Free Response in Opposition to Motion - District Court of Arizona - Arizona

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Sid Leach (#019519) Monica A. Limón-Wynn (#019174) SNELL & WILMER L.L.P. One Arizona Center 400 E. Van Buren Phoenix, AZ 85004-2202 Telephone: (602) 382-6372 Attorneys for Plaintiff Hypercom Corporation [email protected] [email protected] IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Hypercom Corporation, Plaintiff, vs. Omron Corporation, Defendant. No. CV 04-0400 PHX PGR HYPERCOM CORPORATION'S RESPONSE IN OPPOSITION TO OMRON CORPORATION'S MOTION IN LIMINE NO. 2 TO EXCLUDE ANY EVIDENCE OF COMPROMISE

Hypercom Corporation submits this Response in Opposition to Omron Corporation's Motion in Limine No. 2 to Exclude Any Evidence of Compromise. The Motion should be denied for two independent reasons. First, according to Omron's own theory of the case Federal Rule of Evidence 408 simply does not apply here because when the supposed settlement meeting took place in September of 2004, there was no existing controversy between Hypercom and Omron that could have been the subject of settlement negotiations. Absent an existing controversy Rule 408 has no applicability. Second, even if Rule 408 were otherwise applicable, Hypercom will offer the evidence concerning the September 16, 2004 meeting not for a purpose prohibited by Rule 408 but rather for three purposes that constitute "permitted uses" under the rule. The evidence related to the meeting is admissible (1) to show the relationship between Omron and Verve, i.e., that Omron had control over Verve and therefore Omron had control over the baseless patent infringement suits Verve filed against Hypercom; (2) to show that Omron had notice that Verve's patent infringements suits were baseless and therefore had notice that Verve was committing a tort in pursuing such suits and was at least generally

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aware of Verve's tortious conduct; and (3) to attack the credibility of Omron's witnesses Tetsuyki Nakano and Herbert Kerner. Because Rule 408, even if applicable, does not bar Hypercom from offering evidence of the September 2004 meeting for the three purposes stated above, and because Omron's other objections to the admission of this evidence are without merit, Omron's request that "any testimony, documents, and presentation materials, related to the September 16, 2004 settlement conference" be excluded from trial (doc #164 at p. 2), should be denied. This Response is supported by the following Memorandum of Points and Authorities and the Court's entire file in this matter. MEMORANDUM OF POINTS AND AUTHORITIES I. UNDER OMRON'S VIEW OF THE CASE, RULE 408 DOES NOT APPLY Omron has repeatedly pointed out that Omron itself did not make any threats of patent infringement against Hypercom, and that Omron itself did not file any patent infringement lawsuits against Hypercom. For example, in the Joint Case Management Report Omron asserted that there never was any actual controversy between Omron and Hypercom concerning any of Omron's patents. (doc. 71 at p. 14.) Thus, according to Omron, there never was any existing dispute or controversy between Hypercom and Omron concerning the alleged infringement of Omron's patents. The evidence that Omron's Motion No. 2 seeks to exclude on the basis of Rule 408 all involves the patent infringement claims asserted against Hypercom in the lawsuits filed by Verve. If Omron had no ability to control Verve or settle the baseless patent infringement suits filed by Verve, however, then the September 2004 meeting cannot be claimed by Omron to be a settlement meeting. After all, it is undisputed that no representative of Verve attended or participated in that meeting. And according to Omron's own words, there was no controversy between Hypercom and Omron that could then have been the subject of settlement negotiations at that time.

