Free Brief in Opposition to Motion - District Court of Colorado - Colorado

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 03-cv-02579-RPM VARCO, L.P. Plaintiff, vs. PASON SYSTEMS USA CORP., Defendant.

DEFENDANT PASON'S BRIEF IN OPPOSITION TO MOTION TO STRIKE DEFENDANT'S SUPPLEMENTAL DESIGNATION OF EXPERT OPINION Defendant Pason Systems USA Corp. ("Pason"), through its undersigned counsel, respectfully submits this Brief in Opposition to Plaintiff's Motion to Strike Defendant's Supplemental Designation of Expert Opinion (the "Motion to Strike" or "Motion"). FACTS This case concerns Plaintiff Varco, L.P.'s ("Varco") contention that Pason's product called the "AutoDriller" infringes U.S. Patent No. 5,474,142 (the "'142 Patent"). This matter went to evidentiary hearing on Varco's Motion for Preliminary Injunction, which was denied by this Court's Order dated November 15, 2004, holding that Pason does not infringe the '142 Patent, and briefly commenting upon, but not reaching, the issue of whether the '142 Patent is invalid on grounds of obviousness or anticipation by prior art or both. Varco appealed the denial of its Motion for Preliminary Injunction to the U.S. Court of Appeals for the Federal Circuit which reversed the November 2004 ruling, but did not construe the '142 Patent, remanding the case to this Court for further proceedings.

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Before the preliminary injunction hearing, Pason provided Varco with the written expert report of J. Ford Brett dated May 21, 2004 (the "Brett 2004 Opinion"), a copy of which is attached to the Motion as Exhibit 2, concluding that the AutoDriller does not infringe the '142 Patent and that if the '142 Patent were construed as broadly as Varco argues, it is invalid because the invention is not novel and the patent is void on grounds of obviousness or anticipation by prior art or both. That written opinion included all of the disclosures contemplated by Rule 26, and Mr. Brett's complete files were produced prior to his deposition and trial testimony in 2004. Pason provided a supplemental expert report of Mr. Brett dated July 19, 2006, attached to the Motion as Exhibit A (the "Supplemental Report"). The Supplemental Report disclosed two additional pieces of prior art discovered by Mr. Brett that support the conclusions of the 2004 Report that the '142 Patent is invalid as anticipated by prior art, U.S. Patent No. 2,005,889 (the "'889 Patent") and Canadian Patent No. CA876580 (the "'580 Patent"). Mr. Brett concluded: I also believe that these prior art references, which combined with the other prior art referenced in my May 20, 2004 Opinion, including the work I performed for Amoco in the late 1980's, each contain elements of the invention disclosed by the '142 Patent and the work performed by me for Amoco demonstrates that there was in fact motivation, suggestion, or teaching to combine the prior art into the invention disclosed by the '142 Patent. Pursuant to the revised Scheduling Order for this matter, Pason provided Varco with the "Brett Responsive and Supplemental Expert Report" dated September 4, 2006, a copy of which is attached to the Motion as Exhibit 3 (the "September 2006 Report"). This report is responsive to infringement allegations made and claim construction proposed by Gregg S. Perkin, a new expert disclosed by Varco on July 19, 2006. The September 2006 Report, as did the 2004 report, concludes that the Pason AutoDriller does not infringe the '142 Patent, for reasons including but

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not limited to that the AutoDriller does not contain a pressure "regulator," as that term is used in the '142 Patent, nor does the AutoDriller contain a "relay" to relay "said signal," again as those terms are used in the '142 Patent. To generalize, the invention disclosed in the '142 Patent relays one of several specific signals, selected by the device based on settings made by an operator, to control the drill string. In contrast, the AutoDriller receives various data from a sensor array, all of which data are used by a central processor employing an algorithm that computes a new signal that controls the drill string. They are two different inventions. In an effort to be fully disclosive of his opinions, Mr. Brett goes further in his analysis to relate the 142 Patent, as construed by Mr. Perkin, specifically to the prior art he had previously disclosed he would rely upon, a task that would have been impossible or highly inefficient without Varco's proposed claim construction. Appended to the September 2006 Opinion are lengthy tables that disclose specifically which items of prior art, and which inventions or claims disclosed therein, anticipate each step or element of each claim of the '142 Patent that Varco contends is infringed by the AutoDriller, using the broad construction Varco urges. In addition to Mr. Brett's written reports, Varco explored the scope and bases of his opinions in his deposition taken in 2004, as well as his testimony at the evidentiary hearing, where he was cross-examined. In light of the exchange of voluminous documents and the taking of a number of additional fact depositions, the parties have agreed that they will depose each other's experts after all other discovery is finished and are the process of setting those depositions now. Thus, Varco will have an opportunity fully to explore with Mr. Brett the prior art and opinions expressed in his Supplemental Report and September 2006 Report

