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Tellabs Operations, Inc. v. Fujitsu Limited and Fujitsu Network Communications

August 29, 2012

TELLABS OPERATIONS, INC. PLAINTIFF,
v.
FUJITSU LIMITED AND FUJITSU NETWORK COMMUNICATIONS, INC., DEFENDANTS.
FUJITSU LIMITED, PLAINTIFF,
v.
TELLABS OPERATIONS, INC, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Chief Judge James Holderman

Magistrate Judge Jeffrey Cole

MEMORANDUM OPINION AND ORDER

I. INTRODUCTION AND FACTUAL BACKGROUND

In 2006, Fujitsu conducted an extensive inspection of a Tellabs optical scanner purchased on eBay along with confidential manuals that accompanied the scanner.*fn1 Almost from the beginning, the contents and results of that inspection have been the source of a heated and continuing dispute, with Tellabs contending that it was entitled to the documents prepared in connection with that inspection by Fujitsu's engineers, and Fujitsu adamantly resisting production. The somewhat complicated but singularly important background of the dispute is told in the extensive Memorandum Opinion and Order of April 1, 2012. [#647]. See Tellabs Operations, Inc. v. Fujitsu Ltd., 2012 WL 1520333 (N.D.Ill. 2012).

In brief, the Memorandum Opinion concluded that the 2006 inspection was done for competitive and economic reasons, that Fujitsu was simply responding to its loss to Tellabs of an extraordinarily lucrative contract from Verizon, and that "the inspection was not in anticipation of litigation and the primary impetus was commercial not legal." The opinion also rejected the claim that there were two separate inspections, one animated by commercial concerns, the other in anticipation of litigation. The opinion also rejected Fujitsu's argument that the results of the 2006 inspection were irrelevant because Fujitsu represented that the results and conclusions of the 2006 inspection were outdated, and that it would not make any use of any aspect of the inspection at trial. Nor would it allow its expert ever to be exposed to those results. See Tellabs Operations, Inc., 2012 WL 1520333, 16-18. These representations, which have been repeated over and over in varying forms, will, as we shall see, assume significant dimensions in the resolution of the current controversy.

Fujitsu was ordered to turn over the results of the 2006 inspection, and its motion for a protective order was denied. Tellabs Operations, Inc., 2012 WL 1520333, 19. Fujitsu informed the court that while it disagreed with the Opinion, after careful deliberation, it had decided not to file objections to it with Chief Judge Holderman. [# 623]. Consequently, Fujitsu has waived any objection it might have had to the Opinion either in the district court or in the Seventh Circuit in the event of an appeal following the entry of final judgment. See Schur v. L.A. Weight Loss Centers, Inc., 577 F.3d 752, 760 (7th Cir.2009); Egan v. Freedom Bank, 659 F.3d 639, 644 (7th Cir.2011); DirecTV, Inc. v. Barczewski, 604 F.3d 1004, 1011 (7th Cir.2010); Banco Del Atlantico, S.A. v. Woods Industries Inc., 519 F.3d 350, 354 (7th Cir.2008).*fn2

Rather than turnover the 2006 inspection assessment of the engineers in Japan, Fujitsu took the position that those results were protected by the attorney-client privilege and claimed that it had appropriately raised that argument in its motion for protective order. Tellabs disagreed, contending that argument had been waived, and the parties briefed the issue. Meanwhile, in March and again in April 2012, Dr. Alan Willner, Fujitsu's expert, issued his expert reports on infringement and validity.*fn3

In both those reports, issued one month apart, he explicitly stated that he "reviewed and considered" Fujitsu's 2008 infringement contentions -- which relied on or incorporated or utilized the 2006 inspection. Fujitsu had represented repeatedly to the court that those contentions would never be provided to Dr. Willner, and that if they were to be considered by him, production of the 2006 inspection materials would be required.

Tellabs then took the depositions of Dr. Willner and one of the Fujitsu lawyers who participated in the preparation and review of those sections of the reports listing the materials that Dr. Willner "reviewed and considered" in formulating his opinions. Tellabs also deposed other of Fujitsu's lawyers who had reviewed those reports. Each claimed that it was all a mistake, and that Dr. Willner had in fact never even seen the 2008 contentions, although it was conceded that they had been sent to him in December 2010 following the Markman hearing.

