Free Report re: Rule 26(f) Planning Meeting - District Court of Arizona - Arizona

1 DANIEL R. MALINSKI, SBA No. 005911 [email protected] 2 Burch & Cracchiolo, P.A. 3 702 East Osborn, Suite 200 Phoenix, Arizona 85014 4 Telephone: (602) 274-7611; Facsimile: (602) 234-0341 5 PETER E. HEUSER, OSB ID No. 81128 6 [email protected] Kolisch Hartwell, P.C. 7 200 Pacific Building; 520 Southwest Yamhill Street Portland, OR 97204 8 Telephone: (503) 224-6655; Facsimile: (503) 295-6679 9 Attorneys for Plaintiffs Richard G. Krauth and R.M. Wade & Co. 10 11 Terry E. Fenzl (#002485) C. Mark Kittredge (#013907) 12 Christopher S. Coleman (#018287) 13 PERKINS COIE BROWN & BAIN P.A. 2901 North Central Avenue 14 Post Office Box 400 15 Phoenix, Arizona 85001-0400 Telephone: (602) 351-8000; Facsimile: (602) 648-7000 16 Attorneys for Defendants 17 Phelps Dodge Corporation et al. 18 19 20 21 UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA No. CV 04-0544 PHX PGR

Richard G. Krauth, an individual, and R.M. 22 Wade & Co., an Oregon corporation, 23 24 25 Phelps Dodge Corporation, a New York corporation, Phelps Dodge Bagdad, Inc., a 27 Delaware corporation, Phelps Dodge Chino, Inc., a Delaware corporation, Phelps Dodge 28 Morenci, Inc., a Delaware corporation, Phelps 26
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Plaintiffs, vs.

JOINT CASE MANAGEMENT REPORT

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Dodge Sierrita, Inc., a Delaware corporation, Phelps Dodge Tyrone, Inc., a Delaware corporation, and Phelps Dodge Miami, Inc., a Delaware corporation, Defendants. Phelps Dodge Corporation, a New York corporation, Phelps Dodge Bagdad, Inc., a Delaware corporation, Phelps Dodge Chino, Inc., a Delaware corporation, Phelps Dodge Morenci, Inc., a Delaware corporation, Phelps Dodge Sierrita, Inc., a Delaware corporation, Phelps Dodge Tyrone, Inc., a Delaware corporation, and Phelps Dodge Miami, Inc., a Delaware corporation, Counterclaim Plaintiffs, vs. Richard G. Krauth, an individual, and R.M. Wade & Co., an Oregon corporation, Counterclaim Defendants. Pursuant to the Court's Order of November 22, 2005, the parties submit the

following report. For the Court's convenience, the parties have followed the standard

format typically required by the Court for such reports. [See Court's Order Setting Scheduling Conference, filed March 31, 2004] A. NATURE OF THE CASE.

