackaging the 4 stricken expert testimony as “supplemental” contentions. Defendant thus moves the Court to 5 strike Plaintiff’s Supplemental Disclosures and to award Defendant reasonable fees for costs 6 incurred in bringing this motion. Defendant’s Notice of Motion and Motion to Strike Plaintiff’s 7 Supplemental Damages Contentions (“Mot.”), Dkt. 309; see also Reply re Motion to Strike 8 (“Reply”), Dkt. 316. Plaintiff opposes this motion to strike. Plaintiff’s Opposition to Defendant’s 9 Motion to Strike (“Opp.”), Dkt. 313. 10 United States District Court Northern District of California 11 12 II. DISCUSSION A. Legal Standard Before the Court can reach the merits of Defendant’s motion to strike, it must first 13 determine whether or not Plaintiff had a duty to timely supplement any incomplete or incorrect 14 damages contentions. There is no dispute that Patent Local Rule 3-8 requires parties to submit a 15 detailed disclosure of damages information. The Parties dispute whether or not Federal Rule of 16 Civil Procedure 26(e) requires L.R. 3-8 damages contentions to be timely supplemented or 17 corrected. Plaintiff argues that there is no duty to supplement damages contentions and so any 18 amendments to their damages contentions (timely or untimely) are per se permissible. Defendant 19 disagrees and maintains that parties must promptly supplement incomplete or incorrect damages 20 contentions. 21 At least one court in this district has determined that parties have a duty to supplement or 22 amend damages contentions when a party’s damages theory shifts “in some material respect.” 23 Looksmart Grp., Inc. v. Microsoft Corp., 386 F. Supp. 3d 1222, 1227 (N.D. Cal. 2019) (citing Fed. 24 R. Civ. P. 26(e)(1)(A)). The Court agrees with the Looksmart analysis. Contrary to Plaintiff’s 25 position, Looksmart is not an “outlier.” See Opp. at 10. As the Looksmart court noted, two earlier 26 cases contemplated the possibility of a duty to amend damages contentions. See Twilio, Inc. v. 27 Telesign Corp., 2017 WL 5525929, at *5 (N.D. Cal. Nov. 17, 2017) (“The Court notes, however, 28 Case No.: 5:18-cv-02352-EJD ORDER GRANTING DEFENDANT’S MOTION TO STRIKE 4 United States District Court Northern District of California 1 that a new theory of recovery (such as lost profits instead of or in addition to a reasonable royalty), 2 would require amendment to the damages contentions.”); but see id. at *2 (“[T]here is no ‘good 3 cause’ threshold for amendment of damages contentions, nor is there even a requirement to amend 4 the contentions.”); Finjan, Inc v. Cisco Sys. Inc., 2019 WL 1168536, at *1 (N.D. Cal. Mar. 13, 5 2019) (considering whether to permit the plaintiff to amend its damages contentions to state a new 6 theory and considering the potential prejudice to the defendant). While Twilio notes that there is 7 no explicit requirement to amend damages contentions, it (like Finjan) contemplates that a party 8 cannot add new theories of damages without amending their damages contentions, which indicates 9 that there is some duty to timely amend damages contentions. Such a duty fits comfortably within 10 damages contentions’ purpose of “narrow[ing] and sharpen[ing] the issues[,] thereby confining 11 discovery and simplifying trial preparation.” Woods v. DeAngelo Marine Exhaust Inc., 692 F.3d 12 1272, 1280 (Fed. Cir. 2012). After considering the logic of Looksmart and after having reviewed 13 the purposes of damages disclosures, the Court finds that Rule 26(e) requires parties to timely 14 supplement or amend their damages contentions when a party’s damages theory shifts “in some 15 material respect.” Accord Looksmart, 386 F. Supp. 3d at 1231. 16 The second threshold issue that the Court must decide is what constitutes a “material” 17 change. Plaintiff argues that its damages theories have not materially changed because all that a 18 party must do in its damages contentions is disclose its theory of recovery. Opp. at 11; but see 19 Looksmart, 386 F. Supp. 3d at 1231 (“At the very least, a party’s damages contentions must 20 disclose the basis for its expert’s specific theory of recovery.”) (emphasis added). 