Whitewater West Industries, LTD. v. Pacific Surf Designs, Inc. et al

REPLY to Response to Motion re MOTION for Discovery Defendants' Notice of Motion and Motion to Reopen Discovery and Compel Evidence

S.D. Cal.March 20, 2019

T R O U T M A N S A N D E R S L L P 5 8 0 C A L IF O R N IA S T R E E T , S U IT E 1 1 0 0 S A N F R A N C IS C O , C A 9 4 1 0 4 38143970v5 3:17-CV-01118-BEN-BLM 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TROUTMAN SANDERS LLP Mark C. Mao, CA Bar No. 236165 mark.mao@troutman.com Charanjit Brahma, CA Bar No. 204771 charanjit.brahma@troutman.com 580 California Street Suite 1100 San Francisco, CA 94104 Telephone: 415.477.5700 Facsimile: 415.477.5710 TROUTMAN SANDERS LLP Christopher Franich, CA Bar No. 285720 chris.franich@troutman.com 11682 El Camino Real Suite 400 San Diego, CA 92130-2092 Telephone: 858-509-6000 Facsimile: 858 509 6040 Attorneys for Defendants PACIFIC SURF DESIGNS, INC. and FLOW SERVICES, INC. UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA WHITEWATER WEST INDUSTRIES, LTD., a Canadian corporation, Plaintiff, v. PACIFIC SURF DESIGNS, INC., a Delaware corporation and FLOW SERVICES, INC., a California corporation, Defendants. Case No. 3:17-cv-01118-BEN-BLM REPLY IN SUPPORT OF DEFENDANTS' MOTION TO REOPEN DISCOVERY AND COMPEL EVIDENCE Case 3:17-cv-01118-BEN-BLM Document 268 Filed 03/20/19 PageID.12731 Page 1 of 10 T R O U T M A N S A N D E R S L L P 5 8 0 C A L IF O R N IA S T R E E T , S U IT E 1 1 0 0 S A N F R A N C IS C O , C A 9 4 1 0 4 38143970v5 3:17-CV-01118-BEN-BLM 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 I. INTRODUCTION In opposing Defendants’ inequitable conduct defense, Plaintiff has to date insisted that the expiration of the ’589 patent was an isolated, inadvertent error and that Plaintiff moved to revive the patent immediately after it stumbled upon the expiration in searching through records on the Patent Office’s website. But that story has not made sense since it was revealed that Plaintiff’s counsel, Rick Taché, had received the Patent Office’s notice of expiration of the ’589 patent and several other reminders about the deadline to pay maintenance fees for the ’589 patent weeks and months before the expiration was supposedly discovered. Tellingly, Plaintiff failed to produce those communications (again, supposedly “inadvertently”) from its own files during discovery. Instead, Defendants only learned of those communications in response to a third-party subpoena. Now, Defendants have discovered that two foreign counterparts to the’589 patent were also allowed to expire and had to be revived in the relevant time period. Documents related to these expirations, including at least one declaration from Whitewater employee Timothy Kwasnicki, should have been produced in response to Defendants’ previous discovery requests and ESI search terms. But Plaintiff did not produce them. Regardless of whether this information should previously have been produced, this new information justifies Defendants’ request for the narrowly tailored, limited additional discovery Defendants seek about what steps Whitewater took to monitor and pay maintenance fees for the portfolio of patents—including the’589 patent and the two foreign counterparts—that were licensed to Whitewater. This information is clearly relevant, because Plaintiff allowing these ’589 patent counterparts to expire suggests there may have been a deliberate decision to allow the ’589 patent family to expire or at least a deliberate decision to not monitor these patents along with the remainder of the licensed portfolio. Moreover, the Case 3:17-cv-01118-BEN-BLM Document 268 Filed 03/20/19 PageID.12732 Page 2 of 10 T R O U T M A N S A N D E R S L L P 5 8 0 C A L IF O R N IA S T R E E T , S U IT E 1 1 0 0 S A N F R A N C IS C O , C A 9 4 1 0 4 38143970v5 - 2 - 3:17-CV-01118-BEN-BLM 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 knowledge of Plaintiff’s counsel, Erikson Squier, about those expirations is directly relevant to Plaintiff’s argument that he reasonably investigated whether the delay in paying maintenance fees for the ’589 patent was unintentional. Because the information Defendants seek is narrowly tailored and there are no imminent deadlines or pending dispositive motions on the issue of inequitable conduct, Defendants’ request will not pose the “severe prejudice” that Plaintiff claims it will suffer. Defendants therefore respectfully request that the Court reopen