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The Motion to Strike was filed September 19, 2006, approximately two weeks after Varco received Mr. Brett's September 2006 Report. ARGUMENT Varco argues that the Supplemental Report must contain all of the elements required by F.R.C.P. 26(a)(2) for a main or primary expert report and since it does not it is deficient. To explain away the fact that the Supplemental Report is, as it says, a supplement to Mr. Brett's 2004 Report, which contains the bases and reasons for his opinion that the '142 Patent is invalid, Varco asserts that the Supplemental Report addresses "entirely different issues." But this assertion is patently false ­ The Supplemental Report merely adds two additional items of prior art that Mr. Brett discovered to the long list of prior art cited in the original Report. The 2004 Report discusses in detail how this prior art anticipated the '142 Patent. The Supplemental Report specifically references that prior art, including an article of which Mr. Brett is a co-author detailing how in the late 1980's, Amoco experimented with an auto driller using essentially the same technology that Pason uses in its AutoDriller, and indicates in his Supplemental Report that the '886 and '580 Patents anticipated Varco's '142 Patent for the same reasons as the Amoco work and the other prior art cited in his Report. See, Exhibit 2, p. 4-12. The 2004 Report notwithstanding, Mr. Brett's September 2006 Report contains all the detail Varco claims should have been included in the Supplemental Report. In a circular argument, Varco acknowledges that the September 2006 Report goes into great detail as to Mr. Brett's specific opinions how his prior art citations anticipated the key claims of Varco's '142 Patent at issue in this case, but asks that a sizeable but unspecified part of the September 2006 be stricken on the specious grounds that Varco's experts "did not have a chance" to examine that