Plaintiffs and defendants have not agreed on a single statement of the Nature of the Case. Accordingly, plaintiffs and defendants each provide their respective, separate statements below. Plaintiffs' Statement This is a patent infringement case in which the inventor Richard G. Krauth and the exclusive licensee R.M. Wade & Co. has sued Phelps Dodge Corporation and various subsidiaries of Phelps Dodge for infringement of U.S. Pat. Nos. 5,005,806 and 5,030,279.
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These two patents are directed to a controlled percolation system and a method for heap leach mining. Specifically, the patents are directed to an emitting device which is used to slowly, evenly, and in a controlled fashion, provide treatment chemicals to ores that are being treated following a mining operation. These emitters were initially sold by Wade to Phelps Dodge, but Phelps Dodge subsequently began purchasing the emitters from other sources. Plaintiffs allege that the patents have been willfully infringed based upon allegations that defendants knew of the patents, but nonetheless purchased the devices from others and practiced the patented methods without a license to do so. Defendants allege that the two patents are invalid based upon prior art and prior invention by others, contend that the patents are not infringed by the devices and methods used by Phelps Dodge, and that plaintiffs cannot recover damages incurred prior to the filing of the lawsuit because plaintiffs delayed unreasonably after learning of the infringement. At a hearing on August 16, 2004, the Court stayed the case so that the prior art uncovered by defendants could be considered by the U.S. Patent and Trademark Office ("PTO") in two concurrent reexamination proceedings involving the two patents in suit. The PTO determined that there were substantial new issues of patentability because this prior art had not been previously considered, and the reexamination request was granted. However, the PTO then considered the prior art and ruled in Office actions dated October 10, 2005 that "the prior art of record does not teach or suggest either alone or in combination [the claimed inventions]." During the pendency of the reexamination proceedings the parties were discussing settlement of the case. Plaintiffs believe no binding settlement was reached, whereas defendants believe that a binding settlement was reached. Defendants have indicated they will be filing a motion for summary judgment that there was an enforceable settlement agreement reached between the parties. While plaintiffs have not seen defendants' motion, plaintiffs feel it is very likely there will be issues of fact that preclude summary judgment. Plaintiffs have proposed to defendants that if they are going to assert this defense at trial, there should be a bifurcated trial on the enforceability
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issue tried to a jury. Plaintiffs believe that bifurcation is appropriate because the parties' present trial counsel may well be disqualified from trying that case, and the trial would likely be a short one. However, that issue probably does not now need to be decided by the Court. Defendants are proposing that discovery and trial be bifurcated as to liability and damages, and plaintiffs have not agreed to that bifurcation. However, that is similarly not an issue that needs to be decided at this time.

Defendants' Statement As alluded by plaintiffs above, defendants believe that during the time this case was stayed while the Patent Office reexamined the patents in suit, the parties agreed to settle the lawsuit for a one-time payment by Phelps Dodge to plaintiffs and a paid-up license to Phelps Dodge under the patents in suit. Defendants intend to bring a motion for summary judgment enforcing this settlement agreement in short order. Defendants agree with plaintiffs that this is the first issue that should be considered by the Court. The remainder of this section provides defendants' statement of the case with respect to the substantive liability issues, which are not relevant if the Court agrees that the parties entered into an enforceable settlement. Plaintiffs have alleged that each of the seven defendants have infringed two patents, U.S. Patent Nos. 5,005,806 and 5,030,279 (collectively "the patents-in-suit"), by using drip irrigation systems in heap leach mining. Heap leach mining generally involves the use of water-based solutions for leaching metals out of ore (dirt and rock). That is, the patents-in-suit generally disclose and claim the use of a drip irrigation system in place of a sprinkler system for the application of such liquid to dirt. Defendants believe that the use of drip irrigation in place of sprinkler systems for the application of liquid to dirt was not new when the patent application that resulted in the patents-in-suit was first filed in November 1987. Indeed, farmers had been using drip irrigation in place of sprinklers for decades. Moreover, printed publications demonstrate
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that the mining industry has been using drip irrigation for the application of liquid in heap leach mining since at least the 1970's. Accordingly, defendants have challenged the validity of the patents-in-suit based on such prior art. Defendants have also challenged the validity of the patents based on allegations that, notwithstanding the prior art, Krauth did not conceive of the inventions claimed in the patents-in-suit and, therefore, is not properly named as an inventor on such patents. Similarly, defendants have asserted affirmative defenses of inequitable conduct based on Krauth's failure to disclose to the Patent Office: (i) the facts surrounding his alleged invention such that the Patent Office could consider issues of inventorship; and (ii) information related to his appeal of a final rejection of the claims in the parent application to the patents-in-suit, which appeal affirmed the rejection of those claims. Defendants also deny infringement of any of the claims of the patents-in-suit. Finally, although the patents-in-suit issued in 1991 and despite sales of competing systems by numerous competitors since at least that time, this is the first lawsuit based on either of the patents-in-suit. Defendants, therefore, have presented affirmative defenses of laches and estoppel based on plaintiffs' unexplained and unreasonable delay in bringing this or any lawsuit to enforce the patents-in-suit.