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But the law is clear that Rule 408 does not come into play unless there is an existing dispute. Thus, in Josephs v. Pacific Bell, 432 F.3d 1006, 1017 (9th Cir. 2005), the Ninth Circuit held that statements made in a grievance proceeding were properly admitted at trial over a Rule 408 objection "[b]ecause the purpose of Rule 408 is to encourage the compromise and settlement of existing disputes, and the grievance proceeding did not concern Josephs' not-yet-filed discrimination claim." Similarly, the court in United States v. Mirama Enter., Inc., 185 F. Supp. 2d 1148, 1156 (S.D. Cal. 2002), allowed into evidence certain communications over a Rule 408 objection because the requirement of Rule 408 that "there must be a disputed `claim' already existent" was not met. See also Prudential Ins. Co. v. Court Bullock Builders, Inc., 626 F. Supp. 159, 164 (N.D. Ill. 1985) (rejecting motion to strike, on the basis of Rule 408, affidavits that recited what happened during negotiations because for Rule 408 to apply "[a] claim must actually be in dispute at the time of the negotiations, and the conduct or statement must related to that claim"). Because, according to Omron itself, in September of 2004 there was no "existing dispute" and no "disputed `claim' already existent" as between Omron and Hypercom, the provisions of Rule 408 are wholly inapplicable to any evidence relating to that meeting. Omron thus has no legitimate basis for seeking the exclusion of any evidence related to the so-called settlement meeting held on September 16, 2004. II. EVEN IF APPLICABLE, RULE 408 DOES NOT PRECLUDE HYPERCOM FROM OFFERING EVIDENCE OF THE MEETING FOR THREE PURPOSES THAT ARE NOT WITHIN THE RULE'S PROHIBITION Omron seeks to exclude from trial "any testimony, documents, and presentation materials, related to the September 16, 2004 settlement conference." (Motion No. 2 at p. 2.) Within that broad category of evidence Omron's Motion No. 2 specifically addresses only two items: (1) a PowerPoint presentation made by Hypercom at the September 2004 meeting (attached as Exhibit B to Omron's Motion No. 2), and (2) the December 17, 2004 Declaration of Hypercom's Douglas J. Reich (attached as Exhibit C to Omron's Motion No. 2). Other evidence that would fall within the sweep of Motion No. 2. includes trial
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testimony by Mr. Reich concerning the September 16, 2004 meeting that he attended; testimony from Mr. Reich's March 23, 2005 deposition concerning the September 16, 2004 meeting; trial testimony of Omron's witness Tetsuyki Nakano, who also attended the September 16, 2004 meeting; and testimony from Mr. Nakano's March 3, 2005 deposition. All of that evidence is admissible at trial because it will not be offered by Hypercom for one of the narrow purposes that Rule 408 prohibits. A. What Rule 408 Does And Does Not Preclude

Contrary to the impression Omron gives, Rule 408 is not a blanket prohibition on the use at trial of any evidence related to settlement negotiations. Rather, the rule only prohibits the admission of settlement-related evidence for certain specified purposes, none of which is applicable here. Thus, Rule 408(a) provides that the admission of evidence of conduct or statements made in compromise negotiations regarding a claim is only precluded if such evidence is offered for a "prohibited use." The only "prohibited uses" specified in the rule are when the evidence is "offered to prove liability for, invalidity of, or amount of a claim that was disputed as to validity or amount, or to impeach through a prior inconsistent statement or contradiction." Rule 408(a). The rule then goes on to make clear, under the heading "permitted uses," that "[t]his rule does not require exclusion if the evidence is offered for purposes not prohibited by subdivision (a)." Rule 408(b) (emphasis added). Significantly, Omron misleads the Court in one of the two cases it cites for its view that settlement-related evidence must be excluded. Omron tells this Court that in Hudspeth v. Commissioner of Internal Revenue, 914 F.2d 1207, 1213-14 (9th Cir. 1990), the Ninth Circuit "affirm[ed] exclusion of settlement negotiations partially on the grounds that admitting negotiations would inhibit parties from engaging in frank settlement talks." (Motion No. 2 at p. 5.) What actually happened in that case is that the Ninth Circuit reversed the tax court's exclusion of the evidence (valuation data that included values from the Commissioner's previous settlement of a dispute with another taxpayer, "Pine

