Opinion
01 Civ. 10820 (RPP)
February 25, 2004
Amster, Rothstein Ebenstein, Kenneth P. George, Esq., Ira E. Silfin, Esq., New York, NY, Counsel for Plaintiff
Carella, Byrne, Bain, Gilfillan, Cecchi, Stewart Olsen, Francis C. Hand, Esq., Dennis Gleason, Esq., Roseland, NJ, Counsel for Defendants
REVISED OPINION AND ORDER
Defendants Mainetti USA Inc., Mainetti S.p.A. and Mainetti (HK) Ltd. (collectively, "Mainetti") move pursuant to Rule 56 of the Federal Rules of Civil Procedure for an order declaring that certain patents for clothes hangers with side sizer tabs owned by plaintiff AE Products Group, L.P. ("AE") are unenforceable due to prosecution laches. Plaintiff cross moves for an order barring the defense of prosecution laches.
I. BACKGROUND
The patents at issue are United States Patent Nos. 5,613,629 ("`629 patent"), 5,819,995 ("`995 patent"), and 6,145,713 (`"713 patent"). The `629, `995 and `713 patents were issued to Andrew Zuckerman as divisional or continuation applications relating to earlier patent applications for clothes hangers with side sizer tabs filed by Mr. Zuckerman beginning on October 9, 1990. (Defs. Mem. of Law, dated April 14, 2003 ("Defs. Mem"), at 2.)
On October 9, 1990, Mr. Zuckerman filed an application for a patent in the United States Patent and Trademark Office ("PTO") entitled, "Hanger with Irremovable Information Tab." (Id see also Decl. of Francis C. Hand, dated March 11, 2003 ("Hand Decl. I"), Ex. 4.)
On November 22, 1991 applicant filed a continuation application pursuant to 35 U.S.C. § 120 which resulted in the issuance on April 6, 1993 of U.S. Patent 5,199,608 (`"608 patent"). (Defs. Mem. at 2.)
One day prior to the issue date of the `608 patent, applicant filed a divisional application on April 5, 1993 (treated as a continuation application by the Patent Trade Office ("PTO")) that resulted in the issuance of U.S. Patent 5,383,583 (`"583 patent") on January 24, 1995. (Id)
On the issue date of the `583 patent, applicant filed a divisional application on January 24, 1995 that resulted in the issuance of the `943 patent on January 23, 1996. (Id)
One day prior to the issue date of the `943 patent, applicant filed a division application on January 22, 1996, an amendment of which filed on March 13, 1996 (Decl. of Francis C. Hand, dated April 24, 2003 ("Hand Decl. IT), Ex. 10) resulted in the issuance of the `629 patent on March 25, 1997. (Defs. Mem. at 2, 9.)
Prior to the issue date of the `629 patent, applicant filed a continuation application on February 26, 1997, an amendment of which filed on March 20, 1998 (Hand Decl. H, Ex. 9) resulted in the issuance of the `995 patent on October 13, 1998. (Defs. Mem. at 2, 8.)
On the issue date of the `995 patent, applicant filed a continuation application on October 13, 1998, an amendment of which filed on September 21, 1999 (Hand Decl. II, Ex. 8) resulted in the `713 patent on November 14, 2000. (Defs. Mem. at 2.)
In accordance with the provisions of Title 35 U.S.C. § 120 of the United States Code and the Rules of the PTO, no changes were made in the original specification in any of the divisional or continuation patent applications. (Id.) The only difference in each of the patents is in the language used in the claims. AE Prods. Group. L.P. v. Mainetti United States, 2002 U.S. Dist. LEXIS 24280, at *4 (S.D.N.Y. Dec. 18, 2002).
