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

Matthew A. C. Zapf (pro hac vice) A. Colin Wexler (pro hac vice) Chad A. Blumenfield (pro hac vice) GOLDBERG KOHN 55 East Monroe Street, Suite 3300 Chicago, IL 60603-5792 Telephone: 312.201.3914 Facsimile: 312.863.7414 [email protected] [email protected] David P. Irmscher (15026-02) John K. Henning (25203-49) BAKER & DANIELS LLP 111 East Wayne Street, Suite 800 Fort Wayne, IN 46802 Telephone: 260-424-8000 Facsimile: 260-460-1700 [email protected] [email protected] H. Michael Clyde (009647) PERKINS COIE BROWN & BAIN P.A. 2901 North Central Avenue, Suite 2000 Phoenix, AZ 85012-2788 Telephone: 602.351.8000 Facsimile: 602.648.7000 [email protected] Attorneys for Defendant Omron Corporation UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Hypercom Corporation, Plaintiff, vs. Omron Corporation, Defendants. ) ) ) ) ) ) ) ) ) CAUSE NO. CV04-0400 PHX PGR OMRON CORPORATION'S SIGNED OPPOSITION TO HYPERCOM CORPORATION'S MOTION IN LIMINE REGARDING EXPERT TESTIMONY CHARLES BERMAN; OR IN THE ALTERNATIVE, REQUEST FOR DAUBERT HEARING

Omron Corporation ("Omron") opposes Hypercom Corporation's Motion In Limine Regarding Expert Testimony of Charles Berman and its alternative request for a Daubert hearing

Case 2:04-cv-00400-PGR

Document 196

Filed 04/30/2007

Page 1 of 9

("Hypercom's Motion") based on the following grounds. First, the Court should reject Hypercom's argument that Berman's opinions are not relevant to Omron's or Verve's knowledge at the time the lawsuits were filed because Hypercom has placed actual infringement at issue. Hypercom argues that Omron knew Verve's infringement lawsuits were baseless because Hypercom's products do not infringe the Omron-assigned patents. Thus, Berman's opinions regarding infringement are directly relevant in that they rebut Hypercom's only evidence of knowledge, i.e., non-infringement. Second, Berman's testimony is relevant to the issue of compensatory and punitive damages. The merits of Verve's patent infringement claims are relevant to proving (1) Hypercom's damages were not proximately caused by Verve's failure to sufficiently investigate its infringement claims, and (2) the filing of an allegedly under-investigated but meritorious patent infringement claim cannot qualify as the type of "aggravated and outrageous conduct" justifying punitive damages. Third, assuming that the Court permits Hypercom's expert witness, Laurence Pretty, to testify that Hypecom's point-of-sale terminals do not infringe the patents assigned to Verve, Berman's opinions are relevant as a direct rebuttal to Pretty's opinions. Pretty has opined that none of Hypercom's terminals infringes U.S. Patent Nos. 5,012,077, 4,678,895, and 4,562,341. See Main Report Of Laurence Pretty, Expert For Plaintiff Hypercom Corporation On Patent Litigation Procedure, at 1-2, attached as Exhibit B to Omron Corporation's Motion In Limine No. 3 To Bar Testimony By Hypercom's Expert. To the extent that Pretty is allowed to offer any of those opinions at trial, it would be patently unfair to prevent Omron from rebutting those opinions with its own expert.

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I.

Argument

A. Berman's Testimony Is Relevant Because The Infringement Issue Is Critical To Hypercom's Theory of Liability; Berman Responds Directly to Hypercom's Expert, Laurence Pretty. In its motion in limine, Hypercom contends Berman's opinion that Hypercom infringed the Omron-assigned patents is irrelevant because it does not speak to Omron's or Verve's knowledge at the relevant time (i.e., at any time before Verve's infringement actions against Hypercom had been terminated). Yet Hypercom, which must prove that Omron knew Verve failed to perform a reasonable pre-filing investigation of these infringement claims, has placed actual infringement at issue. Hypercom has repeatedly invoked its purported "non-infringement" of any patent assigned by Omron to Verve as circumstantial evidence that Omron knew Verve's claims were baseless. Hypercom argued as follows in opposing Omron's second motion for summary judgment: "[A]fter Hypercom demonstrated on September 16, 2004, that none of the Hypercom products infringed any of the Omron patents, instead of putting a stop to the litigation, Omron demanded millions of dollars from Hypercom." See Hypercom Corporation's Response To Omron Corporation's Second Motion For Summary Judgment ("Hypercom's Response To Second MSJ") at 14 (emphasis added). Similarly, Hypercom repeatedly argued that its demonstrations of noninfringement to Omron during settlement negotiations supplied the intent necessary to support its malicious prosecution and abuse of process claims. See, e.g., Hypercom's Response To Second MSJ at 11 ("On September 16, 2004, less than two weeks after the commencement of the ITC Action, Hypercom met with Mr. Nakano and Omron's attorney Herb Kerner and demonstrated why none of Hypercom's products infringed any of the asserted Omron patents, including the patent involved in the ITC Action."), and 16 ("In this case, Omron undisputedly knew that Verve's lawsuits were baseless after the meeting with Hypercom on September 16, 2004."); -3Case 2:04-cv-00400-PGR Document 196 Filed 04/30/2007 Page 3 of 9