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report before preparing their own report (the revised Scheduling Order called for simultaneous submission of rebuttal reports). In fact, Varco's expert, Mr. Perkin's rebuttal report of September 4, 2006, addresses every piece of prior art Mr. Brett discusses, because Brett's reliance on those references was clearly and timely disclosed. And Varco has not supplemented its own experts' reports or otherwise indicated that after review of the September 2006 Report their opinions have changed in any way. The requirements of Rule 26(a)(2) have been complied with fully. The purpose of the Rule has been fulfilled in that after reviewing Mr. Brett's three written reports, his direct testimony and cross-examination at the preliminary injunction hearing, and his prior deposition examination, Varco has been fully informed as to what it may anticipate Mr. Brett's direct testimony will be at the trial of this case and, in any event, if Varco still doesn't understand, it's lawyers can ask him at his upcoming deposition. A. Brett's Three Written Reports Comply With Rule 26(a)(2) and Contain the Basis and Reasons f or His Opinions. The parties agree that the purpose of Rule 26(a)(2) expert reports is "to set forth the substance of the direct examination." Jacobsen v. Deseret Book Co., 287 F.3d. 936, 953 (10th Cir. 2002) (quoting the Advisory Committee note). Mr. Brett's 2004 Report must have been adequate for this purpose, since Varco has not taken the position that it was inadequate or that they were unable to prepare to cross-examine Mr. Brett at the hearing on the Motion for Preliminary Injunction. Instead, Varco argues that Mr. Brett's Supplemental Report is inadequate because it fails to include all of the elements required by Rule 26(a)(2) to be included in the original Report, a novel proposition for which Varco cites no support. Supplemental reports are governed by
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different standards because of their different purpose - they simply supplement or amend the earlier main report. A party is under a continuing duty to supplement the original expert report "if there are additions or changes to what has been previously disclosed." Jacobsen v. Deseret Book Co., 287 F.3d at 952 (citing F.R.C.P. 26(a)(2) and 26(e)(1)). A party is under a duty to supplement its pretrial disclosures: At appropriate intervals if it learns that in some material respect the information provided is incomplete, inaccurate, and if the additional or corrective information has not otherwise been made known to the other parties during the discovery process. The commentary to this Rule states that supplementation 'need not be made as each new item of information is learned but should be made at appropriate intervals during the discovery period, and with special promptness as the trial date approaches. Tucker v. Ohtsu Tire & Rubber Co., Ltd., 49 F.Supp.2d 456, 460 (D. Md. 1999) (quoting in pertinent part from F.R.C.P. 26(e) and its advisory note). The Supplemental Report made two "additions" to the 2004 Opinion, specifically the two new items of prior art discovered by Mr. Brett after he issued his original report, which contains the bases and reasons for his opinion that prior art anticipated the '142 Patent, rendering it invalid. Those bases and reasons need not be repeated in the Supplemental Report. Supplementation was required when Mr. Brett discovered this additional prior art and concluded it too supported his opinion, which was thereby rendered incomplete. In the Tucker case, the court permitted supplementation by an expert revealing new opinions during his deposition, as well as in a follow-up letter by counsel to the opposing party. Also important to the Court was the fact that since supplementation had been made before discovery cutoff, the party could have asked for a second deposition of the expert or a brief extension of the discovery period in which to do so, but instead of seeking to schedule a
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deposition, filed a motion to strike. We have the same situation here ­ Varco ignores the fact that it has received all the detail it needs in the 2004 and September 2006 Reports and has another opportunity to depose Mr. Brett. Similarly, a party was allowed to substitute a new expert in a case where the new expert's testimony was based upon much of the information disclosed in the first expert's opinion, and there was "no meaningful change" in the testimony, despite the fact that the new expert did not prepare a written supplemental report. Once again, the trial judge allowed the substitution on the condition that the opposing party be allowed to take the deposition of the new expert, which they chose not to do. Ferrara & DiMercurio v. St. Paul Mercury Ins. Co., 240 F.3d 1 (1st Cir. 2001). The case law cited by Varco does not support their novel theory that a supplemental report must contain all of the information required in the expert's main report that is being supplemented. In Murray v. First Marine Ins. Co., 29 Fed.Appx.503 (10th Cir. 2002), the Tenth Circuit upheld the trial court striking an expert opinion in large part because it was based upon photographs that had never been disclosed to the opposing party. The analogy to the present case would be if Mr. Brett proposed to testify as to the invalidity of the '142 Patent on the basis of prior art that he had never disclosed. Instead, we are confronted with the suggestion that the Supplemental Report should be stricken because it discloses two additional pieces of prior art discovered by Mr. Brett that also support the opinion of invalidity that he reached for the reasons set forth in his 2004 Opinion. On the contrary, Mr. Brett was required to issue the Supplemental Report when he discovered those two items of prior art and concluded they too support his opinion.

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Similarly, the Jacobsen case is inapposite. There, the defendants filed expert reports on the issue of damages but never computed their alleged damages, instead disclosing a "method" to do so. The damages opinion was therefore incomplete. In contrast, Mr. Brett has disclosed stepby-step, element-by-element and claim-by-claim, specifically how each item of prior art that he has cited anticipates the claims of the '142 Patent that Varco alleges have been infringed in both his 2004 Report and his September 2006 Report, particularly in the appendix to the latter. B. In the Alternative, Any Alleged Violation of Rule 26(a) is Substantially Justified and Harmless. Varco asserts the Supplemental Report and unspecified and undisclosed portions of the September 2006 Report must be stricken because, they argue, the sanction of Rule 37(c)(1) is "mandatory and self-executing." This is, however, an incomplete statement of the case law as it has developed. "While Rule 37(c)(1) is written in mandatory terms, it also vests the court with discretion to impose 'other appropriate sanctions' in addition to or in lieu of an order striking witnesses or evidence not properly disclosed." Harvey v. United States, 2005 WL 3164236, p. 5 (D.Colo. 2005) (citations omitted). The following factors are relevant to this consideration: (1) The prejudice or surprise to the party against whom the testimony is offered; (2) The ability of the party to cure the prejudice; (3) The extent to which introducing such testimony would disrupt the trial; and (4) The moving party's bad faith or willfulness. Jacobsen v. Deseret Book Co., supra; Harvey v. United States, p.10. 1. Any Violation of Rule 26(a) was Substantially Justified.

