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Oxbo International Corp. v. H&S Manufacturing Company, Inc.

United States District Court, W.D. Wisconsin

June 7, 2017

OXBO INTERNATIONAL CORPORATION, Plaintiff,
v.
H&S MANUFACTURING COMPANY, INC., Defendant.

          FINAL PRETRIAL CONFERENCE ORDER

          JAMES D. PETERSON District Judge

         The court held a final pretrial conference on Wednesday, May 31, 2017, before United States District Judge James D. Peterson. Plaintiff Oxbo International Corporation appeared by counsel, Shane Brunner, Jeffrey Ward, Thomas Johnson, Stephen Howe, and Emily Wessels. Defendant H&S Manufacturing Company, Inc., appeared by counsel, Eric Chadwick, Aaron Davis, and Adam Szymanski.

         GENERAL PRETRIAL INSTRUCTIONS

         Counsel predicted that the case would take 5-10 days to try. The court will tell the jury 10. The jury will consist of 8 jurors to be selected from a qualified panel of 14. Each side will exercise three peremptory challenges against the panel. Trial days will begin at 9:00 a.m. and will run until 5:30 p.m., with at least an hour for lunch, a short break in the morning, and another in the afternoon. Counsel may be required to be in court earlier than 9:00 a.m. to address matters without the presence of the jury. On the first day of trial, counsel are directed to appear at 8:30 a.m.

         Witnesses, with the exception of experts and corporate representatives, will be sequestered.

         The court directed counsel to meet and confer regarding their exhibit lists and deposition designations, to pare down objections. The court will rule on any meaningful objections that the parties are unable to resolve themselves. The court is not inclined to referee a large number of otherwise minor disputes.

         The parties must submit electronic versions of their exhibits for the court not later than 8:30 a.m. on Monday, June 12, 2017. Unless otherwise agreed by the parties, counsel must disclose any exhibits to be used in opening statements not later than 6:00 p.m. on Friday, June 9, 2017, and identify the witnesses they anticipate calling not later than 6:00 p.m. on the business day before that witness is expected to testify.

         Counsel should keep in mind that opening statements are an overview of the evidence. Arguments are to be reserved for the end of the trial.

         Counsel indicated that they are familiar with the court's visual presentation system. Counsel should use the microphones at all times and address all objections to the bench, not to opposing counsel. If counsel need to consult with one another, they should ask for permission to do so. Only the lawyer questioning a particular witness may raise objections to questions put to the witness by the opposing party and argue the objection at any bench conference.

         If counsel call the opposing party's witness as an adverse witness, counsel for the opposing party may choose whether to ask only clarifying questions of the witness and call the witness in its own case or do all its questioning during its opponent's case, in which case the party calling the witness will have an opportunity to respond with questioning. If counsel choose the first option, they are free to call the witness during their case. Counsel have the same two options as to any adverse witness; they are not bound by their decision on questioning any previous witness. Counsel for the witness should inform the court which approach it will be taking before beginning the examination.

         VOIR DIRE AND JURY INSTRUCTIONS

         The court and the parties discussed the draft voir dire and introductory instructions as distributed. Neither party objected to the circulated draft voir dire.

         Oxbo asked the court to instruct the jury on the court's summary judgment holdings and its claim constructions during introductory instructions; H&S generally opposed. The parties briefed the issue after the conference. The court will inform the jury that certain issues have been decided by the court before trial, and it will provide the claim construction instruction. But the court will not instruct the jury on the specific summary judgment findings on infringement in the liability phase. The court concludes that such an instruction will unfairly stack the deck against H&S, and it is not needed to alleviate any juror confusion. (The issue of commercial success is discussed below.)

         The court will consider whether to instruct the jury about the nature of the cross-license and the reasonable royalty calculation, although the court is not convinced that cross-examination on this issue will not be sufficient (as discussed below). Dkt. 468, at 5-7.

         The court will consider the "harvesting in the winter" instruction only if H&S attempts to take advantage of the timing of those tests. Id. at 7-8.

         The court will circulate a draft of the post-trial instructions and a draft of the special verdict forms in the coming days. Final decisions on the post-trial instructions and verdict forms will be made at the instruction conference near the end of the liability phase of trial.

         RULINGS ON MOTIONS

         A. Oxbo's objections to H&S witnesses

         The court resolved Oxbo's objections to H&S's witness list: H&S does not intend to call either Mark Foley or Bob Snape. Witnesses available to testify for trial may not testify by deposition. The court's rulings on the motions in limine will govern the scope of permissible witness testimony.

         B. H&S's anticipation case against the '929 patent

         H&S concedes that under the court's claim constructions, it cannot show that the Beougher reference anticipates claim 44 of the '929 patent. Accordingly, summary judgment is granted to Oxbo on that issue.

         C. Oxbo's motion for sanctions

         As announced during the final pretrial conference, the court has determined that (1) H&S lost or destroyed potentially relevant design and development documents; (2) H&S's duty to preserve those documents arose not later than August 2010, when H&S claimed work product privilege and began preparing for litigation; and (3) the loss has prejudiced Oxbo. H&S's duty to preserve did not expire in August 2011, when Paul Dow and Chris Heikenen discussed the potential infringement issue, prompted by an Oxbo salesperson's comments. The court already determined that it would not have been reasonable for H&S to believe that Oxbo would not enforce its patent rights as a result of that conversation. Dkt. 392, at 12-16.

         The evidentiary hearing on the motion for sanctions revealed that documents were lost as a result of a regular business practice: despite its policy of preserving all documents, H&S wiped computers when individuals left the company and transferred the computers to new users. Thus, H&S destroyed key design and developments documents in 2012 and 2013. But, critically, Oxbo made no showing that the destruction was the result of any effort to hide adverse information from Oxbo. Thus, the remedy for H&S's spoliation is limited to putting Oxbo in the position in which it would have been, but for the spoliation.