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Products") because that evidence was offered to show bias on the part of the Commissioner and thus was admissible under Rule 408: The data was relevant to the issue of whether there was bias, especially given the wide disparity between the two figures and should have been admitted by the trial court. *** While the Pine Products valuation data was irrelevant for the purpose of showing the value of the timber, the evidence was relevant to show bias on the part of the Commissioner's valuation expert. Since the Commissioner's case hinged on the credibility and reliability of his valuation expert, the tax court's exclusion of the Pine Products valuation data was prejudicial. We hold that the tax court's refusal to consider the Pine products valuation data was an abuse of discretion. *** [T]he tax court should have admitted Pine Products valuation data under the bias exception to Federal Rule of Evidence 408. 914 F.2d at 1214-15 (emphasis added) (footnotes omitted). The Hudspeth Court reversed and remanded to the tax court because the settlement-related evidence should have been admitted. Rule 408 does not require the wholesale exclusion of all evidence simply because it is related to settlement negotiations, as Omron apparently believes. Notwithstanding the admitted public policy favoring settlement, the fact is that "the public policy which protects litigants in the compromise of their disputes must bow before the stronger public policy which requires that issues of fact be determined on the basis of the greatest amount of relevant nonprejudicial testimony." A.E. Korpela, Annotation, Admissibility Of Admissions Made In Connection With Offers Or Discussions Of Compromise, 15 A.L.R.3d 13 *2a (2005). As discussed below, the case law interpreting Rule 408 makes clear that the three purposes for which Hypercom will offer evidence of the September 16, 2004 meeting between Hypercom and Omron (i.e., the relationship of the parties, notice, and attacking credibility) are purposes that are included among what Rule 408 now terms "permitted uses." Because Hypercom will offer the evidence for "permitted" and not "prohibited" uses, Omron's Motion No. 2 is not well taken and must be denied.
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B.

Evidence Of The Meeting Is Admissible To Show Control

The declaration and testimony of Mr. Reich that at the September 2004 meeting Omron's representatives led him to believe that Omron had the ability to control Verve such that Omron would be able to terminate Verve's actions against Hypercom will be offered to show the relationship between Omron and Verve. That use is not prohibited by Rule 408. That settlement-related evidence is admissible to show the relationship of the parties is demonstrated by Brocklesby v. United States, 767 F.2d 1288, 1292-93 (9th Cir. 1985), where the Ninth Circuit upheld the admission of a settlement agreement over a Rule 408 objection because that evidence was offered to show the relationship of the parties, i.e., to show that the government and its co-defendant were not adverse, not to establish liability. Another example of the admission of evidence of settlement negotiations to show the relationship of the parties is the Prudential Ins. Co. case cited above, where the district court reasoned that the evidence was admissible under Rule 408 to demonstrate the existence of an agency relationship between the plaintiff and a nonparty. Admission did not contravene Rule 408 because "the portions of the affidavits which refer to conduct and statements at the various meetings in which the parties attempted to resolve the dispute are offered to show the relation between Prudential and [a non-party], not to dispute the claim." 626 F. Supp. at 165 (emphasis added). See also Goodyear Tire & Rubber Co. v. Chiles Power Supply, Inc., 332 F.3d 976, 981 (6th Cir. 2003) (holding settlement communications from a previous case could not be admitted to demonstrate liability, but could be introduced for "another purpose" such as proving that a relationship existed between the parties to the agreement); Bradbury v. Phillips Petroleum Co., 815 F.2d 1356, 1362-66 (10th Cir. 1987) (affirming admission of settlement-related evidence despite Rule 408 objection where plaintiff argued evidence was offered to show, inter alia, the relationship and extent of control between the defendant and an entity defendant claimed was an independent contractor).