Varco concedes that the concept of "substantial justification" includes "justification to a degree that could satisfy a reasonable person that parties could differ as to whether the party was

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required to comply with the disclosure request." Motion to Strike, p. 5. Here, there was no request pending, merely the deadline by which the parties could, if desired, add experts by filing designations. Varco added two experts. Pason, on the other hand, stayed with Mr. Brett, who had previously been disclosed and designated, but used the opportunity to supplement his opinions to include the additional prior art upon which he planned to rely. Pason could reasonably differ with Varco's position, particularly since Varco has never cited any authority for the novel proposition that a supplemental expert report must comply with all requirements of Rule 26(a)(2) as to the original or main expert report. Varco argues that there is a considerable contrast between its own 53-page report and Mr. Brett's Supplemental Report. Varco does not, however, disclose the explanation for this discrepancy, which is that Varco chose to retain and disclose a new expert for this phase of the case. Mr. Brett, in contrast, was merely adding items of prior art to his earlier, 35-page analysis. 2. Varco Has Not Been Prejudiced and Any Violation of Rule 26(a) was Harmless.

Any alleged violation of Rule 26(a) was harmless. First, not only does Pason have the ability to cure any alleged violation, it has done so by its disclosures in the September 2006 Report, which provide Varco all of the detail that it needs in order to prepare to take Mr. Brett's deposition and to cross-examine him at trial because it fully discloses his intended direct testimony. The only counter-argument offered by Varco is the circular argument that unspecified portions of the September 2006 Report should also be stricken so that they cannot cure any alleged defect in the Supplemental Report because the September Report contains detail not contained in the Supplemental Report, a novel proposition to say the least, and because its own experts did not have an opportunity to review the September Report before they filed their
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own rebuttal report. The latter argument has no basis in that Varco does not assert its own expert disclosures changed in any way, or that its experts modified their opinions in any way, in light of the disclosures made in Pason's September 2006 Report. If Varco's experts had modified their opinions in light of Mr. Brett's September 2006 report, they should have supplemented their own report. Finally, there will be yet another opportunity to cure any perceived deficiency in the Supplemental Report or the September 2006 Report when Varco again takes the deposition of Mr. Brett. Any perceived deficiency in the Supplemental Report has already been cured by the disclosures made in the September 2006 Report or may be cured by Varco taking Mr. Brett's deposition, to which Pason has agreed. Varco has not in any way been prejudiced. 3. There is No Evidence the Trial of This Action Would Be Disrupted or that Pason Has Acted in Bad Faith.

The next factor is the extent to which introducing testimony based upon the Supplemental Report would disrupt the trial of this case. There would be absolutely no such disruption. Mr. Brett has already rendered an opinion that the '142 Patent is invalid as anticipated by prior art in the testimony he gave at the hearing on the Motion for Preliminary Injunction. He testified about and disclosed in his 2004 Report a lengthy list of prior art upon which is opinion is based. He intends to testify in a similar vein at the trial of this case, relying upon, as he has again disclosed, a lengthy list of prior art that anticipated the '142 Patent by technology disclosed over a period of more than 50 years. In contrast, Varco offers no evidence that the trial of this case would be disrupted or that Pason has acted in any manner in bad faith with its expert disclosures. Instead, Varco insists that
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if the Supplemental Report is not stricken and unspecified portions of the September 2006 Report are not stricken, that it will be subjected to "trial by ambush," an assertion that is so at variance with the facts as to itself have been made in bad faith. CONCLUSION The Motion to Strike should be denied in all respects. DATED October 10, 2006. s/ Mark E. Haynes Timothy G. Atkinson Mark E. Haynes Mark E. Lacis Ireland, Stapleton, Pryor & Pascoe, P.C. 1675 Broadway, Suite 2600 Denver, CO 80202 Telephone: 303-623-2700 Facsimile: 303-623-2062 E-mail: [email protected]

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CERTIFICATE OF MAILING I hereby certify that on October 10, 2006, a true and correct copy of the foregoing DEFENDANT PASON'S BRIEF IN OPPOSITION TO MOTION TO STRIKE DEFENDANT'S SUPPLEMENTAL DESIGNATION OF EXPERT OPINION was filed with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following e-mail address: [email protected]. And, via U.S. Mail to: Guy E. Matthews, Esq. Robert M. Bowick, Esq. MATTHEWS, LAWSON, BOWICK & AL-AZEM, PLLC 2000 Bering Drive, Suite 700 Houston, Texas 77057 s/ Mark E. Haynes Timothy G. Atkinson Mark E. Haynes Mark E. Lacis Ireland, Stapleton, Pryor & Pascoe, P.C. 1675 Broadway, Suite 2600 Denver, CO 80202 Telephone: 303-623-2700 Facsimile: 303-623-2062 E-mail: [email protected]

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