discovery for the limited purpose set forth in Defendants’ motion and require Plaintiff to produce the requested information. II. DEFENDANTS’ DISAGREE WITH PLAINTIFF’S VERSION OF FACTS Throughout the introduction and its statement of facts, Plaintiff’s Opposition is replete with attempts to characterize Defendants’ Counsel’s actions and motivations using terms like “desperate”, “bizarre”, and “harassing.” For example, one section heading reads “Defendants Harass Whitewater On The Eve Of Trial,” and is followed in the very next section with the contradictory complaint that “Defendants went silent until…the evening after trial ended in the Alleshouse Action.” Plaintiff’s contradictory assertions in and of themselves show that Defendants promptly raised this issue and then delayed pursuing it at Plaintiff’s own request so as not to interfere with trial in the other case between the parties. In another instance, Plaintiff’s brief includes two nearly identical footnotes (3 and 8) with the stated goal of “[e]mphasizing the bad faith nature of Defendants’ tactics” by making reference to an unrelated dispute between the parties. While Defendants disagree with these and other comments, barbs, and mischaracterizations, particularly those included solely to assign bad faith motives to Defendants’ Counsel’s actions, they are not relevant to the matter at hand, and Defendants will not endeavor to respond to these statements individually. Defendants also disagree with many of Plaintiff’s characterizations of the Case 3:17-cv-01118-BEN-BLM Document 268 Filed 03/20/19 PageID.12733 Page 3 of 10 T R O U T M A N S A N D E R S L L P 5 8 0 C A L IF O R N IA S T R E E T , S U IT E 1 1 0 0 S A N F R A N C IS C O , C A 9 4 1 0 4 38143970v5 - 3 - 3:17-CV-01118-BEN-BLM 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 case history, the parties’ phone discussions, and the holdings of the Court. For example, Plaintiff’s Opposition states that “the Court held that Whitewater possessed standing to claims relating to the ʼ589 Patent,” even though the document to which Plaintiff refers addressed only the lone basis upon which the Court dismissed the FSL Action without addressing the other deficiencies in Plaintiff’s standing raised by Defendants that the Court had chosen not to address. As most of these characterizations are not directly related to the very narrow issues raised by this Motion to Compel and Reply, Defendants will similarly not address disputes regarding each such instance in this Reply. III. DEFENDANTS’ PREVIOUS ESI REQUESTS SHOULD HAVE TURNED UP THE REQUESTED DOCUMENTS As soon as Defendants formally included inequitable conduct defenses related to Plaintiff’s reinstatement of the ʼ589 patent, including material misrepresentations Plaintiff made to the PTO as to ownership and the unintentionality of the delay in paying maintenance fees, Defendants pursued and were granted discovery on those issues. Per the agreement between the parties on March 5, 2018, Plaintiff agreed to produce ESI that included searching Mr. Kwasnicki’s email for the terms “delay* & patent*”, between December 10, 2013 and August 24, 2015. Plaintiff does not contest that, to the extent Mr. Kwasnicki had emailed his draft or signed declaration or had received a copy of the draft or as- filed paperwork, that the Kwasnicki declaration to the German patent office would meet both of these search criteria. Regardless of whether documents related to the newly discovered UK and German patent expirations should have been produced in response to Defendants’ previous discovery requests or ESI search terms, the very fact that Defendants have newly discovered this information justifies the narrow additional discovery Defendants seek. Had Defendants received these documents when they were originally requested in March of 2018, Defendants could and would have pursued Case 3:17-cv-01118-BEN-BLM Document 268 Filed 03/20/19 PageID.12734 Page 4 of 10 T R O U T M A N S A N D E R S L L P 5 8 0 C A L IF O R N IA S T R E E T , S U IT E 1 1 0 0 S A N F R A N C IS C O , C A 9 4 1 0 4 38143970v5 - 4 - 3:17-CV-01118-BEN-BLM 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 further discovery into them. That Defendants did not do so sooner is a function of Plaintiff’s non-production creating the impression that there was no issue to pursue. As soon as these documents were discovered while researching another unrelated issue in the case, Defendants diligently pursued