21 22 23 24 25 In its original contentions, Plaintiff stated that it: anticipates that its claim for reasonable royalty damages will be based, in part, on [1] the terms of licenses to comparable patented technology and/or [2] the portion of Cisco’s sales and/or incremental profits that are attributable to the patented invention. This may take the form of a running royalty rate based on a percentage of Cisco’s revenues or a per-unit royalty based on the number of Accused Products sold. 26 Dkt. 312-4 at ¶ 31. Plaintiff argues that it supported its first theory of recovery—a reasonable 27 royalty based on comparable technology—by identifying the licensure of PlexOS, see id. ¶ 9, and 28 Case No.: 5:18-cv-02352-EJD ORDER GRANTING DEFENDANT’S MOTION TO STRIKE 5 United States District Court Northern District of California 1 by estimating the number of infringing units, see id. ¶ 25 (“[Plaintiff] has preliminarily determined 2 that from April 18, 2012 through July 2018, [Defendant] has sold no less than 5.9 million Accused 3 Products classified as switches or routers. However, as discussed above, Cisco has not produced 4 sales data for all Accused Products.”). Plaintiff supported its second theory of recovery—a 5 reasonable royalty based on apportioned profits—by estimating Defendant’s profits. See id. 6 ¶¶ 18–21, 27. Plaintiff maintains that because it already identified its theories (and the bases) of 7 damages in its first damages contentions, its most recent supplemental damages contentions are 8 permissible as they do not constitute “material changes.” 9 The Court understands Plaintiff to argue that so long as a party does not change its 10 “category” of damages, any factual shift in the bases supporting the damages theory is permissible. 11 But, this narrow interpretation contravenes the purpose of both Patent Local Rule 3-8 and Rule 12 26(e). Patent Local Rule 3-8 requires a party to identify not only each category of damages, but 13 also “its theories of recovery, factual support for those theories, and computations of damages 14 within each category.” (emphasis added). This accords with Looksmart’s statement that “[a]t the 15 very least, a party’s damages contentions must disclose the basis for its expert’s specific theory of 16 recovery.” 386 F. Supp. 3d at 1231. It is thus insufficient for a party to only disclose its theory 17 and summarily discuss the underlying support. A contrary finding would eradicate the purpose of 18 damages contentions (i.e., to clarify and narrow the theory of damages, promote settlement, and 19 clarify the issues for trial). Plaintiff’s view would allow a party to state (without detail) its 20 theories of damages and then later fill in the substance of the theory. A party could generally 21 allege a broad theory of damages and then later amend their contentions to allege “an entirely 22 different theory of damages, turning on different facts, and resulting in a drastically different case 23 value.” Looksmart, 386 F. Supp. 3d at 1232–33. Such a practice would hinder the purposes of 24 Rule 26(e) and L.R. 3-8. Id. at 1233; see also Twilio, 2017 WL 5525929, at *3 (“The 25 requirements of L.R. 3-8 could not be more clear: identify the theories of recovery; identify the 26 known facts that support the theories; do the math.”). 27 28 Case No.: 5:18-cv-02352-EJD ORDER GRANTING DEFENDANT’S MOTION TO STRIKE 6 Given the complexity of patent disputes, it is even more important that parties timely United States District Court Northern District of California 1 2 supplement material changes to their theories of damages. Looksmart, 386 F. Supp. 3d at 1234 3 (“[T]he point of contentions is to eliminate the guesswork involved in going through a party’s 4 documentary and other evidence.”). Hence, the fact that Plaintiff identified their theories of 5 damages—a reasonable royalty based on comparable technology and a reasonable royalty based 6 on Defendant’s profits apportioned to the contribution of the patented inventions—does not give 7 Plaintiff carte blanche authority to add copious new facts and discrete theories months after fact 8 discovery closed. 9 B. Plaintiff’s Damages Theories Have Shifted in a “Material Respect” 10 Plaintiff’s supplemental disclosures include over fourteen pages of new or changed 11 damages theories and factual allegations, including new theories about the alleged technical and 12 economic comparability of the PlexOS software license and alleged apportionment of the PlexOS 13 software license. The Court addresses the new theories and allegations in turn. 14 As an initial matter, the Court again rejects Plaintiff’s narrow reading of Looksmart. 