II. DISCUSSION OF PROSECUTION LACHES
A. Defendants' Motion
Defendants' memorandum of law in support of its motion dated April 14, 2003 relies principally on Webster Electric Co. v. Splitdorf Electrical Co., 264 U.S. 463 (1924), which held that prosecution laches was a defense to an infringement action involving new claims issuing from divisional and continuing applications that prejudice intervening adverse public rights. Webster, 264 U.S. at 471: see also Woodbridge v. United States, 263 U.S. 50 (1923). Defendants argue that the delay by plaintiff of over six years from the date of the issuance of the `608 patent before the filing of the amendment containing the claims for the `713 patent, of almost five years before filing the amendment containing the claims for the `995 patent, and of almost three years before filing the amendment containing the claims for the `629 patent constitutes prosecution laches. (Defs. Mem. at 6, 8-9.)
Defendants base part of their argument on 35 U.S.C. § 251 which relates to Reissue of Defective Patents. (Defs. Mem. at 5-6.) Since Mr. Zuckerman filed continuation or divisional applications and did not file an application for reissue, 35 U.S.C. § 251 is irrelevant.
In Symbol Technologies. Inc. v. Lemelson Medical the Federal Circuit reexamined the equitable doctrine of laches and held that the doctrine may be applied to bar enforcement of patent claims that issued after an unreasonable and unexplained delay in prosecution, even though the applicant had complied with pertinent statutes and the rules of the PTO. 277 F.3d 1361, 1368 (Fed. Cir. 2002); accord In re Bogese, 303 F.3d 1362 (Fed. Cir. 2002). The Federal Circuit noted that the Supreme Court inCrown Cork Seal Co. v. Ferdinand Gutman Co., 304 U.S. 159 (1938), "ratified prosecution laches as a defense to an infringement action involving new claims issuing from divisional and continuing applications that prejudice intervening public rights." Symbol Technologies, 277 F.3d at 1364. Traditionally, a laches defense requires proof that (a) "plaintiff delayed for an unreasonable and inexcusable length of time, and (b) "the delay operated to the prejudice or injury of the defendant."A.C. Aukerman v. R.L. Chaides Construction Co., 960 F.2d 1020, 1033 (Fed. Cir. 1992) (citing Costello v. United States, 365 U.S. 265, 282 (1961)).
Defendants assert that they hold intervening rights because: (1) in the summer/fall of 1994. Red Wing Products, Inc. ("Red Wing"), a predecessor in interest of defendants, retained Montalbano Product Development to design a side sizer for a plastic hanger, and on November 9, 1995. Red Wing filed a patent application for such a hanger that resulted in the issuance on November 18, 1997 of U.S. patent 5,687,887 (`"887 patent"), now owned by defendants, and (2) defendants actually started selling hangers with side sizing systems in 1997. (Defs. Mem. at 3.) Accordingly, the defendants claim intervening rights based on prosecution laches as to those Zuckerman patents whose application was filed after November 9, 1995, the date Red Wing's patent application was filed, i.e., as to the `629,'995 and `713 patents. (Id at 7, 9.)
B. Plaintiffs Answering Papers
AE argues: (1) its delay in prosecuting its divisional and continuation applications was not "unreasonable and unexplained," Symbol Technologies, 277 F.3d at 1364, and (2) there has been no injury to plaintiff because the applications did not extend the length of its patent monopoly beyond the term of the `608 patent. (Pl. Mem. of Law in Opp'n, dated May 23, 2003 ("Pl. Mem."), at 2, 4.)
AE states that for prosecution laches to apply defendants must prove by clear and convincing evidence that plaintiff "delay[ed] deliberately, unreasonably and without excuse the issuance of his patent so as to prejudice the intervening rights of another party." (PL Mem. at 4-5 (citing Gen-Probe, Inc. v. Vysis, Inc., 2002 U.S. Dist. Lexis 25020, at *119 (S.D. Cal. Aug. 2, 2002) (finding, after review of prosecution history and receipt of a jury advisory verdict, that prosecution of patent lasted eleven years after first related application was not a bar)).) AE argues that its delay of three years from the issuance of the `608 patent in filing the original application for the `629 patent was not unreasonable as it was prosecuting two other applications during that time period. (Id. at 5.) Similarly, AE asserts that prior to filing its original application for the `995 patent, AE was prosecuting the `629 patent and, prior to its filing for the `713 patent, it was prosecuting the `995 patent. (Id.) Under these circumstances, plaintiff argues that the delays in filing continuation applications were not unreasonable. (Id. (citing Stambler v. RSA Sec., Inc., 243 F. Supp.2d 74, 76 (D. Del. 2003) (finding that three year delay in filing division applications "not unreasonable" because during that period, patentee was prosecuting "two other patent applications based on the original application, which ultimately issued")).) In Stambler, however, the Patent Office also issued a restriction requirement forcing plaintiff to file several divisional applications. Stambler, 243 F. Supp.2d at 76. Nonetheless, at least one court has concluded that "prosecution laches is an equitable tool which has been applied sparingly in only the most egregious cases." Intuitive Surgical Inc. v. Computer Motion, Inc. 2002 WL 31833867, at *3 (D. Del., Dec. 10, 2002).