Deposition of Hypercom Corporation (Douglas Reich), attached as Exhibit 24 to Hypercom's Opposition To Omron's Motion For Summary Judgment, at 34-35. Indeed, the cornerstone of Hypercom's wholly circumstantial case that Omron aided and abetted and/or conspired with Verve is Omron's supposed motive to encourage the filing of infringement actions against non-infringers. See, e.g, Hypercom's Response To Second MSJ at 11-15. But that motive, and thus Hypercom's argument to the jury, weakens materially with the introduction of evidence that Hypercom infringed any Omron-assigned patent. Thus, because they contradict Hypercom's general theory of the case, as well as specific contentions, Berman's opinions on infringement are material and necessary to Omron's defense. Conversely, depriving Omron of the ability to place Berman's conclusions before the jury would prejudice that defense materially. Moreover, Hypercom intends to offer testimony from its expert witness, Lawrence Pretty, that Hypercom's point-of-sale terminals do not infringe the patents that Omron assigned to Verve. Pretty submitted his expert report in March of 2006. Therefore, to the extent that Berman's opinions are irrelevant because he did not perform his infringement analysis and submit his report until April of 2006, Pretty's opinions are irrelevant for the same reasons. However, because Hypercom intends to prove its case-in-chief against Omron by demonstrating noninfringement with Pretty's testimony, Omron is entitled to present evidence that rebuts Pretty. B. The Infringement Issue Is Highly Relevant for Damages Purposes. Berman's testimony is also relevant to the issue of damages. A "party injured by a malicious prosecution is entitled to compensatory damages proximately caused by the defendant's action." CJS Malicious Prosecution, § 94; Auman v. Auman, 653 P.2d 688, 690 (Ariz. 1982) (affirming award of compensatory damages on malicious prosecution claim). To

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establish proximate cause under Arizona law, however, a plaintiff must show that the injury would not have occurred but for the defendant's wrongdoing. Barrett v. Harris, 207 Ariz. 374, 378, 86 P.3d 954, 958 (Ct. App. 2004). If Verve's infringement claims against Hypercom were meritorious, then Verve's failure to sufficiently investigate those claims could not be a "but for" or "proximate cause" of all legal expenses incurred by Hypercom. In other words, if Verve could have filed the same patent infringement action against Hypercom and prevailed, then Verve's inadequate investigation is not a "but for" cause of Hypercom's defense costs. Further, insofar as Hypercom seeks to recover punitive damages, the merits of the underlying infringement claim are clearly relevant. To support an award punitive damages, "there must be evidence of an 'evil mind' and aggravated and outrageous conduct." Linthicum v. Nationwide Ins. Co., 150 Ariz. 326, 330, 723 P.2d 675, 679 (Ariz. 1986) (emphasis added?). The filing of an allegedly under-investigated but meritorious patent infringement claim simply could not qualify as "aggravated and outrageous conduct." Thus, Berman's testimony is both probative and material to Omron's defense of Hypercom's damages claims. C. Berman's Analysis of Hypercom's Products and Software Was Proper and Relevant. Hypercom Misconstrues Basic Notions Of Patent Law And Notice Pleading To Argue Otherwise. Hypercom's other main objection to Berman's testimony ­ i.e., that he opines on the wrong Hypercom terminals ­ is equally insufficient. As a preliminary matter, Berman's infringement opinions still rebut Hypercom's specific allegations and its general theory of the case. As noted above, Hypercom claims that it demonstrated that "none of the Hypercom products infringed any of the Omron patents." Hypercom's Response To Second MSJ at 14 (emphasis added). And Hypercom's attribution of tortious motives to Omron makes little sense when its ICE 5000/5500 or ICE 6000, T7 or T8 Series terminals infringed the assigned patents.