15 Plaintiff argues that a “damages theory” is the method or approach used to determine damages, not 16 a detailed collection of facts that a given theory of recovery may use to calculate the ultimate 17 award. Opp. at 14.1 Looksmart specifically rejected the idea that only shifts between “categories” 18 of damages are material. 386 F. Supp. 3d at 1233; see also Golden Bridge Tech. Inc. v. Apple, 19 Inc., 2014 WL 1928977, at *9 (N.D. Cal. May 14, 2014) (considering whether expert theories 20 were consistent with damages contentions by assessing whether factual allegations underlying the 21 respective theories were consistent). This Court, like the Looksmart court, declines to narrowly 22 confine the duty to supplement—the purpose of supplementation is to help sharpen the issues at 23 trial, not promote gamesmanship by the parties. See supra III.A. 24 25 26 27 28 In its motion, Defendant identified two additional sets of facts as “new damages theories.” In its Opposition, Plaintiff stated that it was withdrawing these two theories from its supplemental contentions. Accordingly, the amount of time that Plaintiff invested in developing PlexOS and the patented inventions, Dkt. 312-12 ¶¶ 52–53, and the amount of money Plaintiff invested in developing PlexOS and the patented inventions, id. ¶ 54, are now withdrawn. Case No.: 5:18-cv-02352-EJD ORDER GRANTING DEFENDANT’S MOTION TO STRIKE 7 1 United States District Court Northern District of California 1 1. 2008 BNP Paribas Software License 2 In its second supplement to its damages contentions, Plaintiff relies extensively on the 3 2008 BNP Paribas Software License. See Dkt. 307-4 (identifying the agreement 15 times); cf. 4 Preliminary Damages Contentions, Dkt. 312-4 (identifying the agreement 0 times). Plaintiff first 5 argues that its damages calculations based on the 2008 PlexOS license to BNP Paribas is not a 6 new damage theory. Opp. at 12. As noted above, Plaintiff’s original damages contentions 7 disclosed that it intended to rely on “the terms of licenses to comparable patented technology,” 8 identified PlexOS as comparable technology, and noted that a royalty may take the form of a “per- 9 unit royalty based on the number of Accused Products sold.” Dkt. 310-6 at ¶¶ 9, 31. From this, 10 Plaintiff argues that Defendant could have inferred that Plaintiff was planning to rely on the 2008 11 BNP Paribas Software License. 12 “[T]he point of contentions is to eliminate the guesswork involved in going through the 13 party’s documentary and other evidence.” Looksmart, 386 F. Supp. 3d at 1234. Plaintiff’s 14 boilerplate statements about using comparable licenses, including ones involving PlexOS, do not 15 disclose the 2008 BNP Paribas Software License. There is no justified excuse for Plaintiff’s 16 failure to explain that it intended to rely on the 2008 BNP Paribas software license to establish a 17 reasonable royalty rate. 18 Plaintiff next suggests that Defendant should have inferred its intent to rely on the 2008 19 BNP Paribas software license based on Plaintiff’s response to Interrogatory No. 15, which sought 20 the identity of any licenses Plaintiff contended were relevant. In response to Interrogatory No. 15, 21 Plaintiff identified, by Bates number only: (1) an end user license agreement for Bank of America 22 to use PlexOS; (2) a letter noticing assignment and transfer of licenses from Bank of America to 23 BNP Paribas; (3) a purchase order for PlexOS; (4) a pricing quote for PlexOS, and (4) an invoice 24 for PlexOS. The response did not explain the identified documents’ particular relevance. Worse, 25 Plaintiff did not actually identify the 2008 software license with BNP Paribas for PlexOS. Rather, 26 Plaintiff identified an End User License Agreement between Plaintiff and Bank of America that 27 does not contain any terms of an agreement between Plaintiff and BNP Paribas. See Dkt. 315-3 at 28 Case No.: 5:18-cv-02352-EJD ORDER GRANTING DEFENDANT’S MOTION TO STRIKE 8 1 1, 4 (allowing Bank of America to transfer rights to BNP-Paribas so long as “BNP-Paribas 2 executes a ‘Software License Agreement’ with [Plaintiff] within a reasonable period of 3 time . . . .”). Incredibly, Plaintiff maintains that from this Defendant could have inferred Plaintiff 4 would use the unproduced 2008 BNP-Paribas software license agreement to establish a reasonable 5 royalty rate. See MLC Intellectual Prop., LLC v. Micron Tech., Inc., 2019 WL 2863585, at *15 6 (N.D. Cal. July 2, 2019).2 Not so. “[T]his type of inferential guesswork is precisely what 7 damages contentions are intended to avoid.” Looksmart, 386 F. Supp. 3d at 1234. Accordingly, 8 Plaintiff cannot now argue that it is entitled to a reasonable royalty based on the 2008 license to 9 BNP-Paribas. This basis of liability was never disclosed and constitutes a “material change.”3 2. Cichlid-PlexOS Willfulness/Commercialization Theory 10 Plaintiff also adds information about an earlier version of PlexOS called “Cichlid.” See United States District Court Northern District of California 11 12 Dkt. 307-4 at 16. Plaintiff argues that this is just a “background” fact that was discussed at length 13 in Mr. Harlow’s deposition. Having read the supplemental damages contentions, the Court 14 disagrees. Plaintiff uses Cichlid to show the development of PlexOS. For the first time, Plaintiff 15 explains that Cichlid, an alleged earlier version of PlexOS, can be used by the jury to apportion the 16 PlexOS license, as the jury can compare the time and investment spent developing PlexOS to Mr. 17 Harlow’s time spent conceiving and developing the claimed patents. See id. ¶ 52 (claiming for the 18 first time that Plaintiff invested “38 man-years” developing PlexOS). This extends Defendant’s 19 20 21 22 23 24 25 26 27 28 Defendant makes great light of Plaintiff’s promise that it would not rely on any contention that PlexOS, or any other NetFuel product, practiced any claim of either of the patents at issue. The Court agrees with Plaintiff that this email is irrelevant; Plaintiff never claimed that it would refrain from using PlexOS as comparable technology. 2 3 Defendant argues that Plaintiff cannot now argue that it is entitled to a reasonable royalty based on PlexOS being a comparable technology. The Court disagrees. While Plaintiff’s preliminary damages contentions did not expressly identify PlexOS as comparable technology, they did identify PlexOS as something that might be used to prove an established royalty rate. See Dkt. 310-6 at ¶ 9 (listing the licensure of PlexOS as proving or tending to prove an established royalty). However, it seems that the issue is less about PlexOS being identified as comparable technology and more about the failure to identify the significance of PlexOS. Accordingly, while PlexOS may have been identified as comparable technology, because its significance was not disclosed (i.e., the PlexOS/BNP-Paribas license, Cichlid, and the 20% apportionment), Plaintiff’s theory of damages as to PlexOS was unclear and the supplemental information clarifying the role of PlexOS in Plaintiff’s damages theories must be struck. Case No.: 5:18-cv-02352-EJD ORDER GRANTING DEFENDANT’S MOTION TO STRIKE 9 1 potential liability as it advances a new theory of commercialization.4 More concerning, Plaintiff previously refused to provide Defendant with technical United States District Court Northern District of California 2 3 information on PlexOS and indicated that “PlexOS was first developed a year after the patents’ 4 priority date, meaning it has no relevance at all to conception and reduction to practice.” Dkt. 5 313-12. There is thus no way that Defendant could have gleaned the significance of Cichlid from 6 Mr. Harlow’s deposition testimony. See Dkt. 313-15 (“Q: Did Cichlid ever mature or become 7 developed into a product that was commercialized? A: No.”). 8 While Plaintiff is correct that it has disclosed that it attempted to commercialize the 9 patented inventions, it failed to disclose the significance of Cichlid to its commercialization theory 10 of liability. The development of PlexOS (and the labor involved) are thus new theories of liability 11 and constitute a “material change.” 