         The court will award Oxbo its reasonable fees and costs in bringing the motion. But crafting the other elements of an appropriate remedy for H&S's spoliation has proven difficult. Oxbo asks the court to: preclude H&S from offering testimony or other evidence regarding the design and development of the Tri-Flex; and preclude H&S from offering testimony or other evidence that it did not copy the patents-in-suit. This goes too far.

         To allow Oxbo to argue and present evidence that H&S copied Oxbo's product while precluding H&S from responding would be tantamount to allowing the jury to draw an adverse inference from the spoliation. An adverse inference instruction-instructing the jury that it should or even may infer that the missing documents are not favorable to H&S-is a remedy appropriate only for bad faith spoliation. Oxbo has not argued, much less proven, that H&S acted in bad faith or to hide certain information from Oxbo. See Faas v. Sears, Roebuck & Co., 532 F.3d 633, 644 (7th Cir. 2008) (holding that the district court properly denied the adverse inference when the record showed that Sears did not destroy the documents to destroy adverse information; Sears shredded the docs as a regular business practice). "Recent Seventh Circuit precedent on the proper standard for determining whether a party destroyed or failed to preserve evidence such that the other party is thus entitled to an adverse inference involves a requirement to show 'bad faith.'" In re Text Messaging Antitrust Litig, 46 F.Supp.3d 788, 797 (N.D. 111. 2014), affd, 782 F.3d 867 (7th Cir. 2015). To force H&S to sit silently as Oxbo accuses it of copying and willful infringement would allow or even encourage the jury to assume that those accusations are unchallenged; it is a sanction equivalent to, if not worse than, an adverse inference instruction.

         The court will instruct the jury as follows:

Most of the documents related to the design and development of the Tri-Flex merger were lost or deleted from the computer system at H&S. Because those documents are now unavailable, you will hear no testimony about the contents of the missing design and development documents. During the trial, witnesses may mention that the documents are missing. But you should not make any assumptions about what is in the missing documents.

         The parties may not introduce evidence or argue about the nature, content, or implications of those missing documents. Because there is no showing that the spoliation was in bad faith, the court will not allow the parties to go into the details about the loss of the documents. Doing so will waste time, risk jury confusion, and encourage the jury to draw an adverse inference about the contents of the missing documents.

         Oxbo may use any surviving design and development documents to prove copying or wilfulness at trial. If Oxbo does so, H&S may use the surviving documents in response. But H&S may not affirmatively use the design and development documents unless Oxbo opens the door.

         Oxbo also asks that the court sanction H&S for its late document production in September 2016. But as the court explained during the final pretrial conference and at other points in this case, the court has already addressed the late production and remediated Oxbo's prejudice. The court expanded the summary judgment schedule and allowed Oxbo additional time and extra rounds of briefing, allowed Oxbo to supplement its expert reports, and allowed Oxbo to otherwise account for the late-produced documents as it deemed appropriate. The court made these changes to the summary judgment schedule in consultation with the parties, and Oxbo gave the court every indication that it had fully addressed the late production situation. The court allowed Oxbo to use and rely on late-produced documents in its summary judgment submissions; the court will not turn around and prohibit H&S from using those documents at trial. But the court will award Oxbo its reasonable attorney fees and costs incurred in having to deal with the late production.

         The court will have Oxbo submit a formal request for its fees for the sanctions motion after trial.

         D. Oxbo's commercial success

         At the final pretrial conference, Oxbo asked the court to instruct the jury about the court's summary judgment decision. The reason Oxbo gave for wanting the instruction was that Oxbo intends to use H&S's sales of infringing Tri-Flex mergers as evidence of Oxbo's commercial success. There is nothing wrong, in principle, with using the infringing product to show commercial success. Brown & Williamson Tobacco Corp. v. Philip Morris Inc., 229 F.3d 1120, 1130 (Fed. Cir. 2000) ("Our case law provides that the success of an infringing product is considered to be evidence of the commercial success of the claimed invention.").

         But evidence of commercial success (or any other secondary consideration) is relevant only if there is a nexus between the claimed invention and the commercial success. Ormco Corp. v. Align Tech., Inc., 463 F.3d 1299, 1311-12 (Fed. Cir. 2006). If the success is due to unclaimed features, or to features that were in the prior art, commercial success is irrelevant. Id. If commercial success is due to superior marketing or distribution, it is likewise irrelevant. See, e.g., Wm. Wrigley Jr. Co. v. Cadbury Adams USA LLC, 683 F.3d 1356, 1363 (Fed. Cir. 2012). Establishing this nexus is typically the province of an expert. But, according to H&S, Oxbo's first disclosure of any factual basis for commercial success was in its damages expert's report. Dkt. 465 (citing Bero report, Dkt. 112). Oxbo's liability expert, Chaplin, did not disclose any expert opinion on commercial success or its nexus to the claimed invention. Oxbo's responses to H&S's contention interrogatories did not disclose any intent to assert commercial success as a secondary consideration in any specific terms.

         Accordingly, Oxbo will not be allowed to assert commercial success as a secondary consideration unless it can demonstrate to the court that it had timely disclosed this theory to H&S. At this point, commercial success is out.

         E. H&S's motions in limine

         1. To sequester witnesses

         The motion to sequester witnesses, except for party representatives and experts, is granted.

         2. To preclude Oxbo from using or referencing H&S's inadvertently produced privileged documents

         The motion is granted, except that Oxbo may use the documents for impeachment purposes. The court will keep a copy of the documents on the bench and ...


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