At least one court has held that the defendant's proof need only meet the preponderance of evidence test. See A.C. Aukerman. 960 F.2d at 1045 (holding "that `preponderance of the evidence' is the appropriate evidentiary standard to establish the facts relating to the laches issue"); accord Intuitive Surgical Inc. v. Computer Motion., Inc. 2002 U.S. Dist. LEXIS 24808, at *5 n. 4 (D. Del. Dec. 10, 2002); Verizon Ca., Inc. v. Ronald A. Katz Tech. Licensing, L.P., 2003 U.S. Dist. LEXIS 23553, at *62 (C.D. Cal. Dec. 2, 2003).But cf. Gen-Probe. 2002 U.S. Dist. Lexis 25020 at *120 ("[S]ince the application of [prosecution laches] would render a patent unenforceable, the moving party must provide clear and convincing evidence.").
AE points out that the presence of terminal disclaimers makes delay more reasonable, citing Digital Control, Inc. v. McLaughlin Mfg. Co. Inc. 248 F. Supp.2d 1015 (W.D. Wash. 2003) (dismissing defense of prosecution laches where patentee filed for eight continuations and continuations-in-part over an eight year period but did not extend the life of the patents). (Pl. Mem. at 6-7.) AE also contrasts its activity of constantly pursuing additional claims from the lack of such activity in Webster and Woodbridge. id, at 10.) At least one court, however, has stated that "a bright line rule that the prosecution laches defense never applies when a terminal disclaimer has been filed would run contrary to the principle that `with its origin in equity, a determination of laches is not made upon the application of mechanical rules.'" Chiron Corp. v. Genentech, Inc., 268 F. Supp.2d 1139, 1143 (E.D. Cal. 2002) (citing A.C. Aukerman, 960 F.2d at 1032).
To explain its delay, AE points to the supporting declaration of Mr. Zuckerman in which he states "during the prosecution of the Zuckerman Patents, [AE] would survey the market in order to determine whether our competitors were copying our hangers." (Pl. Mem. at 11; Decl. of Andrew Zuckerman, dated May 22, 2002 ("Zuckerman Decl. I"), ¶ 6.) After learning from the Patent Trade Office ("PTO"):
that the claims of any pending application were allowable, [Zuckerman] would instruct AE's lawyers to prepare and file an additional divisional or continual application. The new application would include claims that were different from those of the prior Zuckerman patents and . . . would cover competitors' products that copied the elements of [the] invention which had not yet been patented.
(Zuckerman Decl. 1 ¶ 7.)
AE argues that capturing the technology of a competitor in divisional or continuation applications has been consistently held lawful by the courts. (Pl. Mem. at 12 (citing Kingsdown Medical Consultants, Ltd. v. Hollister, Inc. 863 F.2d 867, 874 (Fed. Cir. 1988); Digital Control, 248 F. Supp.2d at 1019).) In Chiron, however, the court points out that "Kingsdown did not address the question of how a long period of delay affects the equities of the situation, particularly where the patentee could have earlier asserted broad claims that would have covered the competitor's product," and states that "Kingsdown . . . does not preclude an alleged infringer from asserting these kind of circumstances as grounds for a prosecution laches defense." Chiron. 268 F. Supp.2d at 1143.