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Nor, given well-accepted standards of notice pleading, does the distinction between terminals matter. In each of its complaints, Verve provided an expressly non-exclusive list of Hypercom terminals that allegedly infringed the assigned patents. For example, in the lawsuit filed in the Western District of Texas, Hypercom alleged: "Upon information and belief, Defendants have been, and still are, directly, indirectly, contributorily, and/or by inducement willfully infringing the '341 patent by making, using, selling, and offering for sale products which embody the inventions claimed in said patent, or colorable imitations thereof, including but not necessarily limited to Hypercom Corp.'s ICE 6000 terminals. . . ." See Verve L.L.C.'s Complaint filed in the United States District Court, Western District of Texas, at 3, attached as Exhibit 3 to Hypercom's Motion (emphasis added).1 This is perfectly sufficient for purposes of satisfying the standards of notice pleadings. See Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002) (holding that the "short and plain statement of the claim" required for notice pleading "must simply 'give the defendant fair notice of the what the plaintiff's claim is and the grounds upon which it rests.'" (internal citations omitted)). Moreover, Form 16 - the sample infringement pleading contained in the appendix to the Federal Rules of Civil Procedure - contains no specific reference to a model number or comparable identifying feature of the allegedly infringing device. See Form 16, ¶ 2, Federal Rules of Civil Procedure ("Defendant has for a long time past been and still is infringing those
1

Similarly, the complaint filed in the Eastern District of Michigan alleged: "Upon information and belief, Defendants have been, and still are, directly, indirectly, contributorily, and/or by inducement willfully infringing the '895 patent by making, using, selling and offering for sale products which embody the inventions claimed in said patent, or colorable imitations thereof, including but not necessarily limited to . . . Hypercom Corp.'s T7 Series Terminals." See Verve L.L.C.'s Complaint filed in the United States District Court, Eastern District of Michigan, at 2-3, attached as Exhibit 4 to Hypercom's Motion. In the ITC proceedings, Verve alleged: "Upon information and belief, proposed respondents have been, and still are directly, indirectly, contributorily, and/or by inducement infringing, at a minimum, Claims 1 and 2 of the '077 patent by making, using, selling, and offering for sale products which embody the inventions claimed in said patent, or colorable imitations thereof, including but not necessarily limited to, . . . Hypercom's ICE 6000 and T8 terminals . . . ." Verve L.L.C.'s

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Letters Patent by making, selling, and using electric motors embodying the patented invention, and will continue to do so unless enjoined by this court."). Thus, Verve's allegation that Hypercom infringed certain patents by making or selling products "including but not necessarily limited to" specific terminals are plainly sufficient to preserve claims against any infringing terminal manufactured or sold by Hypercom. See Fed. R. Civ. Proc. 84 ("The forms contained in the Appendix of Forms are sufficient under the rules and are intended to indicate the simplicity and brevity of statement which the rules contemplate."). As importantly, Hypercom admits that questions of infringement depend on the software which runs the terminals. See Hypercom Corporation's Motion In Limine Regarding Omron Corporation's Expert Witness Brad Berman and His Report at 8. Yet the software and thus the infringing capabilities of the ICE 5000/5500 Series of POS terminals examined by Berman is identical to the SPOS software used with Hypercom's T7 Series and ICE 6000 terminals specifically alleged by Verve to have infringed the '341, '895, and/or '077 patents. See Exhibit A to this Response, June 21, 2002, Letter from Hypercom to its "Valued Customers and Partners," and HyperWare Retail and Restaurant Software Guides, SPOS Version 06A. Nor has Hypercom identified any limitation in the T7 or ICE 6000 machines themselves that would prevent the infringement Berman asserts. Consequently, Hypercom has offered no basis for finding Berman's testimony irrelevant or prejudicial. II. Conclusion

In short, none of Hypercom's relevance objections to the testimony of Charles Berman stands up to scrutiny. And, because it has articulated no sufficient basis for questioning the reliability of Berman's methods, Hypercom is not entitled to a Daubert hearing. Omron
Complaint filed in the United States International Trade Commission at 3, attached as Exhibit 5 to Hypercom's Motion.

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therefore respectfully requests that Hypercom's motion to exclude the opinions and testimony of Charles Berman and, alternatively, for a Daubert hearing, be denied.

RESPECTFULLY SUBMITTED on April 30, 2007.

By: /s/ Matthew A.C. Zapf Matthew A.C. Zapf A. Colin Wexler Chad A. Blumenfield GOLDBERG KOHN 55 East Monroe Street Suite 3300 Chicago, IL 60603-5792 David P. Irmscher (15026-02) John K. Henning (25203-49) BAKER & DANIELS LLP 111 East Wayne Street Suite 800 Fort Wayne, IN 46802 H. Michael Clyde (009647) PERKINS COIE BROWN & BAIN P.A. 2901 North Central Avenue Suite 2000 Phoenix, AZ 85012-2788 Attorneys for Defendant Omron Corporation

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CERTIFICATE OF SERVICE I hereby certify that on April 30, 2007, 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: Andrew Foster Halaby Ray Kendall Harris John Kenyon Henning, IV David P. Irmscher Sid Leach Monica Anne Limon-Wynn Paul Moore A. Colin Wexler Matthew A.C. Zapf [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]

I hereby certify that on April 30, 2007, I caused the attached document to be served by hand delivery on Judge Paul G. Rosenblatt, United States District Court of Arizona, 401 West Washington Street, Phoenix, Arizona 85003-2118

/s/ Lisa M. Sandoval

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