Dr. Willner testified at his deposition that he did not even realize that the contentions had been sent to him, and that while he had opened the FedEx envelope containing the contentions, he did not realize what they were and never looked at them. Instead, he said, they were among a several inch thick stack of documents that he took from the FedEx envelope and placed loosely on his office floor, where they sat for more than two years unreviewed and unexamined. It was not until quite recently when one of Fujitsu's lawyers asked him to search his office to ascertain whether he had the 2008 infringement contentions that he realized they had been on his floor all along. (Tr. 15-19).

Mr. Gino Cheng, the lawyer at Orrick, Harrington & Sutcliffe in California, which is one of the Firms representing Fujitsu, participated in and oversaw the preparation of the sections of Dr. Willner's two expert reports that carefully itemized the materials Dr. Willner certified he "reviewed and considered" in forming his opinions. He claimed that he had made a mistake in twice including Fujitsu's July 2008 contentions in that list, and that Dr. Willner could not have seen those disclosures since they had never been sent to him for review. (Tr. 80, et seq.).

Tellabs, understandably taken aback, took the position these representations were false and that Dr. Willner's unqualified assertions in his expert reports were accurate and that Tellabs was therefore entitled to the 2006 inspection reports since Fujitsu's 2008 infringement contentions had relied on or utilized in some fashion the 2006 inspection. Tellabs then filed an extensive evidentiary presentation with this court, and Fujitsu responded with affidavits and portions of deposition transcripts purporting to support its position that the whole thing was an unfortunate mistake. It was obvious that the matter could not be decided on the conflicting depositions and that an evidentiary hearing was necessary. Cf., Tranzact Technologies Inc. v. 1Worldsite, 406 F3d 851, 855 (7th Cir. 2005); 1SourceUnited States v. Berg , 20 F.3d 304, 311 (7th Cir. 1994).

II.

THE EVIDENCE ADDUCED AT THE HEARING

A.

The Testimony of Dr. Alan Willner By at least June 2011, if not earlier, Fujitsu had decided that it was imperative that nothing related to Fujitsu's 2006 inspection of the Tellabs modules should be conveyed to its expert, Dr. Willner. Mr. James Brooks, a senior member of the Fujitsu legal team at the Orrick Firm, repeatedly represented on the record to this court that Dr. Willner would be insulated from the 2008 infringement contentions, and that if he were exposed to them, Tellabs would indeed be entitled to disclosure of the inspection results. Mr. Brooks' representations may be found in Tellabs's Brief Regarding Dr. Willner's Consideration of Fujitsu's July 2008 Infringement Contentions, Attachment A. [#852]. To isolate Dr. Willner from the 2008 invalidity contentions, Mr. Brooks "gave the directive [to the three or four younger lawyers working under him on the preparation of Dr. Willner's expert reports] to make sure [they] insulated Dr. Willner from the 2008 contentions." (Testimony of Gino Cheng, Tr. 165). Indeed, that directive was discussed "multiple times." (Id.). See also Tellabs' Brief, Exhibit17 at7 et seq, Brooks deposition testimony).

During his testimony at the hearing, Dr. Willner conceded that the 2008 invalidity contentions were actually sent to him by Fujitsu in December 2010 following the Markman hearing. However, he claimed he never actually saw or reviewed them. (Tr. 48-50, 54, 61-63). Instead, believing that they were his own materials that Fujitsu's lawyers' administrative staff had FedEx'd to him so that he would not have to carry them on the airplane from Chicago to California after the Markman hearing, he merely opened the FedEx package, "took out the things, and dumped it on the floor." He said there was no cover letter, and he guessed that he "didn't even think to look at it." (Tr. 57). The materials sat on the floor of his office, where he said they lay unreviewed and undisturbed until a few months ago, when Mr. Brooks asked him to search his office to see if he had the 2008 contentions. It was only then that he realized he had them all along. (Tr. 15-19, 54-57, 61-64).