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Showing the relationship between Omron and Verve is exactly the purpose for which Hypercom will offer the declaration and testimony of Mr. Reich, Hypercom's Senior Vice President, General Counsel, Chief Compliance Officer, and Corporate Secretary, who attended the September 16, 2004 meeting with Omron. Mr. Reich's evidence concerns his conclusion, based upon what he was told by Omron at that meeting, that the relationship between Omron and Verve was such that Omron exerted control over Verve and thus had the ability to terminate all of the lawsuits brought by Verve against Hypercom. For example, evidence of Omron's control over Verve and the pending lawsuits is found in the following excerpt from the Reich Declaration: During the course of the meeting, Omron's counsel, Herbert Kerner, assured the Hypercom representatives, including me, that Omron could settle all of the patent infringement claims against Hypercom, including those asserted against Hypercom by Verve. He stated in words or substance that Omron could settle on behalf of Verve and could make various lawsuits filed by Verve "go away." I understood this to mean that Omron exercised some control over Verve's patent enforcement activities. (Exhibit C to Omron's Motion No. 2 at ¶ 4) (emphasis added). Hypercom will offer the Reich evidence to show the relationship between Omron and Verve, i.e., to show that Omron had control over Verve and therefore Omron had control over the baseless patent infringement suits Verve filed against Hypercom. Because showing the relationship between entities is a "permitted" and not a "prohibited" use for offering settlement-related evidence under Rule 408, Omron's Motion No. 2 must be denied with respect to the Reich evidence concerning the September 16, 2004 meeting. C. Evidence Of The Meeting Is Admissible To Show Notice

