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Callpod, Inc. v. GN Netcom

March 29, 2010

CALLPOD, INC., PLAINTIFF,
v.
GN NETCOM, INC., GN NETCOM, A/S, GN STORE NORD, A/S, AND HELLO DIRECT, INC., DEFENDANTS.



The opinion of the court was delivered by: Judge Virginia M. Kendall

MEMORANDUM OPINION AND ORDER

Plaintiff Callpod, Inc. ("Callpod") filed suit against Defendants GN Netcom, Inc., GN Netcom A/S, and Hello Direct, Inc. (collectively "Defendants") alleging direct and indirect infringement of United States Patent No. 6,801,611 ("the '611 patent"). Defendants counterclaimed seeking a declaratory judgment of invalidity of the '611 patent, and now move for summary judgment on non-infringement and invalidity of the patent. For the reasons set forth below, Defendants' Motion for Summary Judgment of Noninfringement of The '611 Patent is granted. Defendants' Motion for Summary Judgment of Invalidity of The '611 Patent is denied.

In connection with the Motions for Summary Judgment, Defendants moved to exclude certain expert testimony and the parties filed a total of five motions to strike various reports and exhibits filed by the opposing side. On October 27, 2009, the Court denied Callpod's Motion to Strike Defendants' Reply to Callpod's Response to Defendants' Statement of Undisputed Material Facts, Defendants' Cross-Motion to Strike Portions of Callpod's Responsive Fact Statements and Accompanying Exhibits, and Defendants' Motion to Strike Portions of the Deposition Errata Sheet of Callpod's Expert Witness Paul Bierbauer for the reasons stated in open court. The Court addresses the remaining substantive motions in this Order. As explained below, Defendants' Motion to Exclude Opinions of Callpod's Proposed Expert Witnesses is granted in part and denied in part. Callpod's Motion to Strike the August 7, 2009 Supplemental Report of James L. Lansford is granted in part and denied in part. Callpod's Motion to Strike the Affidavit of Ilka Müller and Accompanying Exhibits is denied.

MOTIONS TO STRIKE

I. Defendants' Motion to Exclude Opinions of Callpod's Proposed Expert Witnesses

A. Defendants' Motion to Exclude Opinions of Callpod's Technical Expert, Paul Bierbauer

Paul D. Bierbauer ("Bierbauer") is a senior professor of electronics technology at Devry University who opines that the Defendants' allegedly infringing products (the "accused products") contain each and every element of at least some of the asserted claims of the '611 patent; that GN's sales of certain products meet the standard for contributory infringement; that no design alternatives are available to GN that provide the features and benefits currently offered by the accused products; and that Callpod's Phoenix product practices the claims of the '611 patent. Defendants challenge Bierbauer's opinions regarding the definitions of when a device powers-on and microphone bias current on methodology and relevance grounds, and challenge as unsupported his opinions about contributory infringement, the availability of design alternatives, and Callpod's Phoenix product.

The admissibility of expert testimony is governed by Federal Rule of Evidence 702 ("Rule 702") and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and its progeny. See Ervin v. Johnson & Johnson, Inc., 492 F.3d 901, 904 (7th Cir. 2007). Rule 702 states: "If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise." A three-step admissibility analysis applies to expert testimony under Rule 702 and Daubert. See Ervin, 492 F.3d at 904. First, "the witness must be qualified 'as an expert by knowledge, skill, experience, training, or education.'" Id. (quoting Fed.R.Evid. 702). Second, "the expert's reasoning or methodology underlying the testimony must be scientifically reliable." Id. (citing Daubert, 509 U.S. at 592-93). Finally, the expert's testimony must be relevant, or "assist the trier of fact to understand the evidence or to determine a fact in issue." Ervin, 492 F.3d at 904.

Defendants do not squarely challenge Bierbauer's qualifications to testify as an expert in the field of communications engineering. Bierbauer's Curriculum Vitae, attached as an exhibit to his report, reflects that he is a senior professor in the Electronic Technician department of DeVry University, and that he is currently writing a series of textbooks in the communications engineering field. (See R. 263, Ex. A, Expert Report of Paul D. Bierbauer Regarding Infringement of U.S. Patent No. 6,801,611, at 210-11.) (hereinafter "Bierbauer Rep.") Accordingly, the Court finds him qualified to provide expert testimony on the subjects in his report. See Reilly v. Blue Cross & Blue Shield United of Wisc., 846 F.2d 416, 421 (7th Cir. 1988) (reviewing experts' curricula vitae in order to support an uncontested finding that the experts were qualified in their fields).