B.

JURISDICTIONAL BASIS OF THE CASE.

Plaintiffs' claim arises under 28 U.S.C. §§ 1331, 1332 and 1338(a).

C. 1. 2. 3. 4. 5. 6.

FACTUAL AND LEGAL ISSUES GENUINELY IN DISPUTE. Whether an enforceable settlement had been reached between the parties. Whether any of the defendants have infringed the patents-in-suit. If so, whether the infringement has been willful. Whether the patents-in-suit are invalid based on prior art. Whether Krauth is the sole inventor of the patents-in-suit. Whether Krauth is an inventor of the patents-in-suit.
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7.

Whether the patents-in-suit are invalid because Krauth is not an inventor of the patents-in-suit.

8.

Whether the patents-in-suit are invalid because Krauth is not the sole inventor of the patents-in-suit.

9.

Whether the patents-in-suit are unenforceable due to inequitable conduct by Krauth or other persons involved in prosecution of the patents-in-suit.

10.

If the patents-in-suit are infringed and not invalid, what is the proper measurement of damages?

11.

Whether plaintiffs' claims for damages are barred by the doctrines of laches or estoppel. Whether defendants' alleged infringement was willful and, if so, whether the amount of damages should be increased due to willfulness.

12.

13.

Whether the case is exceptional, making plaintiffs or defendants eligible for an award of attorney's fees.

D.

THE PARTIES.

All of the parties have been served and have answered and counterclaimed. A reply has also been served by plaintiffs.

E.

PARTIES NOT SUBJECT TO THE COURT'S JURISDICTION.

All parties are subject to, or have not contested, the court's jurisdiction. F. FORMAL AND INFORMAL DISCOVERY PERFORMED TO DATE.

The parties have both submitted and responded to formal discovery requests. A deposition of George Potter was taken on September 30, 2003 in a related case between the same parties involving the same patents which was pending in the U.S. District Court for the Eastern District of California (CIV F-03-5809 AWI SMS). That case

subsequently was dismissed based upon lack of personal jurisdiction. The parties agree
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that the above referenced deposition of George Potter can be used as if it were taken in this action. The parties expect discovery to be stayed other than as to the settlement issue, and with respect to elderly individuals whose testimony might need to be preserved pending trial. The parties have agreed that one such individual is Larry Hartzog. Once the settlement issue is resolved, discovery will proceed on other issues, subject to defendants' request that this case be bifurcated between liability and damages issues. The parties have not yet exchanged initial disclosure statements pursuant to Fed.R.Civ. 26(a)(1).

G.

RESOLUTION OF ISSUES BY PRETRIAL MOTIONS.

Defendants will shortly file a motion for summary judgment with respect to settlement of the case, the parties are undecided as to the filing of other motions. Defendants believe that, if their motion for summary judgment enforcing settlement is not granted, this case can and will be significantly narrowed or concluded by motions for summary judgment on liability.

H.

CONSENT TO MAGISTRATE.

The parties have not consented to the trial of the case by a magistrate.

I.

RELATED CASES.

The similar lawsuit was initially by plaintiffs against Phelps Dodge Corporation in the Eastern District of California on June 12, 2003 (CIV F-03-5809 AWI SMS). On March 15, 2004, that case was dismissed for lack of personal jurisdiction. This case was filed in this court on March 18, 2004. No other related cases are pending.

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J.

PROPOSED DEADLINES.

The parties have not been able to come to an agreement regarding bifurcation of liability and damages and proposed deadlines with respect to same. Accordingly, their respective positions are separately provided below.