Hypercom will offer a hard copy of a PowerPoint presentation Hypercom made to Omron at the September 16, 2004 meeting to show that Omron had notice that Verve's patent infringements suits were baseless and therefore had notice that Verve was committing a tort in pursuing such suits. Such a use is also not a "prohibited" one under Rule 408.
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That another "permitted" purpose under Rule 408 for offering settlement-related evidence is to show that a party had notice of certain facts or circumstances has long been recognized . As one district court declared, "[u]sing the `another purpose' exception, courts have frequently held that `Rule 408's prohibitions are limited to situations in which settlement discussions are used to prove liability, not where factual information presented during such discussions negate a claim of ignorance or lack of notice.'" Dorocon, Inc. v. Burke, 2005 U.S. Dist. LEXIS 38839 *46-47 (D.D.C. Nov. 1, 2005) (emphasis added) (collecting cases). In fact, the rule that settlement evidence is admissible to show notice is so well-established that in Breuer Elec. Mfg. Co. v. Toronado Sys. of America, Inc., 687 F.2d 182, 185 (8th Cir. 1982), when defendants objected to the trial court's consideration of settlement negotiations to show that the defendants were aware of trademark infringement issues prior to suit, the Eight Circuit branded that Rule 408 objection "ridiculous." Applying this principle that showing notice is permissible notwithstanding a Rule 408 objection, the Ninth Circuit in United States v. Austin, 54 F.3d 394, 400 (9th Cir. 1995), held that evidence of a past settlement was admissible to show that the defendant had notice that certain conduct was wrongful. And the Fourth Circuit in Spell v. McDaniel, 824 F.2d 1380, 1400 (4th Cir. 1987), held that evidence of a city's settlement of an earlier police brutality action was properly admitted to show that the city was sufficiently aware of aggressive conduct by police officers. Rule 408 was no bar to admissibility in either Austin or Spell. Significantly, the Austin and Spell cases were both cited in the Federal Advisory Committee Note to the 2006 Amendment to Rule 408 in explaining that "[t]he amendment does not affect the case law providing that Rule 408 is inapplicable when evidence of the compromise is offered to prove notice." (emphasis added). Other cases admitting evidence of settlement negotiations to prove notice abound. For example, the district court in Perri v. Daggy, 776 F. Supp 1345, 1349 (N.D. Ind. 1991), held that Rule 408 allowed the admission of prior settlements because "Rule 408
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does not prohibit the use of a settlement to show a defendant's knowledge" or "to demonstrate the unreasonableness of (or deliberate indifference inherent in) subsequent conduct." (emphasis added). See also Green v. Baca, 226 F.R.D. 624, 641-42(C.D. Cal. 2005) (denying Rule 408 objection and admitting evidence of settlements to show that defendant was on notice of an over-detention problem at the county jail); Mirama Enter., 185 F. Supp. 2d at 1157 (admitting communications over Rule 408 objection because "the communications are being introduced by the government to show notice to [defendant] not to prove the amount or validity of the consumer's claim"); Wiener v. Farm Credit Bank, 759 F. Supp 510, 521 (E.D. Ark. 1991) (allowing evidence of compromise to show defendants had notice of plaintiff's options to purchase farms), aff'd, 975 F.2d 1350 (8th Cir. 1992). It is this permitted "notice" purpose under Rule 408 that requires that Hypercom be permitted to introduce settlement-related evidence showing that Omron had notice in September 2004 that Verve's patent infringements suits were baseless and therefore also had notice that Verve was committing a tort in pursuing such suits. In particular, the PowerPoint presentation that Hypercom made to Omron at the September 16, 2004 meeting (attached as Exhibit B to Omron's Motion No. 2) is evidence demonstrating this notice that is admissible under Rule 408(b) as a "permitted use." That PowerPoint presentation shows that Hypercom demonstrated to Omron the specific products accused of infringement and why Hypercom believed those products could not legitimately be accused of infringement of the Omron patents. Thus, that PowerPoint presentation is evidence that Omron had notice of the fact that the patent infringement lawsuits brought by Verve were baseless and is thus also evidence that Omron had notice that Verve's conduct in connection with those baseless lawsuits was tortious, i.e., that Verve's conduct constituted malicious prosecution and abuse of process. In addition to the PowerPoint presentation, there is testimony from the deposition of Omron's Mr. Nakano, another participant at the September 16, 2004 meeting, that also shows notice to Omron. Mr. Nakano's testimony discusses Hypercom's presentation at
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that meeting and thus further demonstrates that Omron had notice of the fact that the patent infringement lawsuits filed by Verve were baseless and there was no justification for maintaining any of the pending infringement suits against Hypercom. See Exhibit 23 to doc. 85 (Hypercom's Statement of Facts, filed in connection with its Response to Omron's Motion for Summary Judgment) at pp. 155-56 and 159. Because evidence relating to the September 16, 2004 meeting such as the PowerPoint presentation and the Nakano testimony discussed above shows that Omron had notice of certain relevant facts (i.e., Hypercom's products did not infringe Omron's patents and Verve was pursuing baseless suits) that evidence is admissible under Rule 408(b) because it is being offered for a "permitted" and not a "prohibited" use. Omron's Motion No. 2 must therefore be denied with respect to the PowerPoint presentation and the Nakano testimony (as well as any other settlement-related evidence that demonstrates notice to Omron). D. Evidence Of The Meeting Is Admissible To Attack Credibility