additional information and discovery. Mr. Kwasnicki’s declarations from the UK and Germany about expiration of foreign counterparts to the ’589 patent is precisely the type of information Defendants were seeking with the agreed to ESI search terms. To the extent Plaintiff located this declaration in its search but withheld it because Plaintiff unilaterally decided it was not relevant, that was improper and further justifies permitting Defendants’ additional discovery request, even at this stage of the case. Finally, facts surrounding revival of these foreign counterparts to the asserted ’589 patent is clearly relevant to the claims of inequitable conduct in this case. Mr. Kwasnicki’s declarations suggest that the UK and German counterparts to the ’589 patent occurred because Whitewater failed to alert the consultant its contracts with to track patent maintenance fee payment deadlines, CPA Global, about the patent portfolio generally (which by Whitewater’s own admission includes the ʼ589 patent). If CPA Global was not asked to monitor and maintain the licensed applications and patents in the ’589 patent family, but was asked to monitor and maintain other patents and applications licensed under the IP License Agreement, a finder of fact would be less likely to believe such an omission was “inadvertent” as Plaintiff has claimed. IV. THE DISCOVERY DEFENDANTS SEEK IS NARROW, RELEVANT & WOULD NOT UNDULY PREJUDICE PLAINTIFF Plaintiff’s Opposition argues that the discovery sought is not relevant to Defendants’ inequitable conduct claims. Quite the contrary, in both his expert report and deposition testimony, Defendants’ expert, Mr. Carmichael, has already demonstrated the relevance of the requested information, relying on previously available information regarding Mr. Squier’s communications with Whitewater Case 3:17-cv-01118-BEN-BLM Document 268 Filed 03/20/19 PageID.12735 Page 5 of 10 T R O U T M A N S A N D E R S L L P 5 8 0 C A L IF O R N IA S T R E E T , S U IT E 1 1 0 0 S A N F R A N C IS C O , C A 9 4 1 0 4 38143970v5 - 5 - 3:17-CV-01118-BEN-BLM 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 during the reinstatement of the ʼ589 patent. To the extent his opinion is based on information that the parties now understand to have been incomplete, he should at the very least be permitted to review this newly discovered information and determine the extent to which it impacts his conclusions regarding the reasonableness of Mr. Squier’s investigation. The additional information requested by Defendants, including which of the 50 licensed patents and patent applications were being monitored and maintained, is directly relevant to the question of the intentionality of the lapsing of, and diligence in revival, of the ʼ589 patent.1 Plaintiff’s Opposition also argues that the scope of requested information is not proportional to the needs of the case and would “severely prejudice” Plaintiff. Understanding what was known by Mr. Squier during the reinstatement of the ʼ589 patent is a significant element of the inequitable conduct claims at issue, and the provision of documents that have already been collected and searched, as in the case of Mr. Kwasnicki’s email, is certainly not disproportionate to the needs of this case. Plaintiff has also already established that it is readily capable of determining what was and was not being monitored by CPA Global, and comparing that list to the licensed assets would not be disproportionate in light of the relevance of the 1 See, FSL Action at D77, 6:19–7:9 where Plaintiff stated that “[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense." Fed. R. Civ. P. 26(b)(1). The definition of relevancy, for purposes of discovery, "has been construed broadly to encompass any matter that bears on, or that reasonably could lead to other matter that could bear on, any issue that is or may be in the case." Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978); see Phoenix Solutions Inc. v. Wells Fargo Bank, NA., 254 F.R.D. 568, 575 (N.D. Cal. 2008) ("The scope of discovery permissible under Rule 26 should be liberally construed; the rule contemplates discovery into any matter that bears on or that reasonably could lead to other matter that could bear on any issue that is or may be raised in a case."). Consistent with the goal of broad discovery, "[t]he party who resists discovery has the burden to show discovery should not be allowed, and has the burden of clarifying, explaining, and supporting its objections." Duran v. Cisco Systems, Inc., 258 F.R.D. 375, 378 (C.D. Cal. 2009) (citing Blankenship v. Hearst Corp., 519 F.2d 418, 429 (9th Cir. 1975)). Case 3:17-cv-01118-BEN-BLM Document 268 Filed 03/20/19 PageID.12736 Page 6 of 10 T R O U T M A N S A N D E R S L L P 5 8 0 C A L IF O R N IA S T R E E T , S U IT E 1 1 0 0 S A N F R A N C IS C O , C A 9 4 1 0 4 38143970v5 - 6 - 3:17-CV-01118-BEN-BLM 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 question of the intentionality of the lapsing of the ʼ589 patent. At bottom, Plaintiff offers nothing to support its contention that this minimal discovery would pose severe prejudice to it. See D267 at 15–16. Nor could it, as there are no imminent deadlines or pending motions in this case, unlike the Nava case Plaintiff cites, and the need for this additional discovery was only recently brought to Defendants’ attention, unlike Shalaby. Nava v. Velardi, No. 15CV1156- AJB(BLM), 2018 WL 3773848, at *4 (S.D. Cal. Aug. 9, 2018) (denying motion based on prejudice to the non-moving party where the additional discovery was sought only in the face of a fully briefed summary judgment motion on the issue); Shalaby v. Newell Rubbermaid, Inc., No. 07CV2107-MMA(BLM), 2009 WL 10672040, at *4 (S.D. Cal. Mar. 11, 2009) (denying the requested additional discovery where the moving party contended that discovery related to a new theory of the case that arose from review of previously produced evidence as opposed to newly discovered information). To the extent Plaintiff complains that it will be forced to have its own expert comment on this additional discovery, that poses no prejudice to Plaintiff at all, since Plaintiff had the option of having its expert opine on this information from its own files earlier in discovery. A. Mr. Squier’s Knowledge Regarding the Intentionality of the Expiration of the ʼ589 Patent Is Relevant to Defendants’ Inequitable Conduct Claims On August 5, 2015, the PTO dismissed Mr. Squier’s February 20, 2015, Petition to reinstate on the basis that Mr. Squier did not show authority to have fees charged to the deposit account listed in the petition. The PTO reminded Mr. Squier that his February 20, 2015 statement was impliedly a certified statement from a person in a position to know that the entire delay in paying the maintenance fee was unintentional. The PTO warned Mr. Squier that in the absence of such knowledge, petitioner must make a reasonable inquiry and, if the result of that investigation showed the delay was unintentional, inform the PTO. Case 3:17-cv-01118-BEN-BLM Document 268 Filed 03/20/19 PageID.12737 Page 7 of 10 T R O U T M A N S A N D E R S L L P 5 8 0 C A L IF O R N IA S T R E E T , S U IT E 1 1 0 0 S A N F R A N C IS C O , C A 9 4 1 0 4 38143970v5 - 7 - 3:17-CV-01118-BEN-BLM 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 When asked if any investigation or discussion with the client took place aside from instructions from Mr. Taché, Mr. Squier testified: Q All right. So my previous question was aside from talking to Mr. Tache about his client communications, was there anything else that you did to determine or investigate whether the delay in payment of the maintenance fee for the '589 patent was unintentional? A My investigation involved getting the details and instructions from the client through Mr. Tache. Q And that's it, right? A The instructions came through Mr. Tache from the client. Q Right. But you didn't independently talk with anyone at the client, correct? A Did not independently other than my communications through Mr. Tache. Q Okay. And when you when you refer to the client, which client are you referring to? What entity are you referring to? A That would be Whitewater. Squier Vol. 2 Dep. Tr. (D192-18) at 137:24–138:19. The recently discovered German petition, submitted on July 15, 2015, includes email exhibits from Mr. Squier and a declaration from Mr. Kwasnicki that show that Mr. Squier was communicating with German counsel between April and July of 2015 on the issue of expiration, renewals, reinstatement, and the portfolio ownership generally. These communications should therefore be considered as they directly relate to Defendants’ inequitable conduct theory, and Defendants’ expert has already opined on statements made mere weeks later by Mr. Squier in his August 11, 2018 renewed petition to reinstate the ʼ589 patent. But even if Mr. Squier had not communicated with Whitewater about the delay in