Defendants Ask that the Case be Bifurcated Pursuant to Fed. R. Civ. P. 42(b), defendants request that the Court bifurcate the issues of liability and damages and defer discovery relating to damages until liability is decided. Bifurcation is appropriate because straight-forward and simple issues of liability are likely to result in an early resolution of this case. In contrast, discovery and trial regarding damages will be complex, time consuming, and ­ if Defendants prevail on liability ­ unnecessary. Bifurcation is particularly appropriate in patent cases such as this. "Patent cases

are uniquely amenable to bifurcation because of the complex nature of the damages determination and the extensive discovery often necessary to prove the nature and extent of those damages." 8 James W. Moore, Moore's Federal Practice 3d, Section 42.24; see also Novopharm Ltd. v. Torpharm, Inc., 181 F.R.D. 308, 311-12 (E.D.N.C. 1998) (bifurcating liability and damages in a patent infringement case pursuant to Rule 42(b) because "[c]onsideration of damages . . . could be complex, involved, and timeconsuming"; damages discovery stayed because "simplification of discovery is the major

benefit of bifurcation."); and Paine, Webber, Jackson & Curtis, Inc. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 587 F. Supp. 1112, 1117 (D.C. Del. 1984) (bifurcating liability and damages and staying damages discovery in patent case involving a securities brokerage cash-management system). As has been noted by other courts in this Circuit, "[b]ifurcation while perhaps not routine, is nonetheless common in patent litigation." Accord Reber, LLC v. Samsung Electronics, 2004 U.S. Dist. LEXIS 4058 (E.D. Il. 2004) (liability and damages bifurcated in patent infringement suit because of complex damages issues); Ciena Corp. v. Corvis Corp., 210 F.R.D. 519 (D. Del. 2002) (same).
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Yamaha v. Bombardier Inc., 2001 U.S. Dist. LEXIS 10738, 59 U.S.P.Q.2d 1088 (C.D. Cal. 2001); General Patent Corp. v. Microcomputer, 1997 U.S. Dist. LEXIS 21342, 44 U.S.P.Q.2d 1954, 1956 n.1 ("bifurcation or even trifurcation is common in patent cases"). Indeed, Congress has endorsed bifurcation of damages in patent cases. 28 U.S.C. § 1292(c)(2). As courts have noted, "[s]eparate trials are particularly appropriate in patent cases because 28 U.S.C. § 1292(c)(2) provides that a finding of liability for patent infringement is an appealable interlocutory order. This allows for easy bifurcation

through the litigation process. If no liability is determined, the time and expense of trying damages is avoided." Industrious Metalicas Marva, Inc. v. Lausell, 172 F.R.D. 1, 4 (D.P.R. 1997), quoting Eaton Corp. v. Auburn Gear, 8 U.S.P.Q.2d 1373, 1374 (N.D. Ind. 1988); see also McCullough v. Kammerer Corp., 331 U.S. 96, 98 (1947) (noting that the object of the predecessor statutes to section 1292(c)(2) "was to make sure that the parties could take appeals in patent equity infringement suits" prior to a determination of damages). At a minimum, and in the alternative, defendants request that the Court stay damages discovery pending resolution of dispositive motions regarding liability.

Plaintiffs Oppose Bifurcation as to Liability and Damages Defendants ask the Court to bifurcate issues of liability and damages for both discovery and trial purposes. Patent cases sometimes present the exceptional But, contrary to

combination of circumstances where bifurcation is appropriate.

defendants' suggestion, even in patent cases bifurcation is not "the norm." In patent cases, "the bifurcation of issues and the separate trial of them is not the usual course of events .... [T]he mere status of being a patent case does not create a presumption or inference in favor of bifurcation and separate trials." F&G Scrolling Mouse, L.L.C. v. IBM Corp., 190 F.R.D. 385, 387 (M.D.N.C 1999); Real v. Bunn-O-Matic Corp., 195 F.R.D. 618, 620 (N.D. 111. 2000) ("The piecemeal trial of separate issues in a single lawsuit is not to be the usual course.... Bifurcation in patent cases, as in others, is the
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exception, not the rule" (emphasis added)); 8 James W. Moore et al, Moore's Federal Practice ¶ 42.20[4][a] (3rd ed. 2003) ("[B]ifurcation and separate trials is not the normal course of events, and a single trial will usually be more expedient and efficient."); 9 Charles Alan Wright, et al., Federal Practice and Procedure: Civil §§ 2381, 2387-92 at 474 (1990) (bifurcation is "not to be the usual course"). "The inconveniences,