Hypercom's PowerPoint presentation is also admissible for "the permitted use" of attacking the credibility of Omron's Mr. Nakano. At his deposition, Mr. Nakano testified that Hypercom's presentation at the September 2004 was "a very rough explanation" and not "detailed." See Exhibit 23 to doc. 85 (Hypercom's Statement of Facts, filed in connection with its Response to Omron's Motion for Summary Judgment) at p. 156. Plainly, however, the hard copy of Hypercom's PowerPoint presentation shows that Hypercom's explanation of why it believed its products did not infringe Omron's patents was very "detailed" indeed. Thus, Mr. Nakano's credibility is open to question. Additionally, at his deposition, Omron's attorney, Herbert Kerner, testified that at the meeting he attended with Hypercom's representatives, "we were not there to talk about the merits of the case." (Deposition of Herbert V. Kerner III dated May 17, 2006 ("Kerner Depo.") attached hereto as Exhibit 1, at 257:12-13.) Kerner also testified that "Hypercom had agreed not -- that was not part of this meeting." (Id. at 259:13-14.) He testified that Hypercom "surprised" him at the meeting by attempting to discuss the merits
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of the infringement claims. (Id. at 262:9-12.) However, the evidence shows that the agenda for the meeting clearly included a discussion of the baseless nature of the patent infringement claims. (Id. at pp. 262-69; Kerner Depo. at Exhibit 32). Kerner even claims he never saw the PowerPoint presentation. (Kerner Depo. at 268:5-17.) Thus, Mr Kerner's credibility also is open to question. The Ninth Circuit has affirmed the admission of evidence of a settlement agreement in Brocklesby v. United States, 767 F.2d at 1292-93, where the plaintiff offered the evidence not to prove liability but to attack the credibility of the defendants' witnesses. That holding in Brockelsby was approved by the Ninth Circuit in United States v. Technic Servs., Inc., 314 F.3d 1031, 1045 (9th Cir. 2002). See also Brotman v. National Life Ins. Co., 1999 U.S. Dist. LEXIS 22379 * 5-6 (E.D.N.Y. Jan. 28, 1999) (motion in limine seeking to exclude evidence of plaintiff's consent order with state education department denied where evidence was offered to attack plaintiff's credibility).1 Hypercom should thus be permitted to use the PowerPoint presentation for the "permitted" use of attacking the credibility of Omron's Mr. Nakano and Omron's attorney, Mr. Kerner. III. OMRON'S OTHER OBJECTIONS TO THE EVIDENCE ALSO FAIL As shown above, Omron's Rule 408 objection to the admission of evidence related to the September 16, 2004 meeting has no merit. Equally without merit are the other evidentiary objections that Omron advances in its Motion No. 2 as bases for excluding the PowerPoint presentation and the testimony of Mr. Reich.