Dr. Willner said that he was "surprised to see that there was a document that had on the front of it something from Tyler, Texas" that appeared to be what Mr. Brooks had asked him to look for. But he didn't even look at it; he just "picked it up with my hand and brought it right to" Fujitsu's lawyers in California. (Tr. 19). He said that he didn't even go past the first page "because at that point it was clear to me this isn't something I am even supposed to look at, so I didn't even bother." (Tr. 20). He did not explain why when following the Markman hearing, he got a second FedEx package, again with no cover letter, that presumably contained the Markman materials he did not realize that the four or five-inch thick "stack" of papers he had placed on the floor was not what he mistakenly thought it was. (Tr. 56, 61-62). Nor did he claim he deposited those documents on the floor with the other materials from the first FedEx package.

Dr. Willner testified that the statements in his reports that he "reviewed and considered" the July 2008 infringement contentions were simply mistaken. (Tr. 18-22, 29-30, 172). He was sure that certain other references to materials he had "reviewed and considered" were also mistaken, but he could not say which ones in fact he had not reviewed. (Tr. 29-33, 47-50). The only ones he was absolutely certain he had not reviewed were the July 2008 infringement contentions. (Tr. 45). He admitted reviewing Fujitsu's 2011 contentions in which he said the July 2008 contentions are referred to. (Tr. 36-37).*fn4 And, significantly, while he said he hadn't seen and reviewed the 2008 contentions, he testified that he believed the 2008 contentions were exhibits to his expert reports, although he wasn't sure, and he said he didn't see all the attachments. (Tr. 47-48). Dr. Willner was quite emphatic that of course he believed that at the time he signed his March and April 2012 reports they were true and accurate. (Tr. 47).

Dr. Willner had been an expert in two prior cases and had prepared reports in both. Neither were patent cases, and he understood the need for "even greater care in this case" than in those. (Tr. 24-26). Yet, despite that awareness, and despite the fact that the first sentence of ¶34 of his March report and ¶ 31 of his April report stated: "I have reviewed and considered Fujitsu's July 28, 2008 Rule 3-1 disclosures and attached exhibits (e.g., for the '163 and '737 Patents)," he insisted that his representations were honest mistakes and that he had not reviewed the 2008 contentions.*fn5 See Fujitsu Brief, Exhibit 9 at 5; Exhibit 10 at 5 [#852-10, 852-11]).

Ultimately, Dr. Willner claimed that he relied on the "accuracy of the list of documents" that he had been given by Fujitsu's lawyers. (Tr. 64). He said that while in his reports he represented that he had "reviewed had considered" the documents listed in ¶¶ 31 and 24 of his reports, he "really didn't know...what [he was] representing [as true] was partially inaccurate...." (Tr. 64). Dr. Willner attempted to suggest that the sections captioned "Materials considered" were somewhat peripheral, and that his focus was largely on more "substantive" provisions of the report. (Tr. 33).

But, Dr. Willner testified both at his deposition and at the hearing that he had spent "many hours" in his "multiple reviews" of his expert reports to ensure accuracy prior to signing them. (Tr. 39; 37, 43-44; see Tellabs' Brief, Exhibit 16, at 36) [#852]). In fact, Gino Cheng, Fujitsu's lawyer at Orrick, who oversaw the preparation of the reports and the compilation of the materials that went along with them, testified at his deposition that Dr. Willner reviewed his reports multiple times in various states of completion (id., Exhibit 18, at 18-19), but never requested any changes to the sections of his report identifying the materials he considered (id. at 17). Nor did Mr. Cheng, despite his "multiple" reviews and those of others of his colleagues, including Mr. Brooks. (Tellabs' Brief, Ex 17 at16).

Like Dr. Willner, Fujitsu's brief seeks to minimize the force and importance of Dr. Willner's certifications in his reports about what he "reviewed and considered" by noting that the statements were not under oath -- what significance that could have the brief does not say -- that only "minimal time"was spent on reviewing the "Materials considered" sections of the reports, and that more time was spent on other portions of the reports. This is an unconvincing argument.

First, what "minimal" means in this context is not explained, and unsupported conclusory statements by lawyers in briefs don't count. IFC Credit Corp. v. Aliano Brothers General Contractors, Inc., 437 F.3d 606, 610-611 (7th Cir. 2006); United States ex rel. Feingold v. AdminaStar Federal, Inc., 324 F.3d 492, 494, 497 (7th Cir. 2003). Second, the fact that more time may have been spent on other sections of the reports than was spent on the"Materials considered" sections tells us nothing about how ...


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