C. Defendants' Reply
In its reply memorandum, Mainetti pointed out that Mr. Zuckerman's declaration had failed to set forth any facts demonstrating why plaintiff had filed the additional continuation or divisional applications. (Defs. Reply Mem. of Law, dated June 13, 2003 ("Defs. Reply"), at 2.) Accordingly, after oral argument, the Court ordered Mr. Zuckerman to provide an affidavit identifying "(0 the competitive products which plaintiff intended to foreclose by filing each division or continuation of the `608 patent, and (ii) the date upon which that product came to its attention." (Order dated Dec. 16, 2003.) Mr. Zuckerman complied with this order on December 22, 2003 by filing a declaration on that date which named competitive products that had come to its attention throughout the six-year period of delay of which defendants complain. (Zuckerman Decl. II.)
With these specifications of its reasons for filing the continuation and divisional application, plaintiff raised a genuine issue of material fact as to whether the delays complained of by defendants were unreasonable and unexplained. Accordingly, defendants' motion for summary judgment based on prosecution laches is denied.
III. IMPACT OF RULE 30(b)(6) TESTIMONY
Additionally, in its reply memorandum, Mainetti complains that Mr. Zuckerman's claims in the May 22, 2003 Declaration, setting forth for the first time reasons for the delay in filing of the divisional and continuation applications, were inconsistent with plaintiffs previous position in this litigation. (Defs. Reply at 14.)
It points out that Kenneth George, Esq., patent counsel for AE's predecessor in interest, testified that he did not know why the applications for the `583 patent, the `943 patent, the `629 patent, or for the `995 patent were filed (Defs. Reply at 15 (citing (Supp. Decl. of Francis C. Hand, dated June 13, 2003 ("Hand Supp. Decl."), Ex. 13 ("George Dep.") at 35-36, 56-58, 60-63)), and that his co-counsel, Neal Rosenberg, Esq., really did all the work on the case and conducted the prosecution of the divisional and continuation applications in the case. (Id. (citing George Dep. at 28, 30).)
Most significantly, defendants point to testimony by Neal Rosenberg, Esq., plaintiffs designated Rule 30(b)(6) witness, that he had no recollection of consulting with Mr. Zuckerman on the patent application for the `583 patent, the `943 patent, the `995 patent, and the `713 patent (id. (citing Hand Supp. Decl., Ex. 14 ("Rosenberg Dep.") at 43, 67-68, 81-82, 90, 97-98)), and that, instead of giving testimony that tends to support Mr. Zuckerman's Declarations of May 22, 2003 and December 22, 2003, Neal Rosenberg gave the following testimony which is inconsistent with the Zuckerman declarations:
Page 68 is missing in the Court's docketed copy of the Hand Supp. Decl., Docket #110.
Q. Who gave you instructions to file such claims?
A. I don't know that I received instructions.
Q. You did it on your own?
A. This was a significant case, application, and we were attempting to make sure our scope of our claims was not limited by any unnecessary structural limitations or functional limitations, and we I would say pretty continually reviewed the language of the claims, and when we found that there was some undue structural or functional limitation, proposed and introduced into the application
claims which did not have such a limitation; for example, changing it from both sides of the tab having a rib to at least one side of the tab having a rib. So I did not necessarily receive instructions from anybody.
Q. Who told you this was an important case?
A. We've gone through a few separate applications directed to the general subject matter. Obviously it was something that we were interested in, and the client was interested enough to be willing to pay the bills involved for a good job.
(Rosenberg Dep. at 53-54.)
Q. You mentioned before you continually review language of the claims. Why do you do that?
A. In any case, and especially in any important case, you try to make sure that the claims that are going to issue in the patent cover the product that's described, reasonable variations thereof that competitors may come up with, and in general are just broad enough in scope to be useful.
Q. Did you at any time receive samples of a competitor's product?
A. In the time frame of the submissions on the Combinations hanger, no. Whether I received it later, the Combinations hanger later, I don't know.
Q. Did you ever receive samples of-A. But anything from a competitor? Q. Yes.
A. I do not specifically recall, but it would not surprise me. Q. If you did receive samples, would they be in the files? A. Possibly.
Mr. MARK ROSENBERG: They were not in the files.