Attacking credibility is a "permitted use" under Rule 408(b) because Rule 408(a) only prohibits the use of settlement-related evidence "to impeach through a prior inconsistent statement or contradiction." (emphasis added). As is made clear in EEOC v. Gear Petroleum, Inc., 948 F.2d 1542, 1545-46 (10th Cir. 1991), which is cited in the Federal Advisory Committee Note to the 2006 Amendment to Rule 408 on this issue, it is only inconsistent conduct or statements made in connection with compromise negotiations that may not be admitted for impeachment purposes due to Rule 408 considerations. Using Hypercom's PowerPoint presentation to attack Mr. Nakano's credibility does not involve impeachment through any conduct or statements of Mr. Nakano. Thus, such use does not fall within either of the two categories of "prohibited uses" that Rule 408(a) specifies vis-à-vis the issue of witness impeachment.
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With respect to Mr. Reich, Omron contends that his testimony should be excluded as "pure hearsay." (Motion No. 2 at p. 7.) That objection is baseless, for at trial Mr. Reich will testify as to what he was told at the September 16, 2004 meeting by Omron's own representative (its counsel, Herbert Kerner). Mr. Reich's testimony about Mr. Kerner's statements thus falls squarely within the category of an admission by a party opponent. Such admissions are declared not to be hearsay by Federal Rule of Evidence 801(d)(2)(C) (a statement by a person authorized by the party to make a statement concerning the subject). Omron's objection based on a supposed lack of "specificity" is also baseless. Omron cites no authority for the proposition that to qualify as an 801(d)(2) admission of a party opponent the admission must be a verbatim quotation of what was said. Nothing prohibits Mr. Reich from testifying as to the gist of what he was told by Omron's Mr. Kerner. With respect to the PowerPoint presentation, Omron first contends that it should be excluded because it relates to Omron's knowledge after the filing of the complaints in the Michigan, Texas, California, and ITC Actions and is thus irrelevant for the reasons discussed in its Motion in Limine No. 8. Omron's thesis is simply incorrect. Omron's knowledge after the filing of the complaints is very relevant indeed. See Hypercom's Response in Opposition to Omron's Motion in Limine No. 8. Because the knowledge Omron gained from the September 16, 2004 meeting as to Verve's tortious conduct in pursuing its baseless patent infringements suits is relevant to the issues to be determined by the jury, Omron's relevance objection must fail. Omron also contends that the PowerPoint presentation should be excluded under Rule 403 because it is supposedly more prejudicial than probative. But Omron can specify no reason why the PowerPoint presentation is "unfairly prejudicial" as that term is used in Rule 403. The concept of "unfair prejudice" generally relates to a tendency to suggest that the jury render a decision on an emotional basis: The Rule [403] is not designed to exclude any prejudicial evidence, only "unfairly" prejudicial evidence substantially outweighed by its probative value. U.S. v. Hankey, 203 F.3d
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1160, 1172 (9th Cir. 2000). "The application of Rule 403 must be cautious and sparing. Its major function is limited to excluding matter of scant or cumulative probative force, dragged in by the heels for the sake of its prejudicial effect." Id. Evidence is unfairly prejudicial when it has an "`undue tendency to suggest decision on an improper basis, commonly, though not necessarily, an emotional one.'" Id. (quoting Advisory Committee Notes to Federal Rule of Evidence 403). Schmelling v. Thomas, 2005 U.S. Dist. LEXIS 6467 *37 (D. Nev. March 4, 2005) (emphasis added). There is certainly nothing in the highly-technical PowerPoint presentation that could possible suggest that the jury decide the matter on either an emotional basis or any other improper basis. See also United States v. Pitrone, 115 F.3d 1, 8 (1st Cir. 1997) ("[v]irtually all evidence is prejudicial -- if the truth be told, that is almost always why the proponent seeks to introduce it -- but it is only unfair prejudice against which the law protects"). Omron's assertion that "[t]here is no evidence in the record that Mr. Nakano ever saw the presentation" (Motion No. 2 at p. 8) does not support Omron's Rule 403 argument. First, it is incorrect. Mr. Nakano's own deposition testimony discussed Hypercom's presentation at the September 16, 2004 meeting. See Exhibit 23 to doc. 85 (Hypercom's Statement of Facts, filed in connection with its Response to Omron's Motion for Summary Judgment) at pp. 155-56 & 159. Second, Omron does not dispute that Mr. Nakano attended the meeting at which the PowerPoint presentation was given. Third, it is equally undisputed that Omron's counsel, Mr. Kerner, was also an attendee at the September 16, 2004 meeting. Thus, Hypercom's PowerPoint presentation gave notice to Omron through its representative Mr. Kerner as well as through its representative Mr. Nakano. Fourth, whether or not Mr. Nakano saw the presentation (which he certainly did) has nothing to do with "unfair prejudice" under Rule 403. Neither does Omron's contention that there supposedly was little "conversation" during the September 16, 2004 meeting about whether Hypercom's products infringed Omron's patents (Omron Motion No. 2 at p. 8) lend any support to Omron's Rule 403