1. Microphone Bias Current

Bierbauer's report opines that the accused products have a sense circuit that detects microphone bias current, defined in his report as a type of bias current that falls into audio levels. (See Bierbauer Rep. at 35-36.) During his deposition, he further testified that bias current and microphone bias current are not the same, and that microphone bias current is a specifically audio signal. (See R. 263, Ex. D, Deposition Testimony of Paul D. Bierbauer, at 184.) (hereinafter "Bierbauer Dep.") Defendants challenge this opinion as not based upon a proper methodology.

Bierbauer testified that he had never "seen the term microphone bias current used until the study of this case." (Bierbauer Dep. at 191.) However, Bierbauer did not conduct any kind of methodic inquiry into whether the term had an established meaning in the relevant art. Without more, Bierbauer's statement that the phrase microphone bias current as used in the '611 patent is novel or unique within the field constitutes a conclusion based solely on his expert intuition which is not an appropriate foundation for expert testimony. See Zenith Elecs. Corp. v. WH-TV Broad. Corp., 395 F.3d 416, 419 (7th Cir. 2005). Bierbauer thus failed to appropriately consider "the ordinary meaning that would be attributed to" the phrase microphone bias current, taken in its entirety, "by persons skilled in the relevant art." SuperGuide Corp. v. DirecTV Enters., Inc., 358 F.3d 870, 874-75 (Fed. Cir. 2001).

Because of his inadequately supported determination that microphone bias current was not a widely used term within the field, Bierbauer attempted to define the term by reference to technical dictionaries and the testimony of other witnesses, who had defined the terms "bias" and "bias current," and to extrapolate from those definitions. (See Bierbauer Rep. at 35-36.) Even though his methodology in determining the meaning of the terms bias and bias current alone was appropriate, this research does not adequately support his proposed expert opinion as to the meaning of the larger, and more relevant term, microphone bias current.

More importantly, however, Bierbauer's proposed testimony would be irrelevant at trial because the construction of the claims of a patent is a legal determination to be made by the Court, and not an issue of fact for the jury. See Terlep v. Brinkmann Corp., 418 F.3d 1379, 1382 (Fed. Cir. 2005). Here, Bierbauer's testimony is little more than an attempt to define for the jury the appropriate construction of a claim in the '611 patent. During claim construction on this case, the Court declined to further construe the term "sense circuit" as used in the '611 patent, because the "patent is clear and unambiguous that the sense circuit uses a microphone bias current to power on the call pod once it detects such a current." (R. 244, Mem. Op. & Order, at 13-14.) The parties did not dispute the meaning of the term "microphone bias current" during claim construction, but Callpod attempts to raise the issue now through Bierbauer's proposed testimony as to the meaning of the term. When experts opine as to claim construction issues, the risk of jury confusion is high, and allowance of such testimony is improper. See CytoLogix Corp. v. Ventana Med. Sys., Inc., 424 F.3d 1168, 1172 (Fed. Cir. 2005). Bierbauer's testimony as to the meaning of the term microphone bias current is therefore not admissible, and Defendants' Motion is granted as to this opinion.

2. The Definition of "Power On"

During claim construction, the Court determined that the term "activate," as used in the '611 patent, "refers to turning the call pod on through the use of a power switch or microphone bias current." (R. 244, Mem. Op. & Order, at 12.) The Court accordingly construed activate as meaning "to power the call pod on." (Id.) Bierbauer now opines that the accused products "power on" when they receive an audio signal. (See Bierbauer Rep. at 52, 55.) Defendants challenge this opinion as contradictory to, and irrelevant in light of, the Court's prior construction of activate.

The parties disputed the claim construction of the term activate as used in the asserted claims, with Callpod asserting that activation refers to operating the call pod to connect a call, and Defendants arguing that activation refers to powering on the call pod. (R. 244 at 12.) Bierbauer's opinion that the call pod does not power on until it receives an audio signal would mean that the call pod is not activated-does not power on-until it receives an audio signal, that is, until a call is connected. This is precisely the construction of activate that the Court considered, and rejected, in its claim construction. Expert opinions that conflict with a court's established claim construction tend only to create confusion and are thus unhelpful to the jury. See CytoLogix, 424 F.3d at 1172. Bierbauer's testimony as to the meaning of "power on" is therefore barred as irrelevant. Defendants' Motion is therefore granted as to this opinion.

3. Contributory Infringement

Bierbauer's report opines that the accused products "meet the standard for contributory infringement." Callpod's Response Brief, however, indicates that it does not intend to offer Bierbauer's opinion on this subject at trial. Accordingly, Defendants' Motion is dismissed as moot with respect to this opinion.

4. Design Alternatives

Bierbauer opines that no design alternatives are available to Defendants that provide the features and benefits currently offered by the accused products. Defendants challenge this opinion as unacceptable because Bierbauer allegedly did not consider any possible design alternatives or examine whether any specific alternative would be acceptable. However, Defendants do not point to the existence of any such hypothetical, but unexamined alternatives, and Defendants concede that they have made no specific attempts to design around the claims of the '611 patent.