Mark Rosenberg is one of plaintiff's attorneys.
(Rosenberg Dep. at 57-58.)
Q. Who gave instructions to you to file this application?
A. Assuming that someone gave me directions, that would have been Ken George, but I may have just done it on my own, too.
Q. I ask you again, who gave you instructions to file? I don't want assumptions. I want a positive answer.
A. I can't — you're making an assumption in your question. Do you want me to say no one?
Q. I want you to say if you don't know, you don't know.
A. The question has an assumption in it.
Q. There is no assumption.
A. Yes, there is, that somebody gave me instructions. MR. HAND: Can we go off the record? (There is a discussion off the record.) MR. HAND: Let's go on the record.
Q. Did anyone give you instructions to file this application?
A. I don't know.
Q. Do you recall?
A. No.
Q. Could Ken George have given instructions?
A. Yes.
Q. Could Andrew Zuckerman have given instructions?
A. No.
Q. Why would you file an application on your own?
A. If I thought it could be proved and the case warranted it and the client was willing to pay the expense.
(Rosenberg Dep. at 98-99.)
EXAMINATION BY MR. MARK ROSENBERG:
Q. Mr. Rosenberg, earlier you were testifying with respect to the Zuckerman patents and the applications. Do you recall that?
A. Yes.
Q. Before you filed any of the continuation or divisional applications, did you receive instructions to do so from a partner of this firm?
A. Yes.
MR. MARK ROSENBERG: No further questions. EXAMINATION BY MR. HAND:
Q. On cross-examination, who was that partner?
A. Ken George.
Q. Now, my recollection is that you did not so testify earlier. Is that correct?
A. I do not know what your recollection is. I did not check with the clients directly.
(Rosenberg Dep. at 107.)
Neal Rosenberg's Rule 30(b)(6) testimony that the continuation and divisional applications resulted from Mr. Rosenberg's concepts of "reasonable variations" and "just broad enough in scope to be useful" suggest, in light of a record which shows each continuation or divisional application was filed by plaintiff on the very last day before issuance of its predecessor patent (or on one occasion after) notice of acceptance, that the applications for the `629, `995 and `713 patents could have been prepared before or soon after the issuance of the `608 patent, and may have been deliberately held in abeyance and filed seriatim to affect competition adversely.
In any event, Neal Rosenberg's testimony suggests that he invented these patents himself. Moreover, it is inconsistent with Mr. Zuckerman's statement in his Declarations of May 22, 2003 and December 22, 2003, and with plaintiffs position on this motion that these patents were designed to capture the technology of competitors. (Zuckerman Decl. I at 3; Zuckerman Decl. II; Pl. Mem. at 11-12.)
Rule 30(b)(6) provides that when a party notices a corporation for deposition, the latter "shall designate one or more officers, directors, or managing agents, or other persons who consent to testify on its behalf, and may set forth, for each person designated, the matters on which the person will testify." Fed.R.Civ.P. 30(b)(6). A party has an obligation to properly prepare its designee to provide testimony on its behalf. See, e.g., Reilly v. Natwest Mkts. Group, Inc., 181 F.3d 253 (2d Cir. 1999) ("To satisfy Rule 30(b)(6), the corporate deponent has . . . to make available . . . persons as will' be able `to give complete, knowledgeable and binding answers' on its behalf.") (citations omitted);Twentieth Century Fox Film Corp. v. Marvel Enters., 2002 U.S. Dist. LEXIS 14682, at *7 (S.D.N.Y. Aug. 8, 2002) ("If the persons designated by the corporation do not possess personal knowledge of the matters set out in the deposition notice, the corporation is obligated to prepare the designees so that they may give knowledgeable and binding answers for the corporation.") (citing United States v. Taylor, 166 F.R.D. 356, 361-62 (M.D.N.C. 1996)); Paul Revere Life Ins. Co. v. Jafari, 206 F.R.D. 126, 127-28 (D. Md. 2002) ("Rule 30(b)(6) . . . implicitly requires [designees] to review all matters known or reasonably available to it in preparation for the Rule 30(b)(6) deposition."). Testimony of a Rule 30(b)(6) witness is then binding on the party that designated the witness. 8A Charles A. Wright, Arthur R. Miller and Richard L. Marcus,Federal Practice and Procedure § 2103 (2nd ed. 1984); Fed.R.Civ.P. 30 advisory committee's note; see also Sabre v. First Dominion Capital LLC. 2001 U.S. Dist. LEXIS 20637, at *2 (S.D.N.Y. Dec. 12, 2001) ("A 30(b)(6) witness testifies as a representative of the entity, his answers bind the entity and he is responsible for providing all the relevant information known or reasonably available to the entity.").