3. License and Apportionment Theories 12 In its March 2020 order, this Court struck (as unreliable) Plaintiff’s expert’s theory that the 13 14 PlexOS software license could be apportioned by 20% to reflect any licensure of the patents-in- 15 suit. Dkt. 301 at 21. Curiously, this figure reappears in Plaintiff’s supplemental damages 16 contentions. See Dkt. 307-4 at ¶ 51 (“NetFuel estimates that 20% of the $1,000 per-unit license 17 fee represented the value of NetFuel’s intellectual property, as distinct from the value of the time 18 and resources required to develop PlexOS as software.”). Plaintiff contends that while this figure 19 was not disclosed during fact discovery, it is permissible as it stems from “anticipated testimony” 20 of Mr. Harlow and “statements he provided to [Plaintiff’s] damages expert, and those statements 21 were disclosed in the expert reports.” Opp. at 16. That these statements were disclosed in the 22 expert reports is irrelevant. The material question is whether or not the facts supporting the 20% 23 apportionment were timely disclosed. They were not. Nowhere in Plaintiff’s original or first 24 supplemental damages contentions is there any information about or factual support for a 20% 25 26 27 28 4 Plaintiff also states, for the first time, that it attempted to sell Cichlid to Cisco. Because the Court has already dismissed Plaintiff’s willfulness theory, the Court sees this as proper background information that does not introduce a new theory of commercial liability. Case No.: 5:18-cv-02352-EJD ORDER GRANTING DEFENDANT’S MOTION TO STRIKE 10 1 apportionment theory. Accordingly, Plaintiff’s attempt to revive its stricken expert theory by 2 introducing it as fact testimony is rejected. See MLC Intellectual Prop., 2019 WL 2863585, at *15 3 (“Because MLC never disclosed this information, Micron was prevented from conducting fact 4 discovery regarding these issues.”). Plaintiff also attempts to revive another stricken apportionment theory—that if a United States District Court Northern District of California 5 6 hypothetical negotiation occurred, the Parties would have agreed to a 50/50 split of revenues. Dkt. 7 307-4 at ¶ 97.5 While the original damages contentions discuss how to apportion a hypothetical 8 negotiation, they do not include any type of valuation. Again, Plaintiff may not attempt to revive 9 its stricken expert theory that the negotiations would have resulted in a 50/50 split of revenues by 10 introducing the information as fact testimony months after the close of fact discovery.6 See MLC 11 Intellectual Prop., 2019 WL 2863585, at *15. Because the 20% apportionment and 50/50 split of 12 revenues present material changes, they too must be struck. C. Plaintiff’s Supplementation Is Neither Substantially Justified Nor Harmless 13 As noted, Plaintiff had an obligation to timely supplement its damages contentions. 14 15 Plaintiff did not do this. Plaintiff waited until (1) months past the close of fact discovery and (2) 16 after portions of its expert reports had been struck to disclose new and material facts to support its 17 damages theories. This is improper; because the new facts materially changed Plaintiff’s damages 18 theories, Plaintiff’s delay was improper. See supra; see also Fed. R. Civ. P. 26(e) (requiring 19 supplements or corrections to be made in a “timely” manner). If a party fails to provide information or identify a witness as required by Rule 26(e), the 20 21 “party is not allowed to use that information or witness to supply evidence on a motion, at a 22 hearing, or at trial, unless the failure was substantially justified or is harmless.” Fed. R. Civ. P. 23 37(c)(1). The Court finds that Plaintiff’s failure was not substantially justified or harmless. 24 25 26 27 28 Defendant also takes issue with Plaintiff’s apportionment of the smallest saleable patent practicing unit as $5.1 billion. This number was disclosed in Plaintiff’s original damages contentions. See Dkt. 312-4 at ¶ 19. 