Bierbauer's opinion on design alternatives is relevant because the calculation of lost profit damages due to infringement of a patent considers "available alternatives-including but not limited to products on the market" in determining what the patent-holder would have made if not for the infringement. See Grain Processing Corp. v. American Maize-Prods. Corp., 185 F.3d 1341, 1350 (Fed. Cir. 1999). This calculation requires reference only to known alternatives, however. Defendants have pointed to no authority arising from the patent-law context supporting the argument that an expert must consider hypothetically possible alternatives that are neither available nor on the market before he may opine that there are no non-infringing alternatives. Defendants' argument would base the damages calculation not on whether there are known non-infringing alternatives, as mandated by the requirement that patentees seeking damages provide "sound economic proof of the nature of the market and likely outcomes with infringement factored out of the economic picture," see id., but on whether there are any possible non-infringing alternatives, for which there is no precedent in the law.

Because Bierbauer's opinion that Defendants have not developed any alternatives to the Accused Products and that no such alternatives are currently available is sufficiently founded in his review of the facts of the case and relevant under the law of damages, Defendant's Motion to bar this opinion is denied.i

5. The Phoenix Product

Bierbauer's report opines that Callpod's Phoenix product practices the claims of the '611 patent. Callpod's Response Brief, however, indicates that Callpod does not intend to offer Bierbauer's opinion on this subject at trial. Accordingly, Defendants' Motion is dismissed as moot with respect to this opinion.

B. Defendants' Motion to Exclude Opinions of Callpod's Damages Expert, James Malackowski

James Malackowski, Callpod's damages expert, opines that an appropriate royalty should Defendants be found to infringe the '611 patent "falls within the range of $15.00 - $20.00 per accused product sold." (R. 263, Ex. C, Expert Report of James E. Malackowski, at 5.) (hereinafter "Malackowski Rep.") Defendants move to bar this opinion due to Malackowski's reliance on Bierbauer's opinion regarding the lack of available design alternatives, but do not otherwise challenge Malackowski's qualifications, methodology, or the relevance of his damages testimony. Therefore, the Court need not consider whether he is qualified to offer his proposed opinions or whether he reached his damages conclusion via an appropriate methodology in general. See United States v. Moore, 521 F.3d 681, 685 (7th Cir. 2008) ("A judge is not obliged to look into the questions posed by Rule 702 when neither side either requests or assists."). His testimony is relevant to the issue of Callpod's damages should a jury ultimately find that Defendants infringed the '611 patent.

As described above, Bierbauer's opinion regarding the lack of available non-infringing alternatives is admissible, and Malackowski's opinion will not therefore be barred for relying upon Bierbauer's opinion. Even if Bierbauer's statement about design alternatives were not admissible, however, Malackowski's reliance upon that opinion in one section of his sixty-one page report would not require that the entirety of the report be barred. He considered several methods for determining a reasonable royalty that did not depend on, or even refer to, the existence of an alternative design, such as the market approach, which considered the licensing history of the patent, the accused products, and other similar products in the market. (See Malackowski Rep. at 30-32.) Only in his discussion of the cost-based approach for determining a reasonable royalty does Malackowski depend upon Bierbauer's opinion that no non-infringing alternatives are available. (See Malackowski Rep. at 37-38.) Thus, even if Bierbauer's opinion were inadmissible, Defendants have not adequately shown that Malackowski's entire conclusion as to Callpod's damages is rendered unreliable by its reliance in only one respect upon Bierbauer's opinion.

Defendants' Motion to Exclude expert testimony is therefore granted in part and denied in part as to Callpod's technical expert, Paul Bierbauer, and denied as to Callpod's damages expert, James Malackowski.

II. Callpod's Motion to Strike the August 7, 2009 Supplemental Expert Report of James L. Lansford

Callpod has moved to strike the supplemental expert report of Defendants' expert James L. Lansford ("Lansford"). For the reasons set forth below, Callpod's Motion to Strike is granted in part and denied in part.

Supplemental expert reports are permitted if they are based upon information discovered after the initial disclosure or upon the realization that the original disclosure was incorrect or incomplete. See Talbert v. City of Chicago, 236 F.R.D. 415, 422 (N.D. Ill. 2006). Rule 37(c)(1) provides that evidence not timely disclosed, in violation of Rule 26(a), may not be used at trial unless the violation is either justified or harmless. Finley v. Marathon Oil Co., 75 F.3d 1225, 1230 (7th Cir. 1996). Four factors are helpful to this analysis: (1) the degree of surprise or prejudice to the non-offending party, (2) the capability of the offender to cure any prejudice, (3) the amount of disruption at trial that would result from the use of the evidence, and (4) the bad faith involved in not producing the evidence earlier. See Bronk v. Ineichen, 54 F.3d 425, 432 (7th Cir. 1995). In this case, though Lansford's supplemental report is untimely, it is both justified and harmless. However, portions of the supplemental expert report are not proper supplements under the Rule and will be stricken.