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objection. What is at issue here is Hypercom's PowerPoint presentation concerning the fact that Hypercom's products did not infringe Omron's patents, not "conversations" between Hypercom and Omron. Moreover, Mr. Reich testified at his deposition that Hypercom did demonstrate to Omron at the September 16, 2004 meeting why there was no infringement. See Exhibit 24 to doc. 85 (Hypercom's Statement of Facts, filed in connection with its Response to Omron's Motion for Summary Judgment) at p. 133 ("[w]e were going to and did demonstrate to them why our products didn't infringe the patents of which we were aware at that time"). Moreover, Omron's "little conversation" objection also has nothing to do with Rule 403 "unfair prejudice." Finally, Omron objects that the PowerPoint presentation is inadmissible hearsay. But hearsay is defined as an out-of-court statement "offered in evidence to prove the truth of the matter asserted." Rule 801(c). Hypercom will not offer the PowerPoint presentation to prove the truth of the matters asserted therein but rather to prove that at the September 16, 2004 meeting Omron was given notice of various matters (i.e., the baseless nature of the patent infringement suits that Verve was pursuing against Hypercom). In other words, whether or not the statements made on the PowerPoint presentation are true (which they happen to be) is wholly irrelevant for the purpose of giving notice. The only salient fact is that the statements made on the PowerPoint slides were actually presented to Omron at the meeting and thus Omron was given notice on September 16, 2004 of the reasons why Hypercom believed that its products did not infringe Omron's patents and thus Verve's infringement suits were baseless. Similarly, the use of the PowerPoint presentation to attack the credibility of Mr. Nakano does not involve using the evidence "to prove the truth of the matter asserted" therein. The importance of the slides is that they show that Hypercom made a detailed presentation to Omron as to why Hypercom believed its products were non-infringing. The truth of the matters stated in the PowerPoint presentation is irrelevant. Because when evidence is offered for purposes other than proving "the truth of the matters asserted" therein that evidence is not, by definition, "hearsay" under Rule 801, the
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PowerPoint presentation does not constitute hearsay and is admissible. See, e.g., Kunz v. Utah Power & Light Co., 913 F.2d 599, 605 (9th Cir. 1990) (affirming admission of evidence; press releases were not inadmissible hearsay because they were offered to prove notice, not to prove the truth of the matters asserted); Stevens v. Moore Business Forms, Inc., 18 F.3d 1443, 1449 (9th Cir. 1994) (affirming admission of evidence; statements in declaration were not hearsay because they were not offered to prove their truth but to show witness's knowledge); Plotner v. Swanton Local Bd. of Educ., 85 F. Supp. 2d 747, 755-56 (N.D. Ohio 2000) (ruling statements in affidavit were not inadmissible hearsay because they were not offered to prove their truth but to show that the defendant was on notice). IV. CONCLUSION For the foregoing reasons, the Court should deny in its entirety Omron's Motion in Limine to Exclude Any Evidence of Compromise. RESPECTFULLY SUBMITTED this 30th day of April, 2007. SNELL & WILMER L.L.P.

By s/ Monica A. Limón-Wynn Sid Leach Monica A. Limón-Wynn SNELL & WILMER L.L.P. One Arizona Center Phoenix, AZ 85004-2202 Attorneys for Plaintiff Hypercom Corporation

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Case 2:04-cv-00400-PGR

CERTIFICATE OF SERVICE I hereby certify that on April 30, 2007, I electronically transmitted HYPERCOM CORPORATION'S RESPONSE TO OMRON CORPORATION'S MOTION IN LIMINE NO. 2 TO EXCLUDE ANY EVIDENCE OF COMPROMISE to the Clerk's Office using the ECF System for filing and transmittal of a Notice of Electronic Filing to the following ECF registrants: David P. Irmscher John K. Henning, IV BAKER & DANIELS 300 N. Meridian Street, Suite 2700 Indianapolis, IN 46204 Phone: 317-237-1317 Fax: 317-237-1000 [email protected] [email protected] Attorneys for Defendant Omron Corporation A. Colin Wexler Matthew A.C. Zapf GOLDBERG KOHN BELL BLACK ROSENBLOOM & MORITZ, LTD. 55 E. Monroe Street, Ste. 3300 Chicago, IL 60603 Ph. 312-201-4000 Fax: 312-332-2196 [email protected] [email protected] Attorneys for Defendant Omron Corporation s/ Monica A. Limón-Wynn
1982154

H. Michael Clyde Todd R. Kerr PERKINS COIE BROWN & BAIN P.A. 2901 N. Central Ave., Ste. 2000 Phoenix, AZ 85012-2788 Ph.: 602-351-8000 Fax: 602-648-7000 [email protected] [email protected] Attorneys for Defendant Omron Corporation

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Filed 04/30/2007

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