6 For these reasons, Plaintiff may not incorporate these damages contentions into their response to Interrogatory Nos. 10, 15, and 20. Case No.: 5:18-cv-02352-EJD ORDER GRANTING DEFENDANT’S MOTION TO STRIKE 11 5 First, Plaintiff contends that the Court’s Daubert Order, which excluded portions of 1 2 Plaintiff’s expert’s testimony on per-unit royalty and apportionment theories, justifies its belated 3 disclosures. Specifically, Plaintiff argues that because it can no longer present its damages 4 theories through an expert witness, it ought to be able to present the same evidence through fact 5 witnesses. Opp. at 21–22. Of course, Plaintiff’s failure to comply with Daubert does not justify 6 its belated disclosures.7 Second, the level of prejudice that Defendant may experience if the supplemental damages United States District Court Northern District of California 7 8 contentions are not struck is astronomical. Over seven months after the close of discovery, 9 Plaintiff now clarifies its damages theories with new underlying factual support. See supra. Even 10 if Defendant could re-depose Mr. Harlow, Defendant has now missed the opportunity to file 11 certain invalidity contentions based on the new damages theories. Likewise, Defendant would 12 have to reengage its experts to opine on material changes to Plaintiff’s damages theories. Hence, 13 if the Court allowed Defendant to (1) re-depose Mr. Harlow, (2) redo portions of its expert 14 discovery, and (3) file invalidity contentions, the substantial waste of prior resources (both 15 Defendant’s and this Court’s) would not be cured. At that point, the Court might as well just 16 “redo” the entire proceeding. This is to say, the Patent Local Rules and the Rules of Civil 17 Procedure are aimed at avoiding the type of duplication that Plaintiff advocates. As the Court 18 stated in its Daubert order, a “second bite” at the apple is only appropriate where minimal 19 disruption to an orderly trial will occur. NetFuel, Inc. v. Cisco Sys., Inc., 2020 WL 1274985, at 20 *15 (N.D. Cal. Mar. 17, 2020). The disruption to Defendant would be significant. Accordingly, 21 the Court must GRANT Defendant’s motion to strike Plaintiff’s supplemental damages 22 contentions. See Yeti by Molly, Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 1105–06 (9th Cir. 23 2001) (“[E]ven absent a showing in the record of bad faith or willfulness, exclusion is an 24 25 26 27 28 Plaintiff suggests that Defendant’s belated production of revenue information prevented Plaintiff from timely disclosing its theories. This is a red herring. First, many of the belated disclosures pertain to evidence within Plaintiff’s control. Second, Defendant produced its revenue information long ago and Plaintiff should have supplemented its damages contentions in accordance with those disclosures at that time. Case No.: 5:18-cv-02352-EJD ORDER GRANTING DEFENDANT’S MOTION TO STRIKE 12 7 1 appropriate remedy for failing to fulfill the required disclosure requirements of Rule 26(a).”).8 D. Attorneys’ Fees 2 The Court declines to impose attorneys’ fees. See, e.g., Ctr. for Individual Rights v. 3 4 Chevaldina, 2018 WL 2432109, at *11 (S.D. Fla. May 30, 2018) (declining to award attorneys’ 5 fees but precluding evidence for failure to supplement initial disclosures with a damages 6 calculation); Richard v. Hospital Housekeeping Sys., GP, L.L.C., 2010 WL 4668438, at *2 (E.D. 7 La. 12 Nov. 4, 2010) (same). Such an additional award is purely discretionary, as indicated by the 8 use of the word “may” in Federal Rule of Civil Procedure 37(c)(1)(A). Having imposed the more 9 serious sanction for Plaintiff’s discovery violations, the Court declines to compound the sanction 10 by adding a monetary award. III. United States District Court Northern District of California 11 CONCLUSION For the foregoing reasons, the Court GRANTS Defendant’s motion to strike. Plaintiff’s 12 13 second supplemental damages contentions and second supplemental responses to Cisco’s 14 Interrogatory Nos. 10, 15, and 20 are hereby STRUCK. IT IS SO ORDERED. 15 16 Dated: July 31, 2020 ______________________________________ EDWARD J. DAVILA United States District Judge 17 18 19 20 21 22 23 24 25 26 27 28 The Court acknowledges and rejects Plaintiff’s argument that Looksmart did not provide them sufficient notice of the duty to supplement. Looksmart was published in June 2019. Thus, when Plaintiff sent Defendant their second supplemental damages contentions, they were on notice of the duty to timely supplement. Indeed, they have been on notice of that duty since June 2019. Case No.: 5:18-cv-02352-EJD ORDER GRANTING DEFENDANT’S MOTION TO STRIKE 13 8
]]>
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You
should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google
Privacy Policy and
Terms of Service apply.