Lansford's supplemental expert report addresses four points: (1) Callpod's expert Bierbauer's deposition testimony regarding the definition of "microphone bias current," (2) Bierbauer's contradictory testimony regarding the meaning of "powering on," (3) Bierbauer's "portable" definition, and (4) the commercial success of the Phoenix product offered by Callpod, following a change in position regarding the Phoenix product by Callpod and its experts.*fn1 Whether these topics can be addressed in a supplemental expert report is governed by Rule 26(e)(1), which states in pertinent part that parties have a duty to supplement discovery disclosures upon learning that previous disclosures were incomplete or incorrect. Fed. R. Civ. P. 26(e)(1).

Initial expert reports were due on June 8, 2009 with rebuttal reports due on July 10, 2009. Expert discovery in this case was set to close on July 31, 2009, but the depositions of Bierbauer and Lansford were set for July 27, 2009 and July 31, 2009, respectively. At Bierbauer's deposition he varied the underlying definitions of "microphone bias current" and "powering on" from those upon which he relied in his original report, and upon which Lansford relied in his rebuttal report. This late change of position rendered portions of Lansford's report incomplete, thus requiring him to supplement his expert report to address these changes. This supplement was finished within the week following Lansford's own deposition and within four days of his receipt of the expedited transcript of Bierbauer's deposition. The Court accordingly finds those portions of the supplemental report that address changes in Bierbauer's testimony to be both justified and harmless. There is no evidence that Callpod will be seriously prejudiced by the allowance of this supplemental report, or that Defendants acted in bad faith rather than with expedience following the changed circumstances which necessitated the supplement.

Lansford's section addressing the commercial success of the Phoenix device is proper for the same reasons, because Callpod's changed in the manner upon which it intended to rely upon the Phoenix device in this litigation after Lansford's initial report, rendering Lansford's original opinion incomplete. However, Lansford's supplemental expert report on the definition of "portable" is merely further rebuttal of Bierbauer's unchanged definition of the same term, which did not need to be readdressed. It is therefore not a proper subject for a supplemental report, because Lansford's original opinion was neither incomplete nor incorrect, and is stricken.

For the foregoing reasons, Plaintiff's Motion to Strike the August 7, 2009 Supplemental Expert Report of James L. Lansford is Granted in Part and Denied in Part.

III. Callpod's Motion to Strike the Affidavit of Ilka Müller and Accompanying Exhibits

Callpod moves to strike the Affidavit of Defendants' witness Ilka Müller and its accompanying exhibits on the grounds that the information contained within the affidavit and exhibits was not disclosed during either fact or expert discovery. For the reasons set forth below, the Motion to Strike is denied.

Rule 26 of the Federal Rules of Civil Procedure requires a party to provide the other party with "the name and, if known, the address and telephone number of each individual likely to have discoverable information that the disclosing party may use to support its claims or defenses... identifying the subjects of the information." Fed. R. Civ. P. (a)(1)(A). Rule 26 also requires a party to supplement or amend its disclosures if it learns that the information disclosed is "incomplete or incorrect and if the additional corrective information has not otherwise been made known to the other parties during the discovery process or in writing." Fed. R. Civ. P. 26(e)(1). To ensure compliance, Rule 37 automatically excludes the evidence unless the sanctioned party shows its violation of Rule 26(a) is either justified or harmless. See David v. Caterpillar, Inc., 324 F.3d 851, 857 (7th Cir. 2003).

Defendants disclosed Ilka Müller as a person with knowledge relevant to this case by February 5, 2008. By February 14, 2008, Callpod had prepared a letter rogatory seeking evidence from RTX and Ilka Müller. Callpod was also made aware of the Ellipse product and of Ilka Müller's identity through the deposition of Hans Christian Nielsen and Defendants' supplementary interrogatory responses. Callpod received numerous documents from RTX and had prepared to take depositions in Denmark but cancelled a week prior to doing so. Thus, it is apparent that Callpod knew Ilka Müller was a person with discoverable information, knew about the Ellipse product that is the focus of Müller's affidavit, made a conscious decision not to pursue this information, and now seeks to bar Müller's testimony. Callpod cannot now claim to be surprised by Defendants' use of Ilka Müller's knowledge and affidavit, because its conscious decision to forego deposing Ilka Müller cannot be taxable to Defendants. See Gutierrez v. AT&T Broadbard, LLC, 382 F.3d 725, 733 (7th Cir. 2004) (plaintiff's tactical decisions not to pursue additional witnesses did not require that the affidavits of known, but non-deposed, witnesses be stricken). Furthermore, Defendants have promptly disclosed the additional documents relied upon in Ilka Müller's Affidavit once they became known to ...


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