payment for the ʼ589 patent, communications about the delay regarding related patents and family members would be relevant to the reasonableness of Mr. Squier’s inquiry. For example, a finder of fact may find it unreasonable to have direct knowledge that the ʼ589 patent’s foreign counterparts were intentionally omitted from the CPA Global account without investigating whether the same Case 3:17-cv-01118-BEN-BLM Document 268 Filed 03/20/19 PageID.12738 Page 8 of 10 T R O U T M A N S A N D E R S L L P 5 8 0 C A L IF O R N IA S T R E E T , S U IT E 1 1 0 0 S A N F R A N C IS C O , C A 9 4 1 0 4 38143970v5 - 8 - 3:17-CV-01118-BEN-BLM 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 issue had applied to the ʼ589 patent itself. In this case, Defendants’ expert, Mr. Carmichael, has opined on the insufficiency of Mr. Squier’s investigation based on Mr. Squier’s failure to speak with anyone at Whitewater during the pendency of the petition. In his report, Mr. Carmichael comments: In my opinion, Mr. Squier’s statement (“THE UNDERSIGNED CERTIFIES THAT THE DELAY IN PAYMENT OF THE MAINTENANCE FEE TO THIS PATENT WAS UNINTENTIONAL”) in his February 20, 2015, Petition carried with it a certification that Mr. Squier had conducted an investigation reasonable under the circumstances. However, Mr. Squier apparently conducted no independent investigation himself and simply spoke with Mr. Tache. Carmichael Report (D197-1) at ¶ 211. Mr. Carmichael’s reliance on information regarding Mr. Squier’s interactions with Whitewater during the relevant time period, and what investigation would have been reasonable directly demonstrates the relevance of the narrow question to which Defendants seek an answer. Further, Defendants’ expert should be permitted to consider the additional information related to Mr. Squier’s involvement in the revival of related applications and update or supplement the portions of his expert opinion that he deems impacted by communications Mr. Squier may have had with Whitewater during the pendency of his first and second petitions to reinstate. Providing this limited discovery, particularly with respect to the production of documents previously collected and searched, but ultimately omitted from ESI search results of Mr. Kwasnicki’s email based on Plaintiff’s unilateral determination of irrelevance, would not unduly burden Plaintiff. Defendants expect that any update or supplementation that Mr. Carmichael would deem necessary in order to ensure his opinion is accurate in view of these communications would be minimal and focused in scope so as not to unduly burden Plaintiff. Case 3:17-cv-01118-BEN-BLM Document 268 Filed 03/20/19 PageID.12739 Page 9 of 10 T R O U T M A N S A N D E R S L L P 5 8 0 C A L IF O R N IA S T R E E T , S U IT E 1 1 0 0 S A N F R A N C IS C O , C A 9 4 1 0 4 38143970v5 - 9 - 3:17-CV-01118-BEN-BLM 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 B. What Was and Was Not Being Tracked Is Relevant to Defendants’ Inequitable Conduct Claims As discussed above, the revival of patents other than the patent-in-suit is relevant to the claims of inequitable conduct in this case. Information about which of the 50 assets related to the license agreement that included the ʼ589 patent were being monitored and maintained by CPA Global would be easy to locate and provide and would not otherwise prejudice Plaintiff to produce. Whether by interrogatory response, declaration or deposition, this Court should require Plaintiff to at least identify which of the 50 licensed patents and applications in the IP License Agreement were being tracked by CPA Global, and which were not, and identify for whom (i.e., Whitewater or Light Wave/Wave Loch) those assets were being tracked. Plaintiff’s own submission of the Cash Declaration prepared after close of discovery confirms that providing such information would not unduly burden Plaintiff. V. CONCLUSION For the foregoing reasons, Defendants ask that the Court grant Defendants’ Motion to Reopen Discovery and Compel Evidence to the limited extent discussed above. The Court should also deny Plaintiff’s request for attorney’s fees, at least because the pending motion is substantially justified. Dated: March 20, 2019 Respectfully Submitted, TROUTMAN SANDERS LLP By: /s/ Christopher Franich Christopher Franich Attorneys for Defendants PACIFIC SURF DESIGNS, INC. and FLOW SERVICES, INC. Case 3:17-cv-01118-BEN-BLM Document 268 Filed 03/20/19 PageID.12740 Page 10 of 10