inefficiencies and harms inherent in these probable consequences -- to the parties and third parties, to the courts, and to the prompt administration of justice --weigh against separation of trials and suggest that, for those probable adverse effects to be overcome, the circumstances justifying bifurcation should be particularly compelling and prevail only in exceptional cases." Kos Pharmaceuticals, Inc. v. Barr Laboratories, Inc., 218 F.R.D. 387, 391 (S.D.N.Y. 2003) (patent case).

Proposed Deadlines The parties do not agree as to whether this case should be bifurcated on the substantive liability and damages issues. However, the parties do agree that the first issue the Court should address is the disputed settlement. Accordingly, the parties agree to the following proposed briefing schedule with respect to the defendants' soon-to-be-filed motion for summary judgment on the disputed settlement agreement. Plaintiffs believe that the Court should schedule an immediate trial on the settlement dispute if the Court determines that there are disputed issues of material fact. Defendants do not oppose such a trial at this time. However, defendants believe it may be more efficient to proceed with defendants' anticipated motions for summary judgment on liability. Accordingly,

defendants reserve the right to urge the Court to proceed with such motions prior to any trial. Event Defendants' filing of motion for summary judgment re settlement Proposed Deadline December 16, 2005

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Event Plaintiffs' opposition to motion for summary judgment re settlement Defendants' reply in support of motion for summary judgment re settlement K.

Proposed Deadline 30 days after service of motion 15 days after service of response

ESTIMATED DATE AND LENGTH OF TRIAL.

The parties agree that the trial of the case will take approximately two weeks.

L.

JURY TRIAL.

The parties agree that any preliminary trial on settlement and the case in chief be tried to a jury. M. SETTLEMENT NEGOTIATIONS.

The parties disagree as to whether a settlement has been reached in this case. The parties have not engaged in any settlement discussions since the PTO ruling of patentability in the reexamination proceedings.

N.

CLASS ACTION.

This is not a class action.

O.

COMPLEX TRACK.

The parties do not believe this case needs to be placed on a complex track.

P.

OTHER MATTERS.

There are no other matters that the parties need to bring to the attention of the court at this time.

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Dated: December 5, 2005. Respectfully submitted,

s/ Daniel R. Malinski Daniel R. Malinski Burch & Cracchiolo, P.A. of Attorneys for Plaintiffs

s/ C. Mark Kittredge C. Mark Kittredge Perkins Coie Brown & Bain P.A of Attorneys for Defendants

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CERTIFICATE OF SERVICE I hereby certify that on December 5, 2005, I electronically transmitted the attached documents to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Daniel R. Malinski [email protected] BURCH & CRACCHIOLO, P.A. 702 East Osborn, Suite 200 Phoenix, Arizona 85014 Attorneys for Plaintiffs and Counterclaim Defendants I hereby certify that on December 5, 2005, I served the attached document by hand delivery to: The Honorable Paul G. Rosenblatt United States District Court Sandra Day O'Connor U.S. Courthouse, Suite 621 401 West Washington Street, SPC 56 Phoenix, AZ 85003-2156 I hereby certify that on December 5, 2005, I served the attached document by first class mail on the following, who is not a registered participant of the CM/ECF System: Peter E. Heuser Kolisch Hartwell, P.C. 200 Pacific Building 520 S.W. Yamhill Street Portland, Oregon 97204 Attorneys for Plaintiffs and Counterclaim Defendants s/ Janet Roe

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