However, while Rule 30(b)(6) testimony is binding, some authority holds that it does not constitute a judicial admission that ultimately decides on issues and cannot be contradicted or used for impeachment purposes.W.R. Grace Co. v. Viskase Corp., 1991 WL 211647, at *2 (N.D. Ill., Oct. 15, 1991) (allowing corporate party to offer evidence at trial contrary to statements made by its corporate representative in a Rule 30(b)(6) deposition); Industrial Hard Chrome, Ltd. v. Hetran, Inc. 92 F. Supp.2d 786, 791 (E.D. Ill., 2000) (""[Rule 30(b)(6)] testimony is not a judicial admission that ultimately decides an issue. The testimony given at a Rule 30(b)(6) deposition is evidence which, like any other deposition testimony, can be contradicted and used for impeachment purposes."); see also Hyde v. Stanley Tools, 107 F. Supp.2d 992, 992-93 (E.D. La. 2000) ("[While] court may disregard affidavit which directly contradicts an earlier 30(b)(6)deposition . . . [c]ourts have allowed a contradictory or inconsistent affidavit to nonetheless be admitted if it is accompanied by a reasonable explanation.") But cf. Ierardi v. Lorillard, Inc., 1991 U.S. Dist. LEXIS 11320 (E.D. Pa., Aug. 13, 1991) (holding that party cannot introduce evidence during trial contradicting previous statements by Rule 30(b)(6) designee); Tavlon 166 F.R.D. at 362 (finding that a statement by a Rule 30(b)(6) designee is not a judicial admission, but can be binding on the corporation as admission against interest under Fed.R.Evid. 804(b)(3)). As the court in W.R. Grace Co. explained the difference:
It is true that a corporation is "bound" by its Rule 30(b)(6) testimony, in the same sense that any individual deposed under Rule 30(b)(1) would be "bound" by his or her testimony. All this means is that the witness has committed to a position at a particular point in time. It does not mean that the witness has made a judicial admission that formally and finally decides an issue. . . . Evidence may be explained or contradicted. Judicial admissions, on the other hand, may not be contradicted.
1991 WL 211647 at *2 (allowing corporate party to offer evidence at trial contrary to statements made by its corporate representative in a Rule 30(b)(6) deposition).
Accordingly, while the court is not bound in its decision by the 30(b)(6) evidence offered, credibility issues have been raised as to whether Mr. Zuckerman's Declarations or Neal Rosenberg's Rule 30(b)(6) testimony reflects the reason for the filing of the divisional and continuation applications for the `629, `995 and `713 patents.
Furthermore, by letter dated December 30, 2003, defendants point out that Mr. Zuckerman's Declaration of December 22, 2003 did not provide identification of the construction of the product so that plaintiff did not correlate the products listed to each divisional or continuation application of the `608 patent. In view of the credibility issues raised and plaintiffs failure to demonstrate that the `629, `995 and `713 patent applications correlate to competitor's products on the market, Defendants have raised genuine issues of material fact which prevent the Court from granting plaintiffs cross motion to bar the defense of prosecution laches.
III. CONCLUSION
Defendant's motion for summary judgment based on prosecution laches is denied. Plaintiffs cross-motion to bar that defense is denied. Furthermore, Mr. Zuckerman is ordered to provide the Court by March 3, 2004 with an affidavit correlating the features of the patents identified in his Declaration of December 22, 2003 with the divisional or continuation papers of the `608 patent at issue in this case